Canada’s Old Age Security (OAS) program is a fundamental component of retirement income for seniors. You can significantly increase your monthly benefits by strategically deferring your OAS payments until age 70.
Understanding Old Age Security
The OAS program provides a monthly pension to eligible seniors starting at age 65. As of the first quarter of 2025, the maximum monthly payment is $727.67, totaling $8,732.04 annually.
These payments are adjusted quarterly to reflect changes in the Consumer Price Index, ensuring they keep pace with inflation.
Benefits of Deferring OAS Payments
Seniors have the option to defer their OAS payments for up to five years, until age 70. For each month of deferral, the payment increases by 0.6%, amounting to a 7.2% annual increase.
Deferring to age 70 results in a 36% permanent increase in monthly payments, raising the amount to approximately $990 per month.
This strategy is particularly beneficial for individuals in good health or those who do not require immediate financial support.
Integrating OAS with Other Retirement Income Sources
While OAS provides a stable foundation, it may not cover all retirement expenses. Combining OAS with the Canada Pension Plan (CPP) and income from savings accounts like Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs) can enhance financial security.
Investing in dividend-paying stocks through a TFSA is an effective way to generate tax-free passive income.
Diversified Royalty Corp (TSX:DIV)
- Share Price: $2.96
- Dividend Yield: 8.44%
- Potential Annual Income: A $7,000 TFSA investment can generate $590.80 annually, or approximately $49.23 monthly, in tax-free dividends.
Diversified Royalty Corp derives royalties from established brands like Mr. Lube and AIR MILES, offering consistent dividends since its inception in 2014. This reliability makes it an attractive option for income-focused retirees.
Aecon Group (TSX:ARE)
- Share Price: $27.05
- One-Year Price Return: +112.74%
- Dividend Yield: 2.81%
Aecon Group operates in construction and engineering, sectors poised for growth as infrastructure projects expand.
With a $6 billion project backlog as of Q3 2024, Aecon offers steady revenue growth, making it a promising investment for retirees seeking both income and capital appreciation.
Strategies for a Balanced Retirement Plan
- Optimize OAS: Consider deferring payments to age 70 for higher long-term benefits.
- Maximize Savings Accounts: Utilize TFSAs and RRSPs to build tax-advantaged retirement income.
- Invest Wisely: Select reliable dividend stocks like Diversified Royalty Corp for passive income and growth-oriented companies like Aecon Group for capital appreciation.
By combining these approaches, retirees can create a comprehensive plan to ensure a secure and comfortable retirement.
| Deferral Age | Monthly OAS Payment | Annual OAS Income | TFSA Investment | Potential Annual Income |
|---|---|---|---|---|
| 65 | $727.67 | $8,732.04 | $7,000 | $590.80 |
| 70 | $990.00 | $11,875.57 | $7,000 | $590.80 |
| 65 | $727.67 | $8,732.04 | $14,000 | $1,181.60 |
| 70 | $990.00 | $11,875.57 | $14,000 | $1,181.60 |
The OAS program remains a critical safety net for Canadian seniors. While the payments alone may not suffice for all financial needs, strategies like deferring benefits and leveraging investments through TFSAs and RRSPs can make a significant difference. Smart planning today lays the foundation for a financially stable and fulfilling retirement.
FAQs
Can I defer OAS payments?
Yes, you can defer OAS payments for up to five years, increasing your payments by 0.6% for each month deferred, up to a 36% increase at age 70.
What is the maximum OAS payment?
For the first quarter of 2025, the maximum monthly OAS payment at age 65 is $727.67. By deferring to age 70, this amount increases to approximately $990 per month.
How can I enhance my retirement income?
Combining OAS with CPP and income from savings accounts like RRSPs and TFSAs can bolster your retirement income. Investing in dividend-paying stocks through a TFSA is an effective strategy for generating tax-free passive income.
