Evelyn Jacks: How to Postpone Your OAS

As of July 2013, OAS recipients can elect to defer taking their OAS pension for up to five years. This would provide for a larger pension then.

For those who have already started to receive their Old Age Security, you must make the decision to defer within 6 months of your start date. After this, you can’t change your mind and decide to defer your pension. 

But if you have already started receiving your OAS and are in the first six months of receipt, you can change your mind and decide to defer starting until a later date. You will have to send back any OAS you’ve already received, however. 

For high-income earners who would have that income clawed back anyway, the repayment is equivalent to the OAS clawback.

Here’s how to do it:

• Shortly after your 64^th birthday, you’ll receive a letter from Service Canada indicating that you will be eligible for OAS as of your 65^th birthday. If you do nothing, your OAS will start automatically. If you wish to defer receipt of OAS, tick the box “I declare that I do not wish to receive OAS at this time” at the end of the letter, sign it and return it to Service Canada.
   
• If you have already received your first OAS cheque and wish to defer, your can send a written request to Service Canada to cancel your OAS, so long as you have received it for less than six months. Within six months of the grant of your cancellation request, you’ll have to repay the full OAS amount that you have already received.

The postponement might also work to your advantage to reduce taxes on other income, particularly if you are single and can’t split income with a spouse. By creating this “untaxed retirement income room” you could generate tax on other sources, such as RRSP or RRIF savings, that would otherwise attract higher tax rates at death or if OAS were taken at the same time.

It’s Your Money. Your Life. Retirement income planning can be complex, but it’s fun to get the results you need on an after-tax basis. Investing some time in the process can help you fund wants instead of needs.

Evelyn Jacks is president of Knowledge Bureau and author of 51 books on tax and personal wealth management. She is also the founder and director of the Distinguished Advisor Conference (DAC). The theme of the 2014 three day think tank in Horseshoe Bay, Texas Nov 9-12 will be “Think BIG: Find the Sweet Spots in Wealth Management”  Follow Evelyn on Twitter at @EvelynJacks.