Almost every retirement plan starts with an assumption about CPP and OAS, and most of those assumptions are wrong in the same direction — people use the maximum, and almost nobody receives it.
For 2026, the maximum CPP at 65 is $1,507.65 a month, but the average for new beneficiaries is only $925.35. Maximum OAS is $742.31 a month at 65–74. Taking CPP at 60 cuts it by 36%; deferring to 70 raises it by 42%. The OAS recovery tax claws back 15 cents on the dollar of net income above $95,323.
The Canada Pension Plan is contributory. What you receive depends on how much you contributed and for how long, based on your earnings history from 18 to 65.
| 2026 CPP retirement pension at 65 | Monthly | Annually |
|---|---|---|
| Maximum | $1,507.65 | $18,092 |
| Average for new beneficiaries | $925.35 | $11,104 |
Two mechanics that help. The general dropout excludes your lowest-earning 17% of months, and the child-rearing provisions exclude or protect years spent raising a child under seven — which materially improves the calculation for parents who took time out. The CPP enhancement, phasing in since 2019, will gradually raise benefits for people contributing during and after that period, so younger Canadians should eventually receive a somewhat higher replacement rate than today's retirees.
Do not guess. Your actual CPP estimate, based on your real contribution history, is available in your My Service Canada Account. It takes ten minutes to check and it is the single most valuable input to any retirement projection you will make.
CPP can start any time between 60 and 70. Starting early reduces it permanently by 0.6% per month before 65; starting late increases it permanently by 0.7% per month after 65.
| Start age | Adjustment | On the maximum | On the average |
|---|---|---|---|
| 60 | −36% | $964.90/mo | $592.22/mo |
| 65 | — | $1,507.65/mo | $925.35/mo |
| 70 | +42% | $2,140.86/mo | $1,314.00/mo |
Those adjustments are permanent and they are indexed, so deferral raises your inflation-protected income for life. On simple cumulative arithmetic, ignoring investment returns:
A Canadian reaching 65 today has a life expectancy comfortably past both figures, which is why the academic and actuarial consensus leans toward deferral for those who can afford to wait. Yet the large majority of Canadians take CPP at or before 65.
The breakeven maths is not the whole decision. Taking CPP early makes sense when: you have a health condition or family history suggesting a shorter life expectancy; you need the income now and the alternative is debt or selling investments in a downturn; or — the subtle one — you are a low-income retiree who will receive GIS, since CPP income reduces GIS and the interaction can erase much of the deferral benefit.
Conversely, deferring is most valuable when you have other income to live on between 60 and 70 (which is exactly what the RRSP meltdown in Lesson 8.3 provides), when you expect to live a long time, and when you value guaranteed, indexed, longevity-proof income more than an uncertain portfolio return. Deferring CPP is, in effect, buying the cheapest inflation-indexed annuity available in Canada.
Old Age Security is entirely different from CPP: it is residency-based, not contributory. You never paid into it directly. Full OAS requires 40 years of Canadian residency after age 18; 10 years qualifies you for a partial, pro-rated amount.
| 2026 OAS | Monthly maximum |
|---|---|
| Age 65 to 74 | $742.31 |
| Age 75 and over | $816.54 |
OAS is indexed quarterly, so the figure drifts upward through the year, and it increases automatically by 10% at 75. It can also be deferred to 70 for a 0.6% monthly increase, up to 36% more — though deferring OAS has a subtlety CPP does not: a larger OAS is more exposed to the clawback below.
The OAS recovery tax — universally called the clawback — reduces OAS by 15 cents on the dollar of net income above $95,323 for 2026. It is fully eliminated at about $154,708 for those aged 65 to 74.
A retiree has net income of $110,000 in 2026.
They lose $2,202 of their roughly $8,908 of annual OAS. And note what this does to their effective marginal rate: on income in that range they pay their ordinary marginal rate plus 15 cents of lost OAS on every dollar — an effective rate approaching 60%.
And here is where Module 2 pays off: TFSA withdrawals are not income. They never appear on the return, so they never trigger the recovery tax. A retiree drawing $30,000 a year from a TFSA and $60,000 from a RRIF has net income of $60,000 and no clawback. The same retiree drawing all $90,000 from a RRIF loses OAS. Same spending, same lifestyle, different accounts.
The Guaranteed Income Supplement is a non-taxable monthly benefit for low-income OAS recipients. And it contains the most under-appreciated fact in Canadian retirement planning:
For a low-income retiree, withdrawing $1,000 from an RRSP does not cost the 15% or 20% income tax they expected. It costs that plus about $500 of lost GIS — an effective rate above 50%, potentially higher than a top-bracket earner pays.
Now put that next to Lesson 2.2. The RRSP is a bet that your marginal rate at withdrawal is lower than at contribution. A person earning $40,000 contributes at roughly 19–24% — and then withdraws in retirement at an effective rate above 50% once GIS clawback is counted.
The arbitrage runs backwards. They took a deduction worth 20% and paid it back at 50%.
For a Canadian who expects to be a GIS recipient — broadly, someone whose retirement income outside OAS will be modest — the TFSA is not merely preferable to the RRSP. It is decisively better, and the gap is larger than almost any other decision in this course. TFSA withdrawals are invisible to GIS, to the OAS recovery tax, and to every other income-tested benefit.
The standard advice to “contribute to an RRSP for the refund” is aimed at middle and higher earners and is actively harmful for lower-income savers — precisely the group least likely to receive tailored advice and most likely to be sold an RRSP at a bank branch in February. If your income is modest and you expect it to stay that way into retirement, fill the TFSA first and keep filling it. This is general education rather than advice for your circumstances, but it is the clearest case in this course where the conventional wisdom is wrong for a large group of people.
The 2026 maximum at 65 is $1,507.65 a month, but the average for new beneficiaries is $925.35 — about $11,100 a year. The maximum requires contributing at or above the yearly ceiling for roughly 39 years, which career breaks, part-time work and lower-earning years all interrupt. Your actual estimate, based on your real contribution history, is in your My Service Canada Account and takes ten minutes to check.
On simple cumulative arithmetic, taking at 65 beats taking at 60 if you live past about 74, and deferring to 70 beats taking at 65 if you live past about 82. Since a Canadian reaching 65 today has a life expectancy well past both, deferral usually wins on the maths. Take it early if you have health reasons to expect a shorter life, if you need the income now, or if you will receive GIS — because CPP income reduces GIS and can erase the deferral benefit.
Net income above $95,323 for 2026. Above that, OAS is reduced by 15 cents on the dollar, and it is fully eliminated at about $154,708 for those aged 65 to 74. TFSA withdrawals do not count as income and never affect it, which is why the account you draw from matters as much as the amount. Note that Canadian eligible dividends are grossed up 38% before entering net income, so they push you toward the threshold faster than the cash you receive suggests.
Educational purposes only — not financial, investment or tax advice. RiskStock is not a registered dealer, adviser, or tax professional. Nothing in this course is a recommendation to buy or sell any security or product. Tax and benefit figures are for the 2026 tax year, were verified against official sources on 2026-07-27, and change annually — confirm your own numbers with the CRA and a qualified professional before acting.