This OAS Hack Will Increase Your Benefit

old age security tends to come second to CPP it's kind of like the stepchild that no one wants to talk about but old age security is a great income source for many and most Canadians and in this video I want to go through a bit of a OAS hack to allow the OS threshold on the clawback to be increased and I'll cover that later in this video the old age security is a monthly payment received by you once you hit age 65 you can delay it all the way till 70. uh the full OAS benefit as of today in 2023 is 691 dollars per month for every month that you delay it past your 65th birthday you're going to get an increase of 0.6 percent so if you don't want it now or you don't need it now you can delay it and get a pretty decent return on that investment going forward so if you wait all the way till 70 you will get 36 percent more than you would at age 65. back on July 1st 2022 there was an implementation of a 10 bump for for those over age 75 so if you're over 75 or if you're getting close to that age and you're watching this video hey thank you for tuning in but B you will get a bump at 10 bump on what your base old age security payments are once you hit age 75 and again it'll roll out a month after your 75th birthday so stay tuned for that as well if you're getting close to that age old age security is a little bit different in than CPP in that CPP is based on amounts you put into the plan old age security is based on how many years you spend in Canada once you hit 40 years in Canada past your 18th birthday then you've maxed out your old age security you've hit the maximum amount again if you've been here 20 years from 18 to 65 and you take all day security you're going to get 50 so it's pretty easy and quick to figure out how much old age security you're going to get based on how many years you were in Canada now again if we go back and look at should you delay old age security should you take it I've talked a lot on this channel if you're going to delay either CPP or old age security it makes more sense typically for most of you to delay CPP because there's a 0.7 percent benefit for delaying CPP whereas there's only a 0.6 percent or 7.2 percent every year for delaying your old age security so if you're contemplating which one to delay look at the CPP and start old age security but you may want to look at delaying both of them if that makes sense for you and this is where this video is gearing there's something called the OAS threshold or clawback and that's basically if your income is over a certain amount they're going to claw back 15 cents on every dollar over that amount and there's an actual hack to allow that room to grow even more so if we're looking at the OAS clawback at 2022 income year which means that this qualifies for your OES payment starting in July 2023 they will look at 2022 income now the threshold is 80 1761 so if you make over that amount again this is personal so if you're married and you've done some income splitting that'll draw down your net income so again if your net income is eighty one thousand seven hundred and sixty one dollars anything above that will start to get clawed back 15 cents on every dollar until your whole OAS payment is clawed back and that's going to happen when you make a hundred and thirty four thousand six hundred and twenty six dollars so that's the upper threshold once you've made over a hundred and thirty four thousand six twenty six your old age security will be fully clawed back and you won't receive any payments but here's a bit of a trick we'll throw the numbers up on the screen here to kind of walk you through this process but let's say back in 2018 so five years ago you turned 65. the maximum old age security benefit at that time that you could have received was seven thousand and forty dollars annually now let's say you decided to not start your old age security because you had a high income let's say a hundred and forty thousand dollar income and you would have got full OAS callback at that point until there was no point starting it so you delayed it all the way till age 70. now in 2023 you turn 70 there's no benefit delaying any further so you apply for the benefit now again the benefit would have been increased by 36 percent which means that you're now collecting nine thousand five hundred and seventy four dollars so you're collecting more which is a great benefit but again you have total income including your old age security is a hundred and forty thousand dollars uh let's assume so we how we calculate the clawback and again we'll put this link below as well but we're going to take your account come 140 000 minus the threshold which is the eighty one thousand seven hundred and sixty one dollars which leaves us with 58 239 if we then take fifteen percent of that which is the clawback amount we'll see we're clawed back eight thousand seven hundred and thirty six dollars but our payment was nine thousand five hundred seventy four which means that we still receive old age security of eight hundred and thirty eight dollars if we think back we have an income of 140 the OAS high in threshold is one thirty four six two six so we're making them more than the high end threshold but because we deferred our old age security we have a higher payment amount and the clawback is based on 15 of the amount you receive so what happens is when you defer your old age security past 65 the upper threshold on the clawback is getting extended every year or every month that you extend and your old age security so if I look at this scenario when would this client that turned 65 in 2018 deferred all the way till 2023 and makes 140 Grand a year how much income could they actually earn before they were 100 clawed back and the answer to that is 145 587 dollars so again if we took their income 145 587 we minus the threshold of 81761 and then took 15 of that difference it would leave us at zero meaning they had full clawback so again this client as an example if they were to defer their old age security payment by that five years increasing that benefit it also increases that clawback number from 134 626 all the way up to 145 587. so substantial substantially more income and again not that they're receiving a large amount of old age security 838 dollars when they're making 140 000 and I get that but it's something to consider as you put together your financial plan so for most of you watching this video you probably think what a great problem to have old age security clawback and we often tell clients when we build out Financial plans we'll try and figure out like how do we avoid clawback and if we can't fully avoid it it's a good problem to have but this is a bit of a hack that most people don't think about or work through now a couple things for all of you watching this video on old age security when you turn 65 old age security payments will start automatically unless you tell them otherwise so make sure if you wanted to for old age security you need to let them know and again that will be on an information package you receive about 11 or 12 months before you turn 65 so make sure you defer the second thing is just to make sure that you understand if there is a benefit to delay old age security look at the linked CPP and how everything works into your cash flow plan again delaying over data security may or may not make sense for a lot of you taking old age secured at 65 shortly after probably makes a lot of sense but defer that CPP again talk to your financial planner get a plan in place and see what makes the most sense for you one more tip before we end the video is when you start your old age security payment if you start at past age 65 you can retroactive the payments back 11 months so if you started let's say you're past age 70 and you forgot about it you're almost 71 you can collect 11 past payments so basically backdate it to 70. so if you're looking to delay it and then you realize I should have started it a little bit ago you can actually back uh take back payments for 11 months as well so that's something to consider when you apply for your old age security benefit

Channel: Parallel Wealth

Views: 67,820

Keywords: Financial Planning, Retirement Planning, Retirement, Tax Planning, Investing, Savings, Passive Income, RRSP, TFSA, Wealth, Parallel Wealth, old age security, oas clawback

Id: rjels6tiwKQ

Length: 8min 17sec (497 seconds)

Published: Fri Apr 28 2023