For many Canadians, the Old Age Security (OAS) and Québec Pension Plan (QPP) form the cornerstone of retirement income. However, to effectively plan for retirement, it’s crucial to understand how these programs work and what benefits you can expect to receive.

What Is OAS?

The Old Age Security (OAS) is a government-funded pension program that provides monthly payments to Canadians aged 65 and older. Unlike other retirement programs, eligibility for OAS is based on residency in Canada after turning 18—not work history or income.

To qualify for the full OAS pension, you must have lived in Canada for at least 40 years after age 18.

Average OAS Income

As of October to December 2024, the maximum monthly OAS payments are:

  • $727.67 for individuals aged 65 to 74.
  • $800.44 for those aged 75 and older.

However, the average recipient receives around $600 per month because many do not meet the full 40-year residency requirement.

What If You’ve Lived in Canada for Less Than 40 Years?

If your residency in Canada is less than 40 years, your OAS payment is prorated. For instance, living in Canada for 20 years might entitle you to 50% of the full pension, approximately $363.84 per month.

What Is QPP?

The Québec Pension Plan (QPP) is a contributory retirement program for Québec workers. Your QPP benefits depend on:

  • The contributions you made during your career.
  • The number of years you worked.

QPP benefits can start as early as age 60, though payments will be reduced if claimed before age 65.

Average QPP Income

For 2024, the maximum QPP payment at age 65 is $1,364.60 per month, but the average recipient receives about $758.32 per month. This lower average occurs because many contributors do not contribute the maximum amount throughout their careers.

Combined Monthly Income Example

Based on average payments:

  • OAS: $600/month
  • QPP: $758.32/month

A retiree receiving both OAS and QPP could expect a combined monthly income of approximately $1,358.32, or $16,299.84 annually. While helpful, this amount may not fully cover living expenses, particularly in cities with higher costs of living.

Factors Affecting Your OAS and QPP Benefits

Your benefits depend on several factors:

  • Residency: Fewer years in Canada mean reduced OAS payments.
  • Contributions: Higher contributions to QPP result in higher benefits.
  • Deferring Payments: Delaying OAS or QPP past age 65 increases your monthly payments.
  • Clawbacks: High-income retirees may face OAS reductions due to the OAS Recovery Tax.

Bridging the Gap in Retirement Income

The combined average monthly income from OAS and QPP is around $1,358.32. This raises a critical question:

How will you bridge the gap between this amount and your desired retirement income?

There are three key steps to take to ensure a better retirement

    1. Maximize Retirement Contributions: Take full advantage of RRSPs and TFSAs.
    2. Explore Private Investments: Use diversified investment options to grow your savings.
    3. Consult a Financial Planner: A professional can help you optimize your retirement strategy.

Maximize Your Benefits with Smart Planning

Planning ahead is essential to making the most of your OAS and QPP benefits. By understanding how these programs work and supplementing them with private savings, you can build a more secure retirement.

Start now to ensure your golden years are comfortable and stress-free.