Canadian retirement benefits (CPP, OAS, pensions)

The three sources

Most Canadians who've worked a normal career qualify for three kinds of retirement income:

• Canada Pension Plan (CPP) — based on what you and your employers paid in across your working years. Max in 2026 is about $1,500/month if you take it at 65; most people get less. You can take it as early as 60 (with a ~36% permanent reduction) or as late as 70 (with a ~42% permanent increase).
• Old Age Security (OAS) — based on years of Canadian residency after age 18. Full OAS in 2026 is about $730/month ($8,800/yr) if you have 40+ years of Canadian residency. Pro-rated for fewer years. You can take it at 65 (standard) or defer to 70 (with a ~36% permanent increase). No early option.
• Workplace pension (DB or DC) — if your employer offered one. Defined benefit (DB) pensions pay a set amount per month for life; defined contribution (DC) pensions are an investment account you draw from. Most private-sector employers stopped offering DB pensions years ago; public-sector workers, teachers, healthcare workers often still have them.

Why this changes your math

Every $1/yr of benefit income reduces what your portfolio has to cover by roughly $25–$33 of required savings (at the 3-4% SWR range). If you'll get $20,000/yr from CPP + OAS combined, your portfolio needs to cover $20,000 less per year of retirement spending — which means about $500,000 to $660,000 less in required savings.

That's the gap most generic "you need $1.5M to retire" rules-of-thumb miss. They ignore benefits entirely. For an average-career Canadian, ignoring CPP and OAS can overstate required savings by half. The Simple Calculator on this site does the same — it ignores benefits to give you a worst-case anchor. The Advanced calculator models them properly.

The take-up timing decision

For both CPP and OAS, there's a take-up decision: when to start. Earlier means smaller monthly payments forever; later means larger monthly payments forever. The actuarial adjustment factors are calibrated so that, statistically, you'd receive the same total lifetime amount regardless of when you take — assuming you live to the actuarial expected age.

That means the take-up decision is partly a bet on your own longevity, and partly a question of when you need the cash flow. Common reasons to take early:

• You're retiring early and need bridge income
• You have a family-history reason to expect a shorter retirement
• You're confident you can invest the early payments at returns higher than the deferral bonus

Common reasons to defer:

• You're working past 65 (taking benefits while still earning high wages is tax-inefficient)
• You have a family-history reason to expect long longevity
• You want the "longevity insurance" — bigger guaranteed income for the years you live longest

The Advanced calculator models the actuarial adjustment automatically — pick your start age for each, and it computes the adjusted annual amount.

OAS clawback (the "recovery tax")

If your retirement income is high enough, the government claws back some of your OAS. In 2026, the clawback starts at $95,323 of net income and recovers 15 cents of OAS for every dollar over the threshold. Above about $148,000 you lose all OAS.

This matters mostly for retirees with significant pension income or large RRSP/RRIF withdrawals. For most Canadians with average benefits and average spending, the threshold isn't a concern. The Advanced calculator has an OAS clawback toggle if you want to model it.

RRIF mandatory minimums at 71

The year you turn 71, CRA forces you to convert your RRSP to a RRIF (Registered Retirement Income Fund) and start withdrawing a minimum percentage each year. The percentage rises with age — 5.28% at 71, 10% at 88, 20% at 95+. These withdrawals are taxable as ordinary income.

For retirees with large RRSPs, this can create a "forced income" problem in late retirement: combined CPP + OAS + RRIF minimums may exceed what you actually want to spend, pushing you into a higher tax bracket. The standard workaround is to draw down the RRSP voluntarily between ages 60–70 (at lower marginal rates) to reduce the age-71+ balance. The Advanced calculator's "Forced RRIF income at 71" panel shows you whether this is a problem for your numbers.