If you're nearing retirement, understanding government benefits – especially Old Age Security (OAS) – is critical.

For the average retired Canadian couple with $75,000 in combined annual after-tax income, about half often comes from OAS and the Canada Pension Plan (CPP).¹ While CPP is based on work history and contributions, OAS is a universal benefit available to most Canadians. And because it's income-tested, the timing of when to start OAS can have a major impact on how much you receive—and how much you keep.

Delaying OAS Can Increase Payments

OAS typically starts at age 65. The maximum monthly OAS payment is $727.67 (Q1 2025, ages 65 to 74), which equates to $8,732 per year. Unlike CPP, which can begin at age 60, you cannot start OAS early. However, you can delay OAS benefits until age 70, increasing payments by 0.6 percent per month to a maximum of 36 percent (which equates to an additional $262 per month or $3,144 more per year based on current figures).

Understanding the Clawback

If your net annual income is greater than $93,454 (2025), OAS is reduced by 15 percent of the excess amount. At $151,668 (ages 65 to 74), your OAS benefit is fully eliminated.

Other Income Sources That Affect OAS Timing

Employment income

Working past the age of 65? Delaying OAS may help you avoid the clawback.

RRIF (Registered Retirement Income Fund) withdrawals

Mandatory RRIF withdrawals begin at age 72, potentially increasing taxable income. Withdrawing smaller amounts before 65 can reduce later mandatory withdrawals.

CPP

CPP payments are taxable and will increase net income. Delaying CPP boosts payments by 8.4 percent per year after age 65, to a maximum of 42 per cent.

TFSA (Tax-Free Savings Account) withdrawals

TFSA withdrawals are not taxable and will not impact OAS eligibility, making it a useful tool for managing income levels.

Pension income splitting

If you have a spouse or common-law partner, splitting eligible pension income may help reduce taxable income to avoid the clawback. However, it could impact a spouse's OAS eligibility.

Changed Circumstances?

If you plan to defer OAS but later experience health issues or a reduced life expectancy, you may be eligible for retroactive payments (up to 11 months) from the date your application is received.

Need Help?

OAS timing is just one part of a comprehensive retirement strategy. I am here to help you navigate these decisions and optimize your retirement income. For a deeper discussion, please reach out:

Lara D. Austin
Senior Portfolio Manager & Wealth Advisor
250-334-5606 | lara.austin@rbc.com
LaraAustin.com

References

1. Statistics Canada 2024 Canadian Income Survey, in 2022 was approximately $74,200 per year.

The content in this article is for information purposes only and does not constitute tax or legal advice. It is imperative that you obtain professional advice from qualified tax and legal advisors before acting on any of the information in this article. This will ensure that your own circumstances are properly considered and that action is taken based on the most current legislation.