Over the past couple of years, the Government of Canada has phased in a laudable process: auto-enrolling eligible seniors at age 65 for Old Age Security (OAS) payments. Instead of you having to proactively apply for OAS, the government will determine eligibility a month after you turn 64. If eligible, you will get a letter notifying you of automatic enrolment beginning at age 65. Nothing else you need to do.
Simplifying access to government benefits should be celebrated, and will benefit almost everyone.
Working past age 65 is no longer uncommon. Canadians work past age 65 for many reasons. Some have to, and some want to. For working seniors, receiving OAS at 65 may not be desirable and you may want to delay receipt of your OAS benefit. Here’s why:
- Canadians can defer OAS payments to age 70. If you delay receiving your OAS pension, your monthly pension payment will be increased by 0.6 percent for every month you delay receiving it, up to a maximum of 36 percent at age 70.
- Old Age Security begins to be “clawed back” when total net world income is above a certain amount. For 2017, this amount is $74,788. OAS is recovered at a rate of 15 cents per dollar above this amount, until it is completely clawed back at income of $121,314.
- Even if OAS is not clawed back, working seniors are likely in a higher tax bracket than when they retire. This means they’ll pay more tax on their OAS payment than if they waited to collect in a lower income year.
In short, working seniors can lower their taxes, avoid OAS clawback and receive a higher OAS benefit if they delay OAS.
Sign me up! I mean, don’t sign me up, for OAS. Find out how to delay OAS here.