Retired Money: Why I won’t defer my OAS past age 65

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OASMy latest MoneySense Retired Money column is about when to take Old Age Security (OAS) benefits and has been posted at MoneySense.ca. Click on the highlighted text to access the full version here: Why I’m taking Old Age Security right at 65.

As the piece goes into in more depth, the Government incentivizes those in their 60s (including Yours Truly) to defer the date for commencing receipt of benefits of the Canada Pension Plan (CPP) and Old Age Security. The longer you delay between 65 and 70 (or in the case of CPP, beyond age 60), the better the ultimate payout: wait till 70 instead of 65 and OAS will be 36% higher and CPP 42% higher.

Reasons for Deferring CPP may not also apply to OAS

However, the circumstances surrounding CPP and OAS are not identical, so in my own case I plan to take OAS as soon as it is on offer, less than two years from now, while I will endeavour to defer starting the receipt of CPP for as long as I won’t need the money.

I have to admit that this idea originated with my own fee-for-service financial planner, who did not wish to be identified for this particular article but he’s one of many who can be found at the Hub’s Guidance section.

Apart from the fact CPP usually will be working from a larger base than OAS, a big difference is that OAS benefits are in greater danger of being clawed back. That may happen if you are the beneficiary of a generous employer-provided Defined Benefit pension, but even for those who lack one, it’s more likely that a large RRSP that becomes a large RRIF at the end of the year you turn 71 will put you into the clawback zone — or at least enough income that some if not all OAS benefits get clawed back.

There are to be sure, many other considerations, such as health, life expectancy, whether you are working part-time in semi-retirement, whether your spouse is still working and how much non-registered investment income is coming in. (Unlike CPP or OAS, the latter can seldom be deferred!).

Other Hub guest blogs on OAS/CPP

Several guest bloggers have looked at this issue over the last few years. See for example, Matt Ardrey’s three-part series. The link is to the third and via that one you can get to the earlier two guest blogs: When is the Right Time for You to Take CPP and OAS? Ardrey is also quoted in the MoneySense column.

Adrian Mastracci, Marie Engen and Lisa Taylor have also contributed guest blogs that touch on this topic in one way or another: use the Hub’s search engine on the right to retrieve them, using either OAS or CPP as the search term and/or the guest blogger’s name. (We’ve posted more than 700 blogs in the almost two years the Hub has been running so there’s a wealth of information if you know how to search for it).

Generally, though, retired actuary Malcolm Hamilton’s advice is sensible: if you need the money, commence receipt of the benefits as soon as you are eligible; if you can get by without it for a few years, you may appreciate the higher benefits once you eventually do decide to slow down a tad.

See also Service Canada’s website for more on the fine points of OAS.

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