What retirees need to know if they plan to defer Old Age Security benefits until 70
It’s been five years since retirees gained the flexibility of choosing to defer receipt of Old Age Security (OAS) benefits from age 65 to as late as 70. This mirrors the option to defer Canada Pension Plan (CPP) benefits, although the “enhancement” is only 36 per cent for OAS, versus 42 per cent for CPP.
Both CPP and OAS are valuable in that they are inflation-indexed guaranteed-for-life payments. If you lack an employer defined benefit pension, the prospect of higher CPP and OAS benefits is not to be dismissed lightly. At 65, the current maximum monthly OAS pension is $600.85 or $7,210.20 per year. Wait until 70 and OAS pays $817.16 per month or $9,805.87 a year, plus any inflation increases.
Even so, as I confessed a year ago here, I chose to take OAS as soon as it was on offer last spring, although I hope to defer CPP until closer to 70. I feel the argument for deferring OAS is less compelling than for CPP. For me the real decider was that while CPP benefits are not clawed back if they exceed a certain threshold, OAS benefits begin to be clawed back once taxable income exceeds $75,910 (rising to $77,580 in 2019) and is completely clawed back at $123,386 of net income. Also, while CPP has limited survivor benefits, OAS does not.