OAS Deferral: Should You Wait Until Age 70 for a Higher Payment
Old Age Security is a taxable monthly benefit available to many Canadians beginning at age 65. Unlike the Canada Pension Plan, OAS is based mainly on age and Canadian residence rather than employment contributions. Eligible recipients can start at 65 or postpone the pension until any month before turning 70.
Deferring OAS can permanently increase the monthly amount, but waiting is not automatically the best choice. Your health, cash-flow needs, other retirement income, tax bracket, and eligibility for the Guaranteed Income Supplement can all affect the decision.
This guide explains the OAS deferral increase, the potential break-even period, and the circumstances in which claiming early may make more sense. For related information about benefits and government support, review N-Grid’s coverage of social programs.
How OAS Deferral Works
OAS can begin as early as age 65. For every month you delay after 65, your payment rises by 0.6%. The increase is simple and permanent, reaching a maximum of 36% when payments start at age 70. There is no financial advantage to delaying beyond the month you turn 70.
For example, a person entitled to $800 per month at age 65 could receive approximately $1,088 per month by starting at 70, before tax and any future indexation. Actual amounts depend on the recipient’s eligibility, residence history, and the official OAS payment rate when the pension starts.
OAS payments are adjusted periodically for inflation. A delayed benefit therefore receives the higher starting amount and future inflation adjustments based on that amount, although annual increases are not guaranteed to match every household’s rising expenses.
Reasons To Consider Waiting
Deferral may be attractive when you have enough income from employment, pensions, investments, or savings to cover your expenses between 65 and 70. In that situation, delaying can create a larger source of indexed lifetime income later, when employment earnings may stop or investment withdrawals become less comfortable.
Waiting can also help people who expect to live well into their 80s or beyond. A higher monthly payment may eventually make up for the five years of OAS payments that were not collected. The decision can be especially compelling for someone in good health with a family history of longevity and limited guaranteed income from other sources.
A larger OAS payment may provide protection against future market declines. Unlike a withdrawal from an investment account, OAS is a government benefit that is adjusted for inflation and continues for life, subject to the applicable rules.
When Starting At 65 May Be Better
Claiming OAS at 65 can be sensible when you need the money for housing, food, medication, or other regular costs. Using OAS instead of drawing down savings may preserve investments for later years, particularly if markets are weak or your emergency fund is limited.
Health and life expectancy are also important. Someone facing serious health concerns may not live long enough to recover the value of the payments forgone between 65 and 70. There is no universal life-expectancy forecast, so this factor should be considered alongside medical advice and the needs of a spouse or family.
GIS recipients need extra caution. The Guaranteed Income Supplement is generally available only when OAS is being received. Delaying OAS can therefore delay GIS as well, which may make deferral unsuitable for a low-income senior who depends on monthly support.
Comparing The Main Choices
The basic financial trade-off is straightforward: start receiving smaller payments earlier, or give up several years of payments for a larger amount later. A simple break-even calculation often falls in the mid-80s, but the result changes with taxes, investment returns, inflation, health, and other benefits.
| Starting age | OAS increase over age 65 | Main advantage | Main concern |
|---|---|---|---|
| 65 | 0% | Immediate income and possible access to GIS | Smaller lifetime monthly payment |
| 67 | 14.4% | Moderate increase with only two years deferred | Two years of payments are forgone |
| 68 | 21.6% | Larger indexed income later | Requires adequate interim cash flow |
| 70 | 36% | Maximum monthly OAS amount | Five years without OAS, and possible GIS delay |
For instance, a $1,000 monthly benefit at 65 becomes about $1,360 at 70 before tax. Ignoring investment returns and inflation, the additional $360 per month would take roughly 13 to 14 years to recover five years of missed $1,000 payments. This is only a starting estimate, not a personalized recommendation.
Tax And Benefit Effects
OAS is taxable income. A higher payment could move some or all of your income into a higher tax bracket, depending on your total earnings, pension income, withdrawals, and province of residence. It can also affect income-tested credits and benefits.
Higher-income seniors should consider the OAS recovery tax, commonly called the OAS clawback. When net world income exceeds the annual threshold, part of the OAS payment must be repaid. Deferral could increase the eventual monthly benefit but may also increase repayment exposure if income remains high.
CPP and OAS are separate decisions. You can defer one while starting the other, depending on your circumstances. Coordinating the two pensions with RRSP withdrawals, a workplace pension, and a spouse’s income may produce a more efficient retirement-income plan than treating OAS in isolation.
A Practical Decision Checklist
Before choosing a start date, gather your estimated OAS amount, CPP statement, workplace pension details, savings balance, and expected annual expenses. The government’s benefit information and your tax records can help establish a realistic income forecast.
Review the rules carefully because residence history, marital status, GIS eligibility, and tax treatment can change the outcome. N-Grid provides general information rather than individualized financial, tax, or legal advice; read the site’s important disclaimer before relying on any benefits guidance.
- Estimate how much income you need between ages 65 and 70.
- Check whether delaying OAS would also delay GIS.
- Compare your expected tax rate now with the rate you may face later.
- Consider health, longevity, spouse needs, and survivor-income planning.
- Test the decision using several investment-return and inflation assumptions.
Build A Retirement Income Plan
OAS deferral is often strongest as part of a broader plan rather than as a standalone choice. Some retirees start OAS early to reduce withdrawals, while others use savings first and preserve government income for later life. Both approaches can be reasonable when matched to the household’s resources and priorities.
Before applying, confirm current OAS rates, eligibility requirements, payment timing, and recovery-tax thresholds through official government sources. A qualified financial or tax professional can help model the decision using your actual income, assets, health considerations, and family circumstances.
Choose the start date that supports reliable income throughout retirement, and revisit the plan whenever your health, work status, tax situation, or household budget changes.