OAS Deferral Strategy — Permanently Boost Your Old Age Security by up to 36%

Overview

Old Age Security (OAS) is a monthly federal pension available to most Canadians aged 65 and older. By default, many people start collecting at 65 — but you don’t have to. You can voluntarily delay OAS by up to 5 years, until age 70, and receive a permanently higher payment for the rest of your life.

The increase is 0.6% per month for each month deferred, compounding to a 36% permanent boost if you wait until 70. Unlike CPP — where deferral is a well-known planning technique — OAS deferral is underused, particularly among people who retire before 65 or have moderate savings.

Do I Qualify?

• You are eligible for OAS or will be soon
• You can cover living costs without starting OAS right away
• You expect average or longer life expectancy, or want stronger guaranteed income later in life
• GIS is not the main reason you need to start immediately
• You want to compare a smaller cheque now against a larger indexed cheque for life later

How the Math Works

The maximum OAS pension in early 2026 is approximately $727/month for those starting at 65. Deferring to 70 brings that to roughly $988/month — an extra $261/month for life, every month you live past breakeven.

The Breakeven Calculation

The breakeven is the age at which the total lifetime payments from deferring finally surpass what you would have collected by starting at 65.

• Deferring 1 year (to 66): breakeven ~age 79
• Deferring 2 years (to 67): breakeven ~age 81
• Deferring 5 years (to 70): breakeven ~age 84–85

The average Canadian reaching 65 today can expect to live into their mid-80s. If you have average or better health, there is a meaningful probability of living past breakeven for any deferral period.

When Deferral Makes the Most Sense

Strong case for deferring:

• You have other income to cover living expenses between 65 and 70 (RRSP/RRIF withdrawals, CPP, part-time work, pension)
• You are healthy and have a family history of longevity
• You want to minimize income in your late 60s to reduce OAS clawback risk in your 70s
• You are drawing down a large RRSP in your 60s (the RRSP meltdown strategy) — lower total income during the drawdown years, then higher guaranteed OAS income after

Weaker case for deferring:

• You have serious health problems or a shorter life expectancy
• You have low income and are eligible for the Guaranteed Income Supplement (GIS) — GIS is reduced dollar-for-dollar by other income, so a higher OAS at 70 may reduce GIS by an equivalent amount
• You have no other income source and need OAS immediately to cover living expenses

The OAS Clawback Interaction

High earners face an OAS “recovery tax” (clawback) once net income exceeds a threshold (~$93,000 in 2026). For every dollar of net income above this threshold, $0.15 of OAS is clawed back — with full clawback around $151,000.

Deferring OAS helps two ways:

1. You avoid adding OAS to income during years when your income is already high (e.g., RRIF minimum years)
2. You draw down your RRSP/RRIF faster in your 60s, potentially reducing mandatory RRIF income in your 70s so the higher OAS payment doesn’t trigger the clawback

How to Defer OAS

OAS is not automatic — you must apply for it. If you haven’t applied by 65, you are effectively deferring.

If Service Canada has already enrolled you automatically (they sometimes do this for Canadians with a long history of tax filings), you can decline the automatic enrolment in writing and choose to defer.

Steps to defer:

1. If you receive an automatic enrolment notice from Service Canada, complete the opt-out section or notify Service Canada in writing before the start date
2. If you have not been auto-enrolled, simply do not apply for OAS until the age you want to start
3. When ready to start, apply at My Service Canada Account or mail a completed ISP-3550 form

Note: You must start OAS no later than the month after you turn 70. If you haven’t applied by then, Service Canada will begin payments automatically and may retroactively pay up to 12 months of back benefits — but you permanently lose any deferral credits beyond 60 months.

Combining OAS and CPP Deferral

Both OAS and CPP can be deferred, and many Canadians do both. CPP deferral earns 0.7%/month (8.4%/year) up to a 42% bonus at 70. The two strategies compound:

• Defer CPP and OAS both to 70
• In your 65–70 window, live off RRSP/RRIF withdrawals (drawing down the account that has mandatory minimums anyway)
• After 70: larger CPP + larger OAS + smaller RRIF = a more balanced income mix with less clawback risk

Frequently Asked Questions

Sources

• Canada.ca — Old Age Security: When to Apply
• Canada.ca — Delaying Your OAS Pension
• Canada.ca — OAS Recovery Tax (Clawback)
• Canada.ca — Guaranteed Income Supplement