Top 7 Reasons to Take OAS As Soon As You Can: Why Should You Take OAS ASAP in Canada?

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Top 7 Reasons to Take OAS As Soon As You Can: Why Should You Take OAS ASAP in Canada? The Old Age Security Canada will be able to automatically enroll you for the OAS pension if sufficient information is available. Service Canada will inform you if you have automatically enrolled.

Top 7 Reasons to Take OAS As Soon As You Can

I have long advocated that anyone who expects to live life should consider deferring their Canada Pension Plan to age 70. Doing so can increase your CPP payments by nearly 50%, an income stream that is both inflation-protected and payable for life. If taking CPP at 70 is such a good idea, why not also defer OAS to age 70?

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Here are some reasons to take OAS early

  1. The starting age to take the OAS pension is 65. unike  CPP, there is no option to take OAS early, such as at age 60, but you can defer it up to 60 months in exchange for enhanced benefits.
  2. Deferring OAS to age 70 can be a wise decision. You will get 7.2% more each year that you delay taking OAS, up to a maximum of 36% more if you take OAS at age 70.
  3. The maximum monthly payments one can get at AGFE 65 is $713.34.
  4. In my opinion, working with clients in my fee-only practice, retirees are loath to give up any of their OAS benefits due to OAS clawbacks.
  5. You can increase every dollar of income above the threshold,, your OAS pension is reduced by 15%.OAS is fully clawed back when income exceeds $142,124.
  6.  It forces retirees to tap into their savings, depleting their nest egg earlier and faster than they would prefer.
  7. Deferring CPP AND OAS increase the amount of guaranteed income you will have for the rest of your life while also reducing your long-term investment risk because you are spending your savings first.

Why Should You Take OAS ASAP in Canada?

Inflation is measured every three months, and OAS payments go up if inflation increases. Inflation adjustments happen each January, April, July and October. You can get even more money from OAS if you delay the start of benefits past ahe 65.

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Each year, when you deal with OAS, your payments will increase by 7.2%. The increase tops out at a 36% increase if you wait until 70. Waiting until 70 would boost the monthly payment to $970.14. This assumes giving in Canada for 40+ years before age 65 to 70 to get the full benefit. Living in Canada for a few years changes these numbers.

When I consider starting OAS at Age 65

 

  1. You can’t Afford to Wait – Those who defer their OAS benefits will usually fill the income gap between 65 and 70 by drawing on investments.
  2. Shortened Life expectancy – If you are in average or better health, waiting to start OAS can make good financial sense. But if you have serious health issues, you may not live long enough to reap the reward.

 

The OAS Decision Can be Complex

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While some situations where it is best to start OAS right away, this decision can be hard, for the most retirees, OAS is one of the many income streams. For a couple who are born in or retire in different years, these income streams may also start at different times.

Many Canadians need help to optimize their retirement income and minimize taxes. If you are feeling overwhelmed by all the work needed to create a retirement plan, you can book a free introductory meeting with me to get started.

The OAS clawback Rate for 2024

OAS benefits must be repaid if your income is too high. So even if one or more of the above factors apply to you, you may still want to hold off on starting payments.

The Clawback threshold for 2024 is net income above $90,997. For every dollar of income above that amount, you have to repay 15 cents of OAS. If your income is close to the threshold, then you will ned to be careful about when you start your OAS.

If you start OAS at age 65, the entire amount will have to be repaid once your 2024 income is greater than approximately $148,065.

Conclusion

In this article, we discussed the Top 7 Reasons to Take OAS As Soon As You Can: Why Should You Take OAS ASAP in Canada. Each year, when you deal with OAS, your payments will increase by 7.2%. The increase tops out at a 36% increase if you wait until 70.

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