Seniors See No Raise for Second Quarter

Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) are indexed quarterly. However, the indexation factor for these purposes for the second quarter—April to June 2016—is nil so there will be no raise in the monthly benefit amount for that period. But that doesn’t mean consumer spending didn’t cost more last quarter, as reported by Statistics Canada, especially for food, alcohol and tobacco.

Seniors who have been in Canada at least 10 years are eligible for Old Age Security when they turn 65. Those who have been in Canada their whole lives will receive the full pension and no action is required to begin receiving it, unless they intend to defer their pension. Those who don’t receive the notice of eligibility after they turn 64 will have to apply. Immigrants and those who have spent time out of the country may have to prove their residency period to qualify. The maximum pension (received by most seniors) is currently $570.52 per month.

Seniors whose income is high enough to be subject to clawback of OAS ($73,756 or more for 2016) as well as those who don’t need their pensions at age 65, may want to defer starting their pension for up to five years. For each month they defer starting to receive their pension, these seniors will have their benefit increased by 0.6%. Deferring to age 70 results in a 36% boost. At current rates, that’s an additional $205.38 each month.

Does it make sense to defer your pension? It depends on two factors:

• how long will you live?
• how much clawback will you have to pay?

With no clawback, you’ll be better off deferring if you live at least 14 years after you begin to receive your pension. With 100% clawback (income over $119,400), deferring can never cost you money.

If you’ve already started receiving your pension and decide you want to defer, you can do so as long as you’ve not received more than six months of pension.

Walter Harder will be teaching tax-efficient retirement income and succession planning together with Alan Rowell and Evelyn Jacks at the May Distinguished Advisor Workshop.  Reserve your attendance in Toronto, Winnipeg, Calgary and Vancouver now.

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