The Old Age Security (OAS) program is an essential part of retirement planning for Canadian seniors, providing a reliable income stream to support living expenses.
However, many Canadians may not realize that delaying their OAS payments until age 70 can lead to significantly higher monthly benefits.
Here’s a guide to understanding how this works, the potential financial gains, and strategies to optimize your retirement income.
What Is the OAS Program?
The Old Age Security (OAS) program is a government pension available to Canadians aged 65 and older. It provides monthly payments that are adjusted quarterly to keep up with inflation.
For the first quarter of 2025, the maximum monthly OAS payment for individuals aged 65 to 74 is $727.67, totaling $8,732.04 annually.
How Delaying OAS Payments Can Boost Benefits
Seniors have the option to defer their OAS payments for up to five years, until age 70. For every month you delay, your OAS payments increase by 0.6%, translating to a 7.2% annual increase. By deferring for the full five years, your payments increase by a total of 36%.
What Does This Mean in Dollars?
| Age | Monthly OAS Payment | Annual OAS Income |
|---|---|---|
| 65 | $727.67 | $8,732.04 |
| 70 | $990.00 | $11,875.57 |
By delaying OAS until age 70, you could receive an additional $3,143.53 annually. This increase can provide long-term financial stability, especially for retirees in good health who expect to live longer.
Benefits of Delaying OAS
- Higher Lifetime Income:
- If you live past a certain age (typically mid-80s), the cumulative payments from delaying OAS can exceed those from starting at 65.
- Inflation Protection:
- OAS payments are indexed to inflation, ensuring your income keeps pace with rising living costs.
- Tax Planning Opportunities:
- Delaying OAS allows you to use lower-income years to withdraw from RRSPs or TFSAs, potentially reducing your overall tax burden.
Supplementing OAS with Other Retirement Income
While OAS is a solid foundation, additional income sources can enhance financial security in retirement. Combining OAS with the Canada Pension Plan (CPP) and investments can help you meet your financial goals.
Example Investment Strategy
| Investment | Amount Invested | Annual Income | Monthly Income |
|---|---|---|---|
| TFSA Dividend Stocks | $7,000 | $590.80 | $49.23 |
| Growth Stocks | $10,000 | $281.00 (2.81%) | $23.42 |
By strategically investing in dividend stocks or growth-oriented companies, retirees can create additional streams of passive income to complement their OAS.
Tips to Maximize OAS Payments
- Delay Payments:
- Deferring your OAS until age 70 ensures you receive the maximum benefit possible.
- Report Accurate Income:
- Ensure your reported income is accurate to avoid overpayment clawbacks for high-income earners.
- Use TFSAs for Tax-Free Growth:
- Contributions to a Tax-Free Savings Account (TFSA) can grow without affecting your eligibility for OAS payments.
- Plan with a Financial Advisor:
- Consulting a professional can help you create a tailored strategy that maximizes your OAS and other retirement benefits.
Delaying your Old Age Security (OAS) payments until age 70 can lead to significant financial benefits, increasing your monthly income to $990 and boosting your annual retirement funds.
By combining OAS with smart investment strategies and other income sources like the Canada Pension Plan (CPP), you can build a secure and comfortable retirement.
Start planning today to maximize your retirement income and enjoy financial peace of mind in your golden years.
FAQs
What happens if I take OAS at 65 instead of delaying?
If you take OAS at 65, you’ll receive the standard monthly amount, but you’ll miss out on the 36% increase that comes with deferring until 70.
Can I change my mind after starting OAS payments?
Yes, you can cancel your OAS payments within 6 months of starting, but you’ll need to repay the amounts received.
Will delaying OAS affect my GIS eligibility?
Delaying OAS can impact your Guaranteed Income Supplement (GIS) eligibility, as it depends on your income levels.
