Old Age Security (OAS) is a cornerstone of retirement income for Canadian seniors. For those 65 and older, it offers financial support based on residency in Canada and other eligibility factors.
However, with rising costs of living, simply receiving OAS might not be enough for a comfortable retirement.
Fortunately, there are strategies to increase your OAS benefits and maximize your retirement income in 2025. Let’s explore these steps to ensure you get the most out of the program.
Eligibility
To qualify for OAS, you must be at least 65 and have lived in Canada for a minimum of 10 years after the age of 18. To receive the full benefit, you need 40 years of Canadian residency after turning 18.
If you fall short of this, your payment will be prorated. For example, living in Canada for 30 years after age 18 entitles you to 75% of the full OAS payment.
If you’re close to the 40-year threshold, staying in Canada for a few more years can help you qualify for the maximum benefit.
Deferring Payments
Deferring OAS beyond age 65 is one of the most effective ways to increase your monthly payment.
For every month you delay, your OAS increases by 0.6%, up to a maximum of 36% at age 70.
For example:
- At 65: $1,000/month
- At 70 (deferred): $1,360/month
Deferring makes sense if you have other income sources or are in good health with a longer life expectancy. While waiting may not work for everyone, it’s a powerful tool for boosting your income over time.
Managing Clawbacks
The OAS clawback, or recovery tax, begins if your income exceeds a certain threshold. For 2024, this threshold is $87,397. Income above this amount results in a gradual reduction of your OAS benefits.
Ways to Reduce Clawbacks:
- Income splitting: Share retirement income with a lower-income spouse to reduce taxable income.
- RRSP contributions: Lower your taxable income by contributing to a Registered Retirement Savings Plan.
- TFSA withdrawals: Use a Tax-Free Savings Account for income since withdrawals aren’t taxable and won’t trigger clawbacks.
By strategically managing your income, you can stay below the clawback threshold and retain more of your OAS payments.
Utilizing GIS
If your income is low, you may qualify for the Guaranteed Income Supplement (GIS), which adds non-taxable income to your OAS payments.
GIS eligibility is based on income and household size. Since it’s not subject to clawbacks, it’s a valuable tool for low-income retirees.
GIS Eligibility Example:
| Status | Income Limit (2024) |
|---|---|
| Single or widowed | $20,832 |
| Couple (one OAS) | $27,744 |
| Couple (both OAS) | $37,008 |
Check your eligibility for GIS to see if you can benefit from this additional support.
Tax Strategies
Since OAS is taxable, you’ll want to manage your overall income to reduce taxes. Tax credits like the Age Amount or Pension Income Tax Credit can help lower your taxable income.
A financial advisor can help you create a tax-efficient retirement income plan.
Inflation Adjustments
OAS payments are adjusted quarterly to account for inflation. For 2024, the maximum monthly payment is $1,235.03, with further increases expected in 2025.
While inflation adjustments are helpful, they might not fully offset rising costs in areas like housing and healthcare.
Dealing with Inflation:
- Defer OAS: Higher payments after deferral help combat inflation.
- Diversify income: Invest in inflation-protected assets, like government bonds or dividend-paying stocks.
- Track expenses: Adjust your budget regularly to account for rising prices.
Maximizing OAS benefits requires a mix of planning, income management, and tax strategies. Whether you’re eligible for GIS, planning to defer OAS, or looking to avoid clawbacks, these steps can help you secure a financially stable retirement.
Take advantage of deferral options and consult a financial advisor to tailor these strategies to your unique situation. By being proactive, you can make the most of your OAS benefits in 2025 and beyond.
