Seniors Get 1% Raise Starting in October

Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) are indexed quarterly through a somewhat complicated formula designed to keep pace with the Consumer Price Index.  But we now know what the total benefit will be for 2019, and what planning needs to take place to maximize it.

For seniors who receive full OAS (i.e. those who have been in Canada at least 20 years), the monthly payment increased $6.07 from $607.46 to $613.53. The total for 2019 is $7,271.67, up $150.36 over the 2018 total.

For those who have delayed the maximum amount (60 months), the monthly payment increased from $826.15 to $834.40 for an annual total of $9,889.47.

When a recipient’s net income exceeds $77,580, there pension is clawed back at 15% of the lesser of their net income over $77,580 and their OAS. This effectively increases their marginal tax rate by 115% for income in the range of $77,580 to $126,057 (assuming full pension starting at age 65). This rate can be reduced by reducing net income over $77,580. This can be accomplished by in several ways such as:

• Reduce any dividend or interest income by earning capital gains instead
• Invest in flow-through shares to get the deductions for exploration and development
• Contribute to an RRSP (if under 72 with RRSP contribution room)

This is a great opportunity for tax and financial advisors to get together with their senior clients to have meaningful discussions about preserving the OAS.  Remember, over a 20-year retirement, this can be worth close to $150,000 or more - per individual - if properly managed. Tax advisors can help to do the math over the long run, taking into account strategies like pension income splitting  to minimize OAS clawbacks. Meanwhile, financial advisors can keep their eyes on  ensuring that tax benefits  are considered with investment objectives and after-tax income outcomes.

Knowledge Bureau will be on the road next month discussing these strategies at the CE Summits, with four experts in year-end and retirement planning, with a special focus on owner-managers of private corporations. Join us:

• November 4 in Winnipeg
• November 5 in Toronto
• November 6 in Calgary
• November 7 in Vancouver

Check out the agenda. First come, first served, with tuition savings on early registration ending on October 15. Call 1-866-953-4769 for personal assistance.    

Additional educational resources: Learn to help clients navigate these changes by taking the Tax-Efficient Retirement Income Planning course.

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