What do I need to know about Canada's Old Age Security (OAS)?

As we age, we all face the challenge of how to make our money last throughout retirement. For most of us, that will include some form of government pension like Old Age Security (OAS). If you're getting ready to retire, or are already retired, here's what you need to know about OAS.

What is Old Age Security?

Old Age Security (OAS) is a monthly pension paid by the Canadian government to eligible seniors. To qualify, you must be 65 years of age or older and a Canadian citizen or legal resident. If you're a legal resident, you must have lived in Canada for at least 10 years.

OAS is not means-tested, which means that your income does not affect your eligibility. However, if your income is above a certain threshold, you may have to pay a clawback. More on that later.

How much does Old Age Security pay?

The amount of your OAS pension is based on how long you've lived in Canada after the age of 18. For every year you've lived in Canada, you get a partial OAS pension. The maximum monthly OAS pension for 2022 is currently $642.25.

You can start receiving your OAS pension as early as age 65, or you can choose to defer it until as late as age 70. For each year you defer, your pension will increase by 0.6%, up to a maximum of 36% if you defer for five years.

What is the Old Age Security clawback?

The Old Age Security clawback is a tax on higher-income seniors. If your income is above a certain threshold - $79,845 in 2021 - you will have to pay back some or all of your OAS pension. The clawback is gradual, so you don't have to pay it all back if your income is only slightly above the threshold.

The OAS clawback is not the only tax you'll pay in retirement. If you have other sources of income, like a pension from a previous job or investment income, you will likely also have to pay income tax on that.

What else do I need to know about Old Age Security?

OAS is just one part of your retirement income. If you want to maintain your standard of living in retirement, you will likely need to supplement your OAS pension with other sources of income, like a workplace pension, RRSPs, or investments.

You may also be eligible for the Guaranteed Income Supplement (GIS), which is a monthly benefit paid to low-income seniors. To qualify, you must have a low income and meet other eligibility criteria. For more information, see the Government of Canada's website.

If you have questions about your specific situation, speak to a financial advisor. They can help you understand what you need to do to ensure a comfortable retirement.