CPP and OAS Aren’t Enough: Here’s How to Fill the Gap

Are you approaching retirement age and questioning whether the Canada Pension Plan (CPP) and Old Age Security (OAS) will be enough for you to retire on?

You’re not alone.

Many Canadian retirees find that CPP and OAS are not sufficient to cover their expenses in retirement. According to the Federal Government, the average CPP cheque for 2026 is $803, while the maximum for somebody first taking benefits at age 65 is $1,500. OAS, meanwhile, is $728 per month for those aged 65 to 74 and $800 per month for those 75 or older.

In an absolute best-case scenario–where you contribute the maximum pensionable amount every year of your career and start CPP at age 65 or older — you might be able to pay for your retirement on CPP and OAS alone. However, most Canadians start CPP close to age 60, and not everybody earns the maximum pensionable amount. So what happens often enough is that many retirees earn just an $800 CPP cheque plus about $700 in OAS.

You don’t need me to tell you that that’s not enough money to cover your expenses. In Toronto, the amount above wouldn’t cover rent on a one-bedroom apartment. Even in small towns, it wouldn’t cover all of a retiree’s life expenses. With that in mind, here’s how to fill the gap between CPP/OAS and your retirement spending needs in 2026.

Have you taken CPP yet?

Before going any further, I should mention that whether or not CPP or OAS are “enough” depends on when you elect to take CPP. If you haven’t taken CPP yet, you could increase your amount by delaying the date on which you first take it. If you’re able-bodied and healthy, this is quite doable. However, if you’re already retired and first took CPP more than 12 months ago, this door is closed to you. If that’s the case, then read on, because I’ll show how you can plug the gap in retirement.

Invest in a TFSA

A good way to plug the gap between CPP/OAS and expenses in retirement is to invest in a TFSA. I say TFSA here instead of RRSP because you might not want to start drawing down your RRSP just yet. The TFSA lets you start withdrawing funds (e.g., earned dividend income) whenever you want, making it more flexible for retirees who want to invest.

In 2026, $109,000 worth of TFSA contribution room has accumulated. If you’re approaching 60 and haven’t opened an account, then you are eligible to deposit that entire amount. By investing $109,000 into a portfolio of dividend-paying stocks and exchange-traded funds (ETFs), you could generate a surprising amount of extra income.

Consider Vanguard FTSE Canada High Dividend ETF (TSX:VDY), for example. It’s a Canadian ETF built on high-yield dividend stocks. Most of the stocks in its portfolio are in sectors like banking, energy, utilities and insurance. This is a solid mix of industries, constituents of which can thrive in a variety of different economic conditions. The fund has a 3.24% trailing yield, which is far above average for TSX stocks as a whole. So, an investment in VDY could add considerable passive income to your portfolio.

With a diversified portfolio of funds like VDY, you could establish a retirement income stream worth thousands of dollars per year that supplements your CPP and OAS. In the best-case scenario, you could really grow your wealth. In any case, you’ll have more income than you’d have with CPP and OAS alone.