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Koroll & Company Blog

When to Start Collecting Your Old Age Security Benefit

[fa icon="calendar"] Jun 19, 2019 11:00:00 AM / by Allen Koroll

A happy retired couple

When it is time for you to retire, there are a number of retirement tools you can draw from when you reach retirement age – Employer-Sponsored Pension Plans, Registered Retirement Savings Plans, Registered Retirement Income Funds and the Canada Pension Plan – but, whether you receive these and the amount you receive, is based on contributions made to these accounts.

The Old Age Security (OAS) benefit, however, is available to all Canadians, as it is funded through tax revenues. To qualify for OAS, you simply have to be a Canadian Resident who is 65 or older and has lived here for 40+ years after the age of 18 to receive the maximum monthly benefit which is adjusted quarterly in January, April, July, and October.

For the first and second quarters of 2019, the maximum monthly taxable benefit is $601.45.

If you have not lived in Canada for 40+ years, you may still be eligible for the benefit, however, you will only receive 1/40th of the maximum amount for each year you resided in the country.

Up until July of 2013, OAS was automatically paid out when recipients reached the age of 65. However, rules changed in 2013 which now allow individuals to defer their OAS payments up to five years.

If you choose to take this deferral, your pension amount will increase by .06% monthly to a maximum of 36% at age 70, if you were to defer your payments for the whole five years.

Whether or not you should take this deferral, and the set period of time you take it for depends on three important factors.

1 - Income requirement

You must first determine how much money you will require to meet your current financial needs. This includes paying your mortgage, utilities, insurance, car payments, food, incidentals, medical, clothing, etc. but you also need to consider the lifestyle you want in retirement – will you travel, buy recreational vehicles, purchase a golf membership, etc.?

2 - Income sources

Determine where your income will come from to pay these bills - What other income sources will be available during this time period – employment income, investment income, income from other retirement savings tools? Will you be able to make do without the OAS or do you need it to pay critical bills?

3 - Income tax implications

Your tax strategy at any time in your life, but especially at retirement is to ensure you can live a comfortable lifestyle while minimizing tax owing and the loss of tax credits and benefits. 2019 rates and limits you will want to consider during your tax planning strategy include, but are not limited to:

  • Federal tax brackets - 15% on up to $47,630 in income, 20.5% on next $47,629, 26% or more on remaining income up to a rate of 33%.
  • The Age Amount – Non-refundable tax credit of $7,494 that is reduced gradually for any income over $37,790.
  • GST/HST Refundable Tax Credit – Full credit is received where family net income is less than $37,789.
  • OAS Clawback – OAS recovery tax paid at a rate of 15% of income over $75,910.

Note that these benefits, credits, clawbacks and tax rates, as well as their limits, can change from year to year, so you will have to continually analyze the tax implications as well as any changes to income or expenses.

To further discuss your retirement plan and whether or not you should defer your OAS benefit, contact us today. We would be happy to look at your unique decisions to help you make the best possible decision for your tax planning strategy.


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The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.



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Topics: Pension Plans

Allen Koroll

Written by Allen Koroll