The Old Age Security (OAS) pension is a key source of retirement income for many Canadians, designed to support seniors aged 65 and above. In 2024, understanding how to maximize your OAS benefits is crucial for ensuring financial stability in retirement. This article will break down everything you need to know, from eligibility to strategies for increasing your OAS payments, and even a schedule of the payment dates for the year.
Maximum OAS Pension in 2024
Maximizing your OAS pension in 2024 involves understanding the eligibility requirements, considering whether to defer your payments and managing your income to avoid clawback. With the proper planning, you can ensure you receive the highest possible pension to support a comfortable retirement.
| Aspect | Details |
|---|---|
| Maximum OAS Payment (65-74) | $718.33 per month (July-September 2024) |
| Maximum OAS Payment (75+) | $790.16 per month (July-September 2024) |
| Clawback Threshold | Starts at $86,912 in net income, fully eliminated at $142,609 (for ages 65-74) |
| Eligibility | Canadian citizens or legal residents aged 65+, with at least 10 years of residence in Canada |
| Deferral Option | You can defer OAS payments for up to 5 years, increasing benefits by up to 36% |
| Payment Dates | Monthly, typically on the 29th or 27th of the month (next payment: September 25, 2024) |
| OAS Clawback | If your income exceeds $86,912, your OAS payments may be reduced by 15% of the excess income |
What is OAS?
The Old Age Security (OAS) pension is a monthly payment provided by the Canadian government to eligible seniors, regardless of their work history. Unlike the Canada Pension Plan (CPP), which is tied to contributions made during your working years, the OAS is funded through general tax revenues. It is meant to provide seniors with basic income support in retirement.
To qualify for OAS, you must be at least 65 years old, and the amount you receive depends on how long you’ve lived in Canada after the age of 18.
OAS Payment Amounts in 2024
The OAS benefit is adjusted quarterly based on inflation, as measured by the Consumer Price Index (CPI). For the third quarter of 2024 (July to September), the maximum OAS benefit amounts are:
- Ages 65-74: $718.33 per month
- Ages 75 and over: $790.16 per month
To qualify for the full OAS amount, you must have lived in Canada for at least 40 years after turning 18. If you’ve lived in Canada for fewer years, you will receive a partial payment, calculated as 1/40th of the full amount for each year of residence.
How To Get Maximum OAS Pension in 2024
Here are a few steps you can take to ensure you receive the highest possible OAS pension:
1. Delay Your OAS Payments
While you can start receiving OAS as soon as you turn 65, deferring your first payment can significantly increase the amount you receive. For each month you defer, your pension increases by 0.6%, up to a maximum increase of 36% if you defer until age 70. This means that if you don’t need the income right away, it may be worth considering a deferral.
2. Manage Your Income to Avoid the Clawback
If your net annual income exceeds a certain threshold ($86,912 in 2024), you will face an OAS clawback, which reduces your benefits by 15% of the excess income. To avoid this, consider tax strategies like income splitting with a spouse, contributing to a Tax-Free Savings Account (TFSA), or deferring your OAS and CPP benefits to later years. These methods can help lower your taxable income and maximize your OAS.
3. Plan Your Residency
If you haven’t lived in Canada for the full 40 years after turning 18, you’ll receive a partial pension. For those who have lived abroad for significant periods, it’s essential to review Canada’s social security agreements with other countries to determine if your time abroad counts toward your residency requirement.
Eligibility Criteria
To qualify for the OAS pension, you need to meet the following conditions:
- Age Requirement: You must be 65 years or older.
- Residency: You need to be a Canadian citizen or legal resident, and have lived in Canada for at least 10 years after turning 18. If you’re applying while living outside Canada, you must have resided in Canada for at least 20 years.
- Income Threshold: If your net income exceeds $86,912, your OAS pension will be reduced (clawback), and if your income surpasses $142,609 (or $148,179 for those 75+), your OAS may be eliminated completely.
OAS Clawback: What You Need to Know
The OAS clawback, officially called the “OAS recovery tax,” starts if your income exceeds $86,912. The clawback rate is 15% of the amount your income surpasses this threshold. If your income exceeds $142,609 (for those aged 65 to 74), you will not receive any OAS payments.
OAS Payment Dates for 2024
Your OAS payments will be made on the following dates in 2024:
- January 29, 2024
- February 27, 2024
- March 26, 2024
- April 26, 2024
- May 29, 2024
- June 26, 2024
- July 29, 2024
- August 28, 2024
- September 25, 2024
- October 29, 2024
- November 27, 2024
- December 20, 2024
It’s essential to note that OAS payments are taxable and must be reported as income on your tax returns.
The Guaranteed Income Supplement (GIS)
Many people receiving the OAS pension may also qualify for the Guaranteed Income Supplement (GIS), especially if they have a low income. This is a non-taxable benefit designed to assist low-income seniors. Here’s what can be added:
What is the Guaranteed Income Supplement (GIS)?
The GIS is a monthly payment added to the OAS pension for those with low income. You may qualify if you:
- Are eligible for the OAS pension
- Live in Canada and have a low or no other income
- Your annual income (excluding OAS) is below a certain threshold (approximately $20,000 for individuals or $26,000 for couples)
GIS payments can be combined with the OAS pension and are determined by your income and marital status. It’s important to note that GIS payments are non-taxable, unlike OAS.
To qualify, seniors must apply for the GIS either online or through a mailed application. The GIS can provide up to $1,065 per month for individuals.
Adding this section would expand on how seniors with limited income can increase their overall retirement benefits by combining GIS with OAS.
Taxation of OAS Pension
Yes, OAS payments are considered taxable income. This means that recipients must include the OAS pension in their annual tax return. While the OAS itself is taxed, recipients may face additional taxes if their income triggers the OAS clawback, officially called the OAS recovery tax.
For individuals receiving the maximum OAS and additional income from other sources, strategies like income splitting, RRSP contributions, and deferring other pensions can reduce the taxable amount and minimize clawbacks.
Income Splitting to Reduce Taxable Income
Income splitting allows seniors to transfer up to 50% of their eligible pension income, including OAS and CPP, to their spouse or common-law partner if they are in a lower tax bracket. This reduces the higher-income spouse’s taxable income, potentially lowering or eliminating the OAS clawback.
How CPP and OAS Work Together
Many Canadians receive both CPP and OAS in retirement. The CPP is a contributory pension based on earnings during your working years, while OAS is a non-contributory pension based on residency. One important strategy is to defer both OAS and CPP for higher monthly payments.
For instance, deferring the CPP until age 70, like the OAS, leads to increased payments. If you defer CPP, payments increase by 0.7% per month for each month deferred, which results in a 42% increase by age 70.
This can be beneficial for individuals who expect to live longer, as the combined deferral of OAS and CPP could provide a higher overall income in later years.
OAS for Canadians Living Abroad
Canadian citizens or legal residents who have lived in Canada for at least 20 years after the age of 18 can continue to receive their OAS pension even if they move abroad. However, the Guaranteed Income Supplement (GIS) is only available to individuals who reside in Canada, so moving abroad may reduce the overall retirement income.
Additionally, recipients living abroad must ensure they update their address with Service Canada and choose direct deposit to a foreign bank account.
Common Mistakes to Avoid When Applying for OAS
- Not Applying On Time: Even though Service Canada often automatically enrolls seniors for OAS, those who don’t receive notification must apply to avoid delays.
- Ignoring Deferral Benefits: Many people start taking their OAS at 65 without considering the long-term advantages of deferring.
- Not Understanding the Clawback: Failing to account for the OAS recovery tax can significantly reduce the benefit.
Frequently Asked Questions
1. Can I receive OAS if I live outside Canada?
Yes, if you have lived in Canada for at least 20 years after turning 18, you can continue to receive OAS while living abroad.
2. How can I apply for OAS?
You can apply online through your My Service Canada Account or by filling out a paper application, which you can mail to Service Canada. In some cases, seniors are automatically enrolled for OAS.
3. What happens if I defer my OAS?
If you defer your OAS past age 65, your monthly payments will increase by 0.6% for each month you delay, up to a maximum increase of 36% if you start receiving payments at age 70.
