Old Age Security: What It Means for Your Retirement Plan

Pierre turned 65 in Trois-Rivières, after working his whole life in Quebec. He claimed OAS and received the maximum, exactly as he expected. In 2026 he withdrew a good sum from his RRSP to redo the roof. In July 2027 the OAS deposit dropped, and nobody warned him.

He had done nothing wrong. OAS, the Old Age Security pension, looks like the simplest piece of the retirement puzzle: it is the only one that never depended on what you earned or what you saved. However, the amount that arrives each month is not decided by a single rule. It is decided by three different clocks.

The first one stopped years ago, and it counts the years you lived in Canada. The second one you set once: it is the age at which you claim the pension. The third runs late, because every July it recalculates your payment using last year's tax return.

Three clocks decide your pension. The one that costs you most is the one you never look at.

What OAS pays, and who does not receive the maximum

Between July and September 2026, the maximum OAS is $751.97 a month between 65 and 74, and $827.17 from 75 onward. That jump is an automatic 10% increase the month after your birthday. These are per-person amounts, not per household: in a couple, each of you receives your own.

OAS is protected against inflation. The amounts are reviewed every January, April, July and October to follow the cost of living, and if the cost of living falls, the pension does not fall with it. What matters is not that it beats your savings, because it may not. It is that this protection is automatic and depends on neither how you invest nor how the markets behave, while your own money shrinks if it sits still.

That is the ceiling. The floor is set by the first clock. To receive the full OAS you need to have lived 40 years in Canada after turning 18. If you lived here less, you receive a proportional fraction: the years you lived, divided by 40. With fewer than 10 years of residence there is no pension at all, even while you live here.

Most OAS recipients reach the maximum or come close. The program's actuarial report put the average benefit at around 95% of the maximum in 2020. Someone born here who stayed usually reaches the full 40 years. Pierre is that case: he lived in Quebec from 18 and arrived at 65 with 47 years of residence. Since the count stops at 40, he receives the maximum.

Mireya is the other case. She arrived in Quebec at 34 and turned 65 here, which gives her 31 years: her fraction is 31 divided by 40, that is 77.5% of the maximum. On $751.97, her pension comes to about $583 a month. Both worked, saved and retired the same way, and the gap is roughly $169 a month for life. Nor does it close over time, because the 10% increase at 75 is calculated on each person's own pension and not on the maximum. Every year missing from that clock is worth 2.5% of public pension forever, and that moves the savings target you need.

Can you do anything about that first clock? You cannot improve it: the years are counted, and at 65 the count closes. You can lose it. If you move outside Canada, the minimum goes from 10 years to 20. Someone with 14 years of residence receives their fraction while living here and receives nothing at all if they move. GIS, the Guaranteed Income Supplement, additionally requires you to live in Canada.

If moving outside Canada is in your plans, or might be, weigh it along with everything else. It is a price, and the only thing that changes is whether you know it before you decide or discover it afterwards.

At 65 or at 70? It depends who you are

Unlike the QPP, which you can claim from 60, OAS does not arrive before 65. What you can do is delay it. Every month you wait past 65 adds 0.6% to the payment, 7.2% a year, up to a ceiling of 36% at 70. That increase is indexed too, so inflation does not eat it.

Put that way, waiting looks like the obvious decision. We tested it with seven sample households that differ in income, savings and marital status. For some, the date barely moved the outcome. For others, it changed everything. Go through them one at a time; one will look like yours.

Start with Lucrèce, who retires alone with a modest public pension and little savings. For her, delaying the pension to 70 is the worst possible move, and the reason comes down to a single rule: GIS is only paid to someone already receiving OAS. Delaying the pension delays the supplement too. That is five years receiving neither, and the 36% increase lifts only the OAS, never the GIS. What does not come in over those five years comes out of her savings, and in our simulations that moves the moment she is left with nothing years closer.

Réjean and Monique, a couple with similar incomes, have the same problem twice over. Their plan holds up well if they claim early and turns fragile if they delay to 70: those five years of waiting are paid for by draining savings that cannot cover it.

Gilles and Diane are the opposite case, and the only one of the seven whose plan gains security by waiting. They have enough savings to get through those five years without running dry, but not so much that they have plenty to spare. That is where a higher pension guaranteed for life does its work. Even so, the gain is small and comes with a trade-off. Waiting until 70 leaves them less to pass on than claiming earlier, and it only pays off if returns are moderate or if they live well into their nineties.

Marc and Céline are at the far end. With an employer pension and ample savings, their plan is in no danger whenever they claim. But their income already exceeds the recovery threshold, so delaying gives them a bigger pension and, with it, more pension to hand back. In our simulations, the recovery tax they pay across their lifetime nearly doubles. Waiting costs them money and buys them nothing.

Lined up side by side, the seven tell one story. Delaying OAS is buying insurance. If your plan is already solid, you are paying for coverage you do not need. If your plan is tight but workable, the insurance is worth what it costs. And if your plan does not get there, the premium is five years without a pension that you cannot afford.

There is one more thing, and it does not come from these seven cases but from everything we have measured. The start date moves the outcome considerably less than the order in which you empty your accounts. It is a decision to make with judgement, not one that deserves months of anguish. If you are weighing the whole timetable, we go into it in At what age should you retire in Quebec?.

The clock that runs late

This is where the surprise arrives, and it is the one Pierre got. If your net income exceeds the year's threshold, you hand back 15 cents of OAS on every extra dollar. This is the recovery tax, and for the 2026 tax year the threshold is $95,323. So far, nothing strange.

What is strange is when it is collected. The government looks at your income for one year and uses it to adjust the cheques running from July of the following year to June of the one after. The 2024 income moved the payments from July 2025 to June 2026. The 2025 income moves those from July 2026 to June 2027. And the 2026 income will move those from July 2027 to June 2028.

It is worth reading twice: a large RRSP withdrawal made in 2026 does not touch your 2026 OAS, it shrinks the cheques starting in July 2027. That is exactly what happened to Pierre, who withdrew for the roof in 2026 and received the cut in July 2027, when the money was already spent and the decision forgotten. The lag explains the surprise: you decide in one year and are billed between seven and eighteen months later.

The ceiling exists too. With income from the 2025 tax year, the last one closed, OAS disappears entirely above $152,062 between 65 and 74. From 75 onward that ceiling rises to $157,923. The equivalent 2026 ceilings are still estimates, because the government itself marks them provisional until October.

That second ceiling looks like relief and is not. At 75 OAS rises by 10%, but the threshold where recovery begins does not move with age. It is the same for someone who is 66 as for someone who is 80. The stretch until you have nothing left is 10% longer precisely because there is 10% more to recover. You have more pension to lose from the same starting point. And the mandatory withdrawals from your registered accounts grow every year, so both forces push the same way.

Three things worth knowing about this clock:

• OAS and the threshold belong to each person. The threshold applies to your individual net income, not to the household's: even living as a couple, what counts is what you report. That is why pension income splitting matters so much here. Moving part of the income to the spouse who earns less can give the other back the OAS they were about to lose, and marital status and retirement covers it.
• The TFSA does not count. Withdrawals from a TFSA are not net income, so they do not bring you closer to the threshold. It is one of the reasons the order between TFSA, RRSP and non-registered matters so much.
• The order of your withdrawals changes the outcome. How much OAS you keep depends on which account you empty first, and we cover it in how to draw down in retirement.

OAS is a consequence of your plan, not a fixed figure

The three clocks ask three different things. The first can no longer be improved, only lost, so the only thing to do is know its price before deciding where you are going to live. The second is set once, and the right answer depends on whether your plan needs insurance and whether it can pay the premium. The third is the only one you keep moving every year, with every withdrawal you sign, and also the easiest to overlook because its effect arrives late.

That is where the real room is. At 71 the RRSP becomes a RRIF and the minimum withdrawals stop being optional. The years between the day you stop working and that date are the ones that decide how much income you report and, with it, how much OAS you keep afterwards. That is the logic of dismantling your RRSP before 71, and also the reason two people with the same pension end up receiving different amounts.

A plan that treats OAS as a fixed figure will give you a wrong answer, and it will give it to you with great confidence. At AuraPlan we do not calculate it separately. OAS goes into the same plan as your other income, your accounts, the age at which you stop working, the order in which you withdraw and each year's tax. That is what no general rule can give you, because what happens to your pension depends on everything else you do with your money.

One clock stopped, one you set once and one you move every year without noticing. None of the three will warn you, but all three can be read in time, and that is what decides whether retirement arrives as something you recognise rather than as a surprise.