Are you familiar with the Old Age Security (OAS)? It's a benefit for Canadian seniors and one of the sources of income to consider when planning your retirement. Read on to learn more about it and find out at what age you should apply for it.
First, the OAS isn’t based on the number of years you worked. In fact, you don’t even need to be retired or have ever held a job to qualify. To receive all or part of the OAS, you must meet the following three criteria:
Good to know: You may still qualify for the OAS even if you live or have lived outside Canada. For full details and criteria, visit the federal government page dedicated to these specific situations.
To qualify for the maximum amount, you must have lived in Canada for 40 years since age 18.
Those who are citizens or legal residents and have lived in Canada for between 10 and 39 years after they reached the age of majority (age 18) will qualify for part of the benefit.
If you qualify for a partial OAS because you’ve lived in Canada for between 10 and 19 years since the age of 18, you must be living in Canada to receive it.
However, if you qualify for full or partial OAS and have lived in Canada for 20 years or more since age 18, you can claim the OAS no matter where you live in the world.
The amount received will be based on the number of years spent in Canada divided by 40 (so you’ll receive 1/40th of the benefit per year of residence).
For example: Julie became a legal resident of Canada at age 45. She will therefore receive 20/40th of the pension (so half) if she applies at age 65. Why? Because she lived in Canada for half of the 40 years required to receive the full OAS (she lived in Canada for 20 years before applying for it).
Pro tip: While it’s always very important to save and adequately plan your retirement, it’s even more important if you don’t have access to the full OAS amount. Feel free to meet with one of our specialists for help.
Yes, this can happen. It depends on the two thresholds set by the federal government. If your income exceeds the first threshold, you must repay part of your OAS. When your income is higher than the second threshold, you'll have to repay your OAS in full.
What if your income exceeds the first threshold, but not the second? You’ll have to repay 15% of the difference between your net income (after tax and deductions) and the minimum clawback threshold set by the government each year. To calculate the amount you may have to repay:
Good to know: Different repayment calculations may apply for those living in a country other than Canada.
The amount is reviewed four times a year to take into account changes to the cost of living. This is called indexation: benefits may increase according to the Consumer Price Index. It’s a way of reducing the effects of inflation, an important component of retirement planning. Rest assured that the amount you receive each month won’t go down, even if the cost of living does.
Good to know: The government has announced that the OAS amount will be increased by 10% for recipients aged 75 and over starting in July 2022.
Yes, the Old Age Security you receive is taxable. You must include it on your income tax return each year.
Some people may want to wait to get the OAS because the longer you wait, the greater the benefit amount. But there is no right answer, it depends on your situation. Speak to a trusted specialist before making a decision. Your decision to delay the OAS benefits or not will have an impact on the rest of your financial planning for your retirement.
By postponing the OAS, you'll increase the amount you receive each month. Starting the month after your 65th birthday, for each month you don’t collect your OAS, the amount increases by 0.6%. So if you put off receiving the OAS for 60 months after you're qualified, you could get a 36% increase in your benefit.
People who are healthy and have enough income may be advised to postpone receiving their OAS. One strategy that some people use is to withdraw money from their RRSPs between the ages of 65 and 70 while they wait to receive their OAS.
Those who need the OAS for their basic needs should apply for it as soon as they qualify.
There is little advantage to delaying the OAS if you qualify for the Guaranteed Income Supplement (GIS) or the spousal Allowance. It’s always a good idea to talk to your specialist to properly plan your retirement. To receive the GIS, you must also be receiving the OAS. Does this apply to you? You should receive both your OAS and the GIS starting the month after your 65th birthday.
Individuals with lower life expectancy due to their health should discuss the OAS pension with their specialist. Together, you’ll be able to determine the best time to receive it.
In some cases, the federal government will send you a letter the month after your 64th birthday informing you that you’ll receive the OAS pension. You’ll then have to decide whether to claim it the month following your 65th birthday, or later, on the date you choose. Remember that after age 70, there are no benefits to delaying your OAS pension (the amount won’t increase), so be sure to claim it by then
You'll be mailed a cheque or the payment will be deposited into your bank account if you’re registered for direct deposit with the Canada Revenue Agency.
What happens if you qualify for the OAS but haven’t been contacted? In this case, you may have to apply to Service Canada.
Good to know: Instead of waiting until you file your next income tax return to adjust your OAS, contact the federal government as soon as your situation changes or if you think you’re not receiving the right amount. That way, your benefits will be adjusted more quickly.
For many retirees, government benefits such as the OAS are key to their financial planning. That’s why it’s important to understand how it works and when you should apply for it. To help you figure it all out and successfully plan your retirement income, talk to our specialists. We’re here to answer your questions.
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