What Is OAS (Old Age Security)?

If you've read the CPP post, you know I mentioned OAS briefly and promised to come back to it. Here we are!

OAS gets lumped in with CPP constantly, but they are fundamentally different programs. Understanding how OAS works, and how to plan around it, can meaningfully change how you think about retirement income in Canada. Let's break it down.

What Is OAS?

OAS stands for Old Age Security. It's a monthly benefit paid by the federal government to most Canadians aged 65 and older. Unlike CPP, it has nothing to do with how much you worked or how much you contributed. It's funded by general government revenue and paid out based almost entirely on how long you've lived in Canada.

No T4. No paycheque deduction. No contribution history required. You just have to have been here.

Who Qualifies for OAS?

To receive the full OAS benefit, you need to have lived in Canada for at least 40 years after turning 18. If you have at least 10 years of Canadian residency after 18, you qualify for a partial benefit - one-fortieth of the full amount for each year of residency.

You also need to be a Canadian citizen or legal resident when your benefit begins.

If you immigrated later in life or spent significant years abroad, your OAS may be prorated. Worth checking your personal residency history if that applies to you.

How Much Does OAS Pay?

For 2025, the maximum OAS monthly benefit for someone aged 65 to 74 is approximately $727/month, or about $8,700/year. Canadians aged 75 and older automatically receive a 10% top-up, bringing that to roughly $800/month.

That 10% boost for 75+ was introduced in 2022 and is permanent. It's the government acknowledging that costs don't go down as you age.

Like CPP, OAS is indexed to inflation. It's adjusted quarterly based on the Consumer Price Index, so your purchasing power is somewhat protected over time.

When Can You Start Collecting OAS?

OAS begins at 65 by default. But you can defer it, up to age 70, and receive a higher monthly amount in exchange.

The math - for every month you delay past 65, your benefit increases by 0.6%, up to a maximum of 36% more at age 70.

So instead of ~$727/month at 65, delaying to 70 gets you roughly $988/month, and that higher amount is what gets indexed going forward. If you live into your 80s, deferring OAS almost always wins.

The breakeven point on deferring to 70 versus taking at 65 is typically somewhere in your late 70s. If your family history and health suggest you'll clear that, deferring is worth serious consideration.

Unlike CPP, you cannot start OAS before 65. There is no early collection option.

What Is the OAS Clawback?

This is where OAS gets more nuanced, and where a lot of people get caught off guard.

If your net income in retirement exceeds a certain threshold, the government starts clawing back your OAS benefit. In 2025, that threshold sits at approximately $90,997. For every dollar of income above that line, you repay 15 cents of your OAS benefit.

The clawback is complete, meaning you receive nothing, once your income reaches roughly $148,000.

The clawback is applied based on your individual income, not household income. So a couple where each person earns $85,000 wouldn't trigger it, even though their combined income is $170,000.

A few income sources that count toward the clawback threshold:

• RRSP/RRIF withdrawals
• CPP
• Employment income
• Capital gains and dividends
• Rental income

TFSA withdrawals do not count. That's one of the most powerful features of the TFSA in retirement - it lets you top up your spending without pushing your income into clawback territory. This is why TFSA strategy in the accumulation years has real consequences decades later.

If you're expecting significant RRSP/RRIF income in retirement and you're planning to collect OAS, the clawback math is worth modeling out now, not at 65.

What Is GIS?

GIS stands for the Guaranteed Income Supplement. It's an additional benefit layered on top of OAS for lower-income Canadians aged 65 and older. If OAS is the floor, GIS is what goes under the floor.

In 2025, single seniors with little to no income beyond OAS can receive up to approximately $1,086/month in GIS, on top of OAS. That's nearly $1,800/month combined from the government - before any CPP.

GIS is income-tested and reduces as your income rises. It starts phasing out once you have other income beyond OAS, at a rate of 50 cents for every dollar of other income. It disappears entirely around $22,000 in annual income for a single person.

Most people pursuing financial independence won't qualify for GIS. But it's worth knowing it exists, especially for the RRSP drawdown strategy. If someone retires early with a modest RRSP and no pension, strategically drawing down the RRSP before 65 can reduce RRIF minimums in later years, keeping retirement income low enough to access full or partial GIS. It's a legitimate planning play that gets overlooked.

Why Does This Matter for Your Planning?

OAS is a future income stream, like CPP, but with a different set of levers.

The clawback should shape your RRSP drawdown strategy. If you're doing an RRSP meltdown in your 50s and early 60s, drawing down the RRSP before CPP and OAS kick in, one of the goals is to keep your registered assets low enough that your retirement income doesn't trigger the OAS clawback at 65. The RRSP drawdown post covers this in more detail.

Deferring OAS to 70 pairs well with early retirement. If you retire at 50 and start drawing from your RRSP and portfolio, you can let both CPP and OAS grow untouched until 70. By the time they kick in, you'll have two inflation-indexed income streams that are meaningfully larger than if you had started them at 65.

TFSA dollars are clawback-invisible. Building a large TFSA matters not just for tax-free growth but for flexibility at 65+. You can pull from the TFSA without touching your OAS entitlement.

Spousal income planning matters. Because the clawback is individual, income-splitting strategies in retirement, including pension income splitting and managing whose name holds which account, can help both spouses stay below the threshold.

The Short Version

• OAS is a government benefit paid to most Canadians aged 65+, based on years of residency, not contributions or work history.
• Full benefit requires 40 years of Canadian residency after age 18. Partial benefits start at 10 years.
• Maximum benefit in 2025 - ~$727/month at 65, ~$988/month if deferred to 70, and an automatic 10% top-up at 75.
• The OAS clawback begins at ~$90,997 of net income and eliminates the benefit around $148,000. TFSA withdrawals don't count.
• GIS provides additional income for low-income seniors on top of OAS - a meaningful planning consideration for early retirees with modest registered assets.
• For early retirees, the main OAS levers are - deferral timing, clawback management, and TFSA strategy.

OAS isn't the most exciting thing to read about. But when it's $12,000 to $18,000 a year in inflation-indexed income that you might partially lose to poor planning, it's worth understanding properly.