OAS Deferral Bonus: Delaying OAS Past 65

Old Age Security can be deferred up to age 70 in exchange for a 0.6% increase per month past 65, up to a 36% increase at age 70. Unlike CPP, OAS cannot be started before 65. Deferral is most valuable for retirees who do not need OAS income at 65, expect to live well past the breakeven age (~84), or want to manage OAS clawback exposure during high-income years between 65 and 70.

OAS deferral mechanics

OAS amounts are indexed quarterly to inflation. The bonus is calculated on the base OAS amount for the start date, then continues to be indexed. Once OAS starts, the rate is locked.

The 75-plus bump still applies

OAS recipients aged 75 and over receive an automatic 10% increase to OAS regardless of when they started. A retiree who deferred OAS to 70 with a 36% bonus also gets the 10% bump at 75, which is added on top: 1.36 × 1.10 = 1.496, or roughly a 49.6% effective increase over the original base age-65 amount.

Breakeven analysis

Breakeven for OAS deferral is approximately age 84. A retiree who defers to 70 and lives to 83 has received less total OAS than if they had started at 65; living to 85 or beyond, the deferred-to-70 strategy pays more.

Worked example: at Q2 2026 base $743.05/month:

• Start at 65: $743.05 × 12 × 19 years (to age 84) = $169,376
• Start at 70: $1,010.55 × 12 × 14 years (to age 84) = $169,772
• The two are approximately equal at age 84. Past 84, deferral wins.

This calculation excludes inflation indexation, which slightly favours deferral (the bonus is applied to indexed amounts each year). Including the 75-plus bump, deferral becomes more attractive past 80.

Deferral and OAS clawback

OAS recovery tax (clawback) reduces OAS when net world income exceeds the annual threshold ($95,323 for 2026 income). Retirees with high RRIF income at age 65-69 may have OAS fully clawed back during those years. Deferring OAS to age 70 (when other income may be lower) preserves the OAS that would otherwise be lost to clawback.

Worked example: a retiree with $120,000 of RRIF income at age 67 has OAS clawback of 15% × ($120,000 – $93,454) = $3,981, exceeding their full annual OAS of $8,917. Deferring OAS to age 70 (when they expect RRIF minimum to be lower than the threshold) avoids this clawback entirely and produces higher OAS at 70.

Reasons to start OAS at 65

• Income is needed at 65 and OAS is one of the few reliable sources.
• Expected lifespan below 80 (terminal illness, poor health, family history).
• Clawback is not an issue (income reliably below threshold).
• Liquidity concerns: deferral means living without OAS for up to 5 years.

Reasons to defer OAS past 65

• Other income covers needs from 65 to 70 (RRIF, employment, defined benefit pension, severance).
• Long expected life: 85+ produces clear lifetime gains from deferral.
• OAS clawback bites at 65-69: deferring preserves what would be clawed back anyway.
• Inflation hedge: larger indexed base produces larger absolute inflation adjustments.

OAS eligibility based on residency

Full OAS at any start age requires 40 years of Canadian residency after age 18. Partial OAS is available with at least 10 years of residency (and 20 years if applying from outside Canada). Partial OAS is calculated as years of residency / 40 × full OAS. The deferral bonus applies to the partial amount.

How to apply or defer

OAS is now mostly automatic for Canadians aged 65 with sufficient residency. Service Canada sends a notification several months before age 65 confirming automatic enrolment. To defer, submit Form ISP-3550 indicating the desired start date (any month between age 65 and age 70). The deferral form is also available through My Service Canada Account online.