If you are a senior over the age of 75, you will have received a notification about a new increase in your Old Age Security (OAS) benefits. OAS is a monthly payment that is given to seniors who are at least 65 years old. You are eligible for this benefit if you have lived in Canada for at least the last 65 years. However, you should be aware of several factors before making a decision about your monthly income.
Delaying OAS may be better than delaying CPP
Delaying the increase in Old Age Security (OAS) payments is an option available to most Canadian seniors. It can improve a pensioner’s benefits and reduce their tax bill. But it comes with a price. There are several important factors to consider before deferring. Whether you are deciding between deferring CPP or OAS payments, you should weigh the advantages and disadvantages carefully.
When you delay your CPP or OAS, you are essentially putting your retirement savings to work. Depending on your financial situation, you might be able to draw upon your savings in an interim period. You might also be able to sell your capital assets at a higher rate. However, this type of income is not taxed the same as investment income.
Delaying the increase in OAS can also help you avoid being hit with the clawback tax. The actuarial adjustment for deferring your OAS past 65 is 36% compared to the 42% actuarial adjustment for deferring CPP.
However, delaying the OAS will result in a larger monthly payment. This is because the base OAS benefit is more than a third higher for delayed recipients. And the increase in the OAS payment is indexed to inflation, so your monthly benefit will increase every three months. For a 65-year-old couple, this would mean an additional $277 per year.
A 10% boost to your OAS benefit is also available if you delay your enrolment to age 75. In addition to the OAS’s actuarial increase, the government recently added a quarterly inflation adjustment to the payment amount. These adjustments are rare, but they are meant to make up for inflation and ensure that the benefits remain consistent with the cost of living.
There are many reasons why you might want to postpone the increase in your OAS benefits. One reason is if you plan on spending down your RRSP funds before you die. Alternatively, you may be preparing to leave an inheritance to family or charity. Another reason is if you want to keep your investments intact.
Some people have a hard time deciding between deferring CPP or deferring OAS. They may feel that delaying the increase in their pension is a luxury, or they are concerned about how long they can survive to get it. If you are considering deferring the increase in your pension, you should talk to your employer or the plan sponsor to determine what the impact will be on your benefit.
Although you can delay your CPP or OAS for as many years as you wish, you must have sufficient retirement savings. If you do not have a sufficient amount, you might end up burning through your RRIF assets before you reach 70. Moreover, you must be sure that your investments are worth something.
Old Age Security is a monthly payment for seniors over 65 years of age
If you are over 65 years of age, you may be eligible for a monthly payment under the Old Age Security program. This is a federally funded public pension program that provides a modest monthly benefit to seniors in Canada.
The pension is designed to supplement your retirement income and is subject to tax. Your monthly benefit is adjusted quarterly based on changes in the Consumer Price Index. When you reach 65, you will be automatically enrolled in the OAS program. Alternatively, you can apply to receive the benefits.
To qualify for an Old Age Security pension, you must be a Canadian citizen, a resident of Canada, and have lived in Canada for at least 10 years since you turned 18. You can defer your benefits for up to 60 months, and the first payment will begin when you turn 65. However, if you delay your pension, your payments will increase for each month you delay.
A monthly payment from the provincial government, known as the Senior’s Supplement, is also available to eligible seniors. In March 2020, there were 2.1 million people receiving GIS.
Some seniors receive additional benefits from the Government of Ontario or British Columbia. These include supplemental health benefits and reduced semi-annual deductibles. Additionally, many local government agencies provide senior support programs.
Another benefit from the Government of Canada is the Senior’s Price Index. It is a measure of the cost of living for seniors. It has a maximum recovery threshold for 2022 of $134,626. For more information, visit the Government of Canada’s website.
Old Age Security (OAS) is one of the largest pension programs in the country. The amount of your monthly payment is based on your income, length of residency in Canada, and your age. In addition to this, you can receive a guaranteed income supplement that adds extra financial benefits to your OAS pension.
The Guaranteed Income Supplement is only available to residents of Canada. It provides extra financial assistance to low-income individuals who are eligible for the Old Age Security pension. Unlike the Senior’s Supplement, the Guaranteed Income Supplement is not automatically included in the monthly OAS payment.
To apply for the Guaranteed Income Supplement, you must be a resident of Canada, meet the income requirements, and have a pension of at least $2,740. If your annual income is less than the yearly income threshold, you can contact Service Canada to see if you are eligible.
You will receive a notification letter from Service Canada when you become eligible for the program. You can also apply for the benefits online if you do not receive the letter.
Getting a taxable monthly payment can help you maintain your quality of life and avoid destitution. The Government of Canada offers several other types of pension benefits for seniors.
Lifetime loss calculation
The lifetime loss calculation for a senior with a defined benefits plan can be a daunting prospect. Thankfully, there are ways to reduce the sting. One such tactic involves deferring benefit payments to a later date in retirement. Alternatively, a hybrid pension scheme can provide both a defined benefit and a money purchase option. This can be a boon for those who are looking to maximise their cash flow.
One of the best ways to do this is by taking advantage of a pension’s drawdown feature. Unlike other options, this one has the added benefit of not using up your LTA. You can leave this money unused, or use it to fund a drawdown for your surviving spouse. It can also be used to supplement your own pension, should you resign. If you are unsure about the amount of cash you can afford to part with, you might want to consult your financial adviser.
Another way to reduce the lifetime loss is to defer your benefits until you reach age 65. Many employers allow you to do this and then switch to a smaller benefit at an older age. Similarly, you can opt to take out a larger sum of money in order to enjoy some of the retirement lifestyle that you have always dreamed of. As for when you should make this choice, it’s entirely up to you. Your provider should be happy to advise you on the best course of action.
Although it may be difficult to choose between the various options, the right decision is the best path to a secure financial future. By taking the time to learn more about your pension, you can make better decisions when the time comes. Using a specialist broker can help you get the most from your pension, while ensuring you have the peace of mind you deserve. There’s no better time than the present to find out what your plan can do for you. So, start planning for your retirement today. Remember, you don’t have to wait until your 75th birthday to start reaping the rewards of a lifetime of saving. A well designed plan can be a lifesaver. With a little bit of effort, you can ensure that the retirement you have always wanted is yours.