Key Takeaway

The Canada Pension Plan (CPP) and Old Age Security (OAS) form the baseline of retirement income for most Canadians, but they typically replace only 25% to 40% of pre-retirement income. CPP is a contributory pension that grows with your earnings history and can start between ages 60 and 70, while OAS is a non-contributory benefit available at 65 (or later) based on residency. Building a complete retirement plan means understanding how much these programs will pay, when to start them, and how to fill the gap with personal savings in RRSPs, TFSAs, and workplace pensions.

What CPP and OAS Are

The Canada Pension Plan and Old Age Security are federal retirement income programs that provide a financial foundation in retirement, but they serve different purposes and follow different rules.

CPP is a contributory pension program. If you work in Canada (outside Quebec, which has the separate Quebec Pension Plan or QPP), you and your employer each contribute 5.95% of your pensionable earnings between the Year’s Basic Exemption and the Year’s Maximum Pensionable Earnings (as of 2026, the YMPE is $68,500). Self-employed individuals pay both the employee and employer portions. Your CPP retirement pension amount depends on how much you contributed and for how long. According to the Government of Canada, the average monthly CPP retirement pension for new beneficiaries in 2026 is approximately $816, while the maximum monthly amount (for someone who contributed the maximum for at least 39 years) is $1,364.60. You can start CPP as early as age 60 (with a 0.6% reduction per month before 65, totaling 36% if you start at 60) or delay it until age 70 (with a 0.7% increase per month after 65, totaling 42% if you start at 70).

Old Age Security, by contrast, is a non-contributory pension funded from general government revenue. You do not need to have worked or contributed to receive OAS. Eligibility is based on age and Canadian residency: you must be 65 or older and have lived in Canada for at least 10 years after age 18. To receive the full OAS pension, you need 40 years of Canadian residency after age 18. As of 2026, the maximum monthly OAS pension is approximately $713. You can choose to defer OAS past age 65, earning a 0.6% increase per month (up to 36% at age 70), but unlike CPP, you cannot start OAS before 65. OAS is also subject to a clawback (the OAS Recovery Tax) if your net income exceeds a threshold (around $90,997 for 2026). The clawback recovers 15 cents of every dollar above that threshold, and OAS is fully clawed back at a higher income level.

How CPP and OAS Fit Into Your Retirement Income Plan

CPP and OAS together provide a predictable, inflation-indexed base income, but most Canadians cannot retire comfortably on these programs alone. The combined maximum from CPP and OAS is roughly $2,078 per month (as of 2026), or about $24,936 annually. However, most people receive less than the maximum, especially if they had gaps in their earnings history, worked part-time, or took time out of the workforce for caregiving or education.

Financial planners often recommend aiming to replace 70% to 80% of your pre-retirement income to maintain your standard of living in retirement. If CPP and OAS cover only 25% to 40% of that target, the remaining 30% to 55% must come from personal savings (RRSP, TFSA, non-registered accounts), workplace pensions (defined benefit or defined contribution plans), and other sources such as rental income or part-time work.

Because CPP and OAS amounts are known (or can be estimated using the Service Canada online calculator), they serve as the anchor for your retirement income plan. You calculate the gap between your total income need and your expected government benefits, then determine how much you need to save in your RRSP, TFSA, or other accounts to fill that gap. For example, if you need $50,000 per year in retirement and expect $20,000 from CPP and OAS combined, you need to generate $30,000 annually from your own savings. Using the 4% withdrawal rule as a rough guideline, that would require approximately $750,000 in invested assets at retirement.

Key Considerations for CPP and OAS in Your Plan

When to Start: The decision of when to start CPP and OAS is one of the most important retirement planning choices. Starting CPP at 60 gives you income earlier but permanently reduces the monthly amount by 36%. Delaying until 70 increases the monthly amount by 42% and provides more protection against longevity risk (outliving your savings). The break-even age (the point at which the total lifetime benefits from delaying surpass those from starting early) is typically around age 74 to 76, depending on your assumptions. If you expect to live into your 80s or 90s, or if you have other income sources to bridge the gap until 70, delaying CPP (and OAS) can significantly increase your total lifetime benefits. Conversely, if you need the income early, have health concerns, or lack other savings, starting at 60 or 65 may be the right choice.

Read also: Best ETFs for an RRSP in Canada in 2026: Build Tax-Deferred Growth

OAS Clawback: High-income retirees must plan for the OAS clawback. If your retirement income (from RRSP/RRIF withdrawals, workplace pensions, investment income, and CPP) pushes you above the clawback threshold, you will lose 15 cents of every OAS dollar for each dollar over the limit. Strategies to reduce the clawback include withdrawing from your RRSP earlier (before you start OAS or CPP), maximizing TFSA contributions (TFSA withdrawals are not considered income and do not trigger the clawback), income splitting with a lower-income spouse, and timing capital gains or other one-time income events carefully.

Guaranteed Income Supplement (GIS): For low-income seniors, the Guaranteed Income Supplement provides additional monthly income on top of OAS. GIS is income-tested and reduces as your other income rises. If you expect to qualify for GIS, you must plan carefully: for example, withdrawing from an RRSP or RRIF can reduce your GIS entitlement dollar-for-dollar (or more, depending on the clawback rate), while TFSA withdrawals do not affect GIS eligibility. This makes the TFSA an especially valuable savings vehicle for lower-income retirees.

Integration with Personal Savings: CPP and OAS start at specific ages (60 to 70 for CPP, 65 to 70 for OAS), but many Canadians retire earlier. If you plan to retire at 55 or 60, you need a bridge strategy to cover living expenses until government benefits begin. Common approaches include drawing down non-registered savings first, using TFSA funds, or taking a smaller early CPP payment while preserving RRSP assets for later. Once CPP and OAS begin, you can reduce withdrawals from your RRSP/RRIF, allowing those assets to continue growing tax-deferred.

Conclusion

CPP and OAS provide a stable, inflation-protected foundation for retirement income in Canada, but they are not designed to fully replace your working income. Understanding how much you can expect from these programs, when to start them, and how they interact with personal savings, the OAS clawback, and programs like GIS allows you to build a retirement plan that covers your needs throughout your retirement years. Most Canadians will need to supplement government benefits with RRSPs, TFSAs, workplace pensions, or other savings to achieve a comfortable retirement. Amounts and thresholds change annually, so verify current CPP and OAS rates and contribution limits on the Government of Canada website, and consider consulting a Certified Financial Planner (CFP) or Chartered Professional Accountant (CPA) for advice tailored to your personal situation.

Financial Disclaimer: This article is for educational and informational purposes only and does not constitute personalized financial, tax, or investment advice. CPP and OAS rates, contribution limits, clawback thresholds, and program rules change annually. Verify current amounts and eligibility requirements on the official Government of Canada website before making any retirement planning decisions. Consult a qualified financial adviser, Certified Financial Planner (CFP), or Chartered Professional Accountant (CPA) for advice specific to your personal circumstances.