Old Age Security (OAS) is a government pension that every Canadian who has lived in the country for over 40 years after turning 18 is eligible for. Unlike the Canada Pension Plan (CPP) where you contribute, OAS is purely funded by the government and begins at age 65. But the payout has its conditions and eligibility.
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What happens when you delay OAS?
For 2026, you can get a $762.50 maximum monthly payment provided your 2025 taxable income is at or below $93,454 and you have lived in Canada for 40 years after turning 18. The Canada Revenue Agency (CRA) gives you an option to delay OAS till 70 and offers a 0.3% hike in payments for every month of delay. In five years, you can get 36% more, which comes to $1,037.
Could delaying OAS make sense?
Time is money. You have the luxury of time when you were young. You could give your investments time in the market to grow. But after you retire, the logic reverses. Time is scarce, and money is more so. Delaying OAS till age 70 might look like leaving money on the table. But there are certain circumstances that make delaying OAS sensible. Let’s look at both sides and understand the trade-off.
Reasons not to delay OAS
If you have lived all your life in Canada and are now going to live off your retirement savings, collecting as many benefits as possible makes sense. A $762.50 monthly payout can help you save up your retirement portfolio for later or to pass it on as an inheritance to loved ones.
If you have built a sizeable Registered Retirement Savings Plan (RRSP) portfolio, taking OAS at age 65 makes sense. Because at age 71, the RRSP will end, and you have to shift the portfolio to a Registered Retirement Income Fund (RRIF), which has mandatory withdrawals as a percentage of the portfolio.
A sizeable portfolio can increase your taxable income at 71, which could lead to OAS clawback. By taking payouts at age 65, you can at least enjoy the maximum eligible OAS payout for six years.
Reasons to delay OAS
Unlike CPP, OAS has eligibility criteria.
The first is income; if you are still working and your 2025 income is between $93,454 and $152,062, delaying OAS makes sense, as the CRA will claw it back. Your payout will be lower than the maximum amount if your income is above $93,454 and $0 if the income is $152,062 or more.
The second is 40-year residence. To qualify for OAS, you should have lived in Canada for
- At least 10 years if you currently live in Canada
- At least 20 years if you currently live outside of Canada
If you meet the above criteria, you can get partial OAS, which is the number of years in Canada divided by 40. If you live for 30 years, you can get 75% (30/40) OAS.
Many Canadians delay OAS to meet the residency years criteria. Because once you start collecting OAS, the additional years you live in Canada does not increase your payout.
What should eligible Canadians do?
If eligibility is not a concern for you, avoid delaying OAS for the 36% spike. The five years of payouts will make up for the 36% increase. The OAS will continue till your last breath and will automatically increase once you turn 75.
How to maximize retirement benefits
RRIF withdrawals are mandatory and added to taxable income. However, Tax-Free Savings Account (TFSA) withdrawals are tax-free and do not disturb your OAS benefits. Consider maxing out your TFSA contributions after 60 to maximize your retirement payments. Canadian Natural Resources (TSX: CNQ) is a safe dividend growth stock that can pump up your TFSA payouts. It has a safe dividend payout ratio of below 50% and a conservative debt profile, which reduces the risk of dividend cuts. Canadian Natural Resources even has a 26-year history of growing dividends at an average annual rate of 20%.
