Old Age Security Simplified

We often encounter clients struggling with when to start their Canadian OAS pension. So, we have put together some tips to help you strategically enhance your lifetime income and avoid unnecessary claw back while maximizing Your OAS benefits.

OAS Residency Requirements

OAS is a lifetime pension indexed to inflation, based on residence in Canada rather than work
history or contributions. Eligibility for OAS depends on the number of years lived in Canada between ages 18 and 65:

• 40+ years: You receive 100% of the benefit.
• 10-39 years: You receive a partial benefit, calculated as (Years in Canada / 40) x Full Benefit.

If you move out of Canada, benefits continue for six months if you lived in Canada for less than 20 years. If you lived in Canada for 20+ years, you can continue receiving OAS while living abroad.

Strategies to Maximize Your OAS Benefits

The standard OAS start date is age 65, but deferring it to age 70 increases your pension by 36% (0.6% per month deferred). This flexibility allows retirees to make strategic decisions based on their net income and tax situation. However, many start OAS at 65 while still earning high incomes, leading to unnecessary clawbacks and missed increases.

• Updated OAS Maximum Benefit Amounts (2025)
• Under 75: $727.67/month
• 75 and older: $800.44/month

Automatic Enrollment Confusion

Many Canadians receive a notice before age 65 stating their OAS will begin automatically unless they choose to defer. If this notice is missed, individuals could start receiving OAS while still working, triggering a full clawback of benefits they could have otherwise increased by delaying.
On the flip side, some never apply for OAS—often assuming they earn too much and would lose the benefit to taxation. This assumption can be costly. Once you reach age 70, there are no further increases for delaying, and retroactive payments are limited to 11 months. So, make sure you apply no later than a month before your 71st birthday!

OAS Claw back & Recovery Tax

If your net income exceeds $93,454 (2025 threshold), your OAS payments will be reduced by 15
cents for every dollar over the threshold. For example, if your income is $105,000, your OAS will be reduced by $1,731.90 annually, or $144.33 per month. At $151,668 (under 75) or $157,490 (75+), the entire benefit is recovered. However, proper income splitting and tax planning can reduce net income and preserve OAS benefits.

Ways to Reduce OAS Claw back

There are several strategies to minimize the impact of the OAS claw back:

• Defer OAS Payments: You can defer your OAS payments for up to five years, increasing your monthly payment by 0.6% for each month deferred, up to a 36% maximum at age 70!
• Sell Stocks the Year Before Collecting OAS: Realize capital gains before you start collecting OAS to avoid increasing your taxable income.
• Give Money to Your Spouse: Use spousal RRSPs or pension splitting to reduce your taxable income.
• Manage RRSP Withdrawals: Plan your RRSP withdrawals carefully to stay below the clawback threshold.
• Maximize Deductions: Use deductions like RRSP contributions and interest on investment loans to lower your taxable income.
• Use a Holding Company: For high earners, transferring investments to a corporation can help manage taxable income.

Many retirees may not fully utilize their benefits due to lack of awareness. Efficient planning, such as strategic deferral, tax management, or income splitting, can maximize your OAS benefits and prevent potential losses. Contact your Financial Advisor to ensure you are accessing all available entitlements.