In this article, let’s talk about Retirement Benefits and Old Age Security Pension (OAS). Let’s get started.
What is Old Age Security(OAS) Pension?
The Old Age Security pension is one of the three pillars in the Canadian retirement Income System.
The other two important pillars to note are the Canada Pension Plan(CPP) and Employment Pension Plans(EPP).
Old age security pension is a taxable monthly payment accessible to seniors who are aged 65 and above and who meet the eligibility requirements. Let’s look at the eligibility requirements in just a bit.
Also another thing to note about The OAS is that, Old Age Security benefits are not tied to your employment.
You’ll be eligible to receive the OAS pension even if you have never worked or are still employed.
In addition to the OAS pension, there are other benefits that low income seniors may also qualify for:
The Guaranteed Income Supplement,
Allowance for the Survivor
I’ll discuss these in a separate article.
Eligibility for Old Age Security Pension (OAS)
In this section, let’s talk about the eligibility to get the Old Age Pension (OAS):
You must be at least 65 years of age while applying
If you are living in Canada: You must be a Canadian Citizen or legal resident and must have lived in Canada for at least 10 years after you turned 18
If you are living outside Canada: You must have been a Canadian citizen or legal resident before you left Canada and must have resided in Canada for at least 20 years since you turned 18.
Applying for OAS Pension
So you meet all of the eligibility conditions outlines at canada.ca. Now that’s great news.
Next, How do you apply for the OAS Pension?
You’ll need to go to this link in-order to starting receiving your old age pension – https://www.canada.ca/en/services/benefits/publicpensions/cpp/old-age-security/apply.html
If you wish to start receiving your OAS pension on time, you can send in your application the month after you turn 64.
Service Canada will also enrol seniors automatically and send a confirmation notification letter.
If you are not automatically enrolled, complete and mail the Application for the Old Age Security Pension Form from the above link. It’s better you do it ASAP to avoid delayed payments.
Amount You’ll Receive from OAS in 2019?
The amount you will receive on a monthly basis depends on how long you have lived in Canada after turning 18.
To qualify for a full OAS pension, you must have lived in Canada for at least 40 years after age 18.
You will receive a partial pension benefit if you haven’t resided in Canada for the full 40 years.
The partial pension benefit is 1/40th of the full pension amount for each complete year you lived in Canada after age 18.
For example, if you had lived in Canada for 20 years as an adult, you may qualify to receive 20/40th or one-half of the full benefit.
OAS benefits are adjusted quarterly in January, April, July, and October based on the prevailing Consumer Price Index.
For the first quarter of 2019 (i.e. January to March), the maximum monthly OAS benefit is $601.45.
OAS PAYMENT DATES FOR 2019
Below is the payment dates every month that you’ll receive OAS Pension Amount:
January 29, 2019
February 26, 2019
March 27, 2019
April 26, 2019
May 29, 2019
June 26, 2019
July 29, 2019
August 28, 2019
September 26, 2019
October 29, 2019
November 27, 2019
December 20, 2019
What is OAS Deferral? Does it Apply to me?
As of July 1st, 2013, individuals can voluntarily defer their OAS pension for up to 5 years after the date they become eligible.
The deferral will make them eligible for a higher monthly pension later.
For instance every month the OAS is deferred, the monthly pension amount increases by 0.6% up to a maximum of 36% at age 70.
What is OAS Recovery Tax?
OAS Clawback is officially known as the OAS recovery tax.
Your OAS benefit may be reduced by a clawback if your net income for the previous calendar year exceeds $77,580 for 2019.
If your net income exceeds this amount, you must pay back 15% on the excess income up to a maximum of the total OAS benefit received.
This deduction is like an additional 15% tax on top of your current tax rate.
OAS Clawback Example
For the January to March 2019 quarter, if your net income exceeds $125,696, your OAS benefit will be reduced to zero.
5 Simple Steps To Help You Reduce OAS Clawbacks
A few strategies that can possibly help you to limit OAS clawback:
1. Split Your Net Income With Spouse
By Splitting your eligible pension income.
By eligible pension income; I mean to say all income sources such as – workplace pension, RRIF, and maximizing spousal RRSP’s.
By doing so you’ll be able to lower your spouses overall income and reduce OAS clawback.
2. Defer OAS/CPP
As you already know by now, as a Canadian Senior you can defer OAS pension payment for up to 5 years from the eligibility date.
Also, CPP can be deferred as well.
However, note that deferring OAS or CPP or both; will increase your benefits later down the road and could then trigger OAS clawbacks.
3. Prioritize TFSA Contribution
TFSA’s are tax free savings investments.
Income you’ll generate from TFSA investments are non-taxable and do not count towards your net income.
Also, make sure that you and your spouse maximize your TFSA contributions.
4. Make the best of your RRSP Contribution Room
Quick Fact – You’ll be able to contribute to an RRSP until the end of the year you’ll turn 71.
With that said, if you have any unused RRSP contribution room left from previous years, contributing to an RRSP will lower your net income for OAS clawbacks.
Also, make sure your spousal RRSP contributions is well utilized as well.
5. Optimizing Other Taxable Investments
Interest income from GIC’s, Savings, etc are fully taxed.
Dividends and other interest generated will push your income over the maximum threshold.
Did you also know that, 50% of capital gains are included in taxable income.
OAS Contact or Further Help
If you have questions or concerns about the Old Age Security pension, you can directly get in touch with Service Canada at the phone number 1-800-255-4786.
Also do visit a Service Canada nearby your location.
Please let me know your thoughts and comments below.
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Hey, I’m Sagar from Toronto, Canada.
I am a self-taught, motivated Canadian Personal Finance Blogger who loves writing articles about Savings, Investing, Stocks & ETF reviews, Side Hustles, Frugal Living, Credit Cards and Retirement Planning. Husband. Father. Software Developer. Web Designer. Hiking Enthusiast.