Planning for retirement is a major milestone, and one of the most significant sources of income for Canadians is Old Age Security (OAS). The OAS pension provides a modest, taxable monthly benefit to eligible seniors for life. At Edward Jones, we understand the complexities of retirement planning, which is why we’ve compiled the top 10 questions we’re asked about OAS.
Table of Contents
1. How Do I Qualify for an OAS Pension?
OAS eligibility depends on your age and residency in Canada, not your employment history. You may qualify even if you’ve never worked or are still employed.
For Canadians living in Canada:
- Be 65 years or older.
- Be a Canadian citizen or legal resident when your application is approved.
- Have lived in Canada for at least 10 years after turning 18.
For Canadians living abroad:
- Be 65 years or older.
- Have been a Canadian citizen or legal resident on the day before leaving Canada.
- Have lived in Canada for at least 20 years after turning 18.
Service Canada often automatically enrolls eligible seniors and will notify you if this applies to you.
2. How Much OAS Pension Will I Receive?
The amount varies based on your years of residency, age, and net income from the previous year.
Maximum OAS pension amounts (January–March 2024):
- Aged 65–74: $713.34 per month.
- Aged 75+: $784.67 per month (includes a 10% increase introduced in July 2022).
If your income exceeds certain thresholds, your OAS benefits will be reduced through the recovery tax, also known as the clawback.
3. What is the OAS Clawback?
The OAS clawback applies when your income surpasses the annual threshold. For every dollar above the threshold, your OAS is reduced by 15%.
- Recovery tax threshold (2023 income): $86,912.
- OAS fully clawed back at:
- $142,609 (ages 65–74).
- $148,179 (ages 75+).
4. Are OAS Benefits Taxable?
Yes, OAS benefits are fully taxable without preferential treatment. However, supplementary benefits such as the Guaranteed Income Supplement (GIS) and Allowance benefits are tax-free.
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5. When Can I Start Receiving OAS Benefits?
The standard age to begin OAS benefits is 65. While early payments are not allowed, you can defer benefits up to age 70. Payments increase by 0.6% per month (7.2% per year) for every month you delay, up to a maximum increase of 42% at age 70.
6. When Should I Start Receiving OAS?
This decision depends on your personal and financial circumstances. Consider:
- Tax rate: Deferring payments may be beneficial if you’re in a high tax bracket.
- Income: If your income exceeds clawback thresholds, delaying OAS can help maximize benefits.
- Need for income: If you require funds to maintain your desired retirement lifestyle, starting at 65 may be necessary.
- Health and longevity: Those with longer life expectancies may benefit from deferring OAS, while individuals with shorter life expectancies might prefer earlier payments.
- Lifestyle: Your current plans and financial goals may influence your decision.
Consulting a financial advisor can help you determine the optimal timing.
7. Are There Additional Benefits for Low-Income Individuals?
Yes, low-income seniors may qualify for supplementary tax-free benefits:
- Guaranteed Income Supplement (GIS): For seniors 65+ receiving OAS with incomes below $21,624 (2024). Maximum monthly payment: $1,065.47 (2024).
- Allowance: For individuals aged 60–64 whose spouse or partner is eligible for GIS, with combined income below $39,984 (2024). Maximum monthly payment: $1,354.69 (2024).
- Allowance for the Survivor: For widowed individuals aged 60–64 with incomes below $29,112 (2024). Maximum monthly payment: $1,614.89 (2024).
8. What Happens to My OAS Pension When I Die?
OAS payments end upon death. There is no survivor or death benefit. Benefits issued after the date of death must be repaid. Notify Service Canada by phone or mail to cancel payments.
9. Can I Split My OAS Pension with My Spouse?
No, OAS pension benefits are not eligible for income splitting with a spouse or common-law partner.
10. How Do I Apply for OAS?
Service Canada may automatically enroll you for OAS. If not, you’ll need to apply online or via a paper application. Check with Service Canada to confirm your enrollment status.
Final Thoughts: Make the Most of Your Retirement
Understanding Old Age Security is key to effective retirement planning. By knowing the details of eligibility, benefits, and supplementary options, you can make informed decisions to optimize your retirement income. For personalized advice, connect with your Edward Jones advisor today.
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