Some retirees see it as a golden age perk.
For others, it’s a vital addition to their retirement income. Whether you’re 65, 55, or younger, you’ve probably heard about Canada’s Old Age Security Pension (OAS).
It’s been in the news a lot lately because the 2012 federal Budget included proposals to increase the OAS eligibility date from age 65 to age 67. However, those budget proposals will not affect your eligibility date if you were born prior to April 1958.
Here’s more basic OAS info:
• OAS is one of the resources on which to build your retirement income. It is available to most Canadians aged 65 or older whether you have worked or never worked.
• You must apply to receive OAS and you’re eligible if you are 65 or over and have lived in Canada for at least 10 years after turning 18. Apply for OAS six months before you turn 65 using an application kit available at Service Canada Centres or their website.
• If you are approved, you’ll receive your OAS pension payment during the month after your 65th birthday, the month after you meet the requirements, or during a month of your own choosing, depending on which month is the latest.
• You are eligible to receive a full OAS pension if you have been a legal resident in Canada for at least 40 years after age 18. If your Canadian residency is less than 40 years, you may be approved for a partial pension, with the amount calculated and prorated on how many years of Canadian residence you have between 10 and 40 years.
• The maximum monthly OAS benefit is $540.12. It’s reviewed each quarter against the Consumer Price Index and adjusted as necessary to keep up with cost of living increases.
• An OAS pension is taxable income. Each tax year, you’ll receive a T4-OAS information slip to complete your income tax return.
• Beware the OAS clawback! It kicks in when your yearly net income hits $69,562 and requires you to repay part of your OAS benefit at a rate of 15 per cent for each dollar in excess of that threshold, with a full clawback at an annual income level of $112,772. (OAS income thresholds are adjusted annually.)
OAS is an important source of retirement income — but it is only one component of your overall retirement and financial plan.
Talk to your professional adviser about OAS and other benefits available to seniors such as the Guaranteed Income Supplement, the Allowance or the Allowance for Survivor — as well as how to make the most of your retirement income for all your retirement years.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.