Retirement planning: How much will your OAS benefits be?

While most Canadians will qualify for the Old Age Security (OAS) pension when they retire, not everyone understands how OAS benefits work, or how much they pay out. If you're still wondering what you're entitled to when you retire, this article will explain the basics.

What is Old Age Security?

Launched in 1927, OAS is designed to provide seniors with a modest monthly pension to cover basic living expenses.

When can I start receiving payments?

You become eligible to receive OAS when you turn 65. However, in order to start receiving payments on your 65th birthday, you must apply in advance. You can do this easily online through Service Canada, up to 11 months before your 65th birthday.

If you like, you can also defer receiving OAS pension payments for up to five years, or until your 70th birthday. If you do, your monthly OAS pension will increase by 7.2% for each year you delay receiving benefits, up to a maximum of 36%.

How do I know if I'm eligible?

To qualify for OAS, you must be a Canadian citizen or legal resident, and have resided in Canada for 40 years after age 18. But even if you've spent extended time abroad, you can still qualify for a partial OAS pension as long as you've spent at least ten years in Canada after the age of 18, or have lived in a country with a social security agreement with Canada (if you're not sure, consult Service Canada).

How much are OAS payments, on average?

OAS pension payment amounts are adjusted quarterly (in January, April, July and October) according to the cost of living in Canada, as measured by the Consumer Price Index inflation rates.

As you can see from the chart below, the 2016 average monthly amount paid by OAS is $570.52, which comes out to just under $6,900 a year.

  Average monthly amount for 2016 Average yearly amount for 2016 OAS reduction starting with income over OAS eliminated when income reaches
OAS pension benefit $570.52 $6,846.24 $73,756.00 $119,398.00
Surviving spouse or common-law partner $1,213.00 $14,556.00 $1.00 $23,328.00

Note that the amount you're eligible to receive through OAS also depends on the income you receive. There is an OAS pension recovery tax of 0.15% for each dollar you earn over $73,756, meaning your OAS pension is completely eliminated when you earn over $119,398 per year.

Are there spousal benefits?

Surviving spouses and common-law partners of OAS recipients are entitled to a survivor pension. Like the OAS pension itself, this benefit can be offset by recovery tax if your surviving spouse or partner is earning an income, and completely eliminated if their earnings exceed $23,328.

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