Retirement series: The trials and tribulations of applying for OAS

For those approaching age 65 and who still want to work, you may want to wait before applying for OAS.

A year before my uncle turned 65 he received a letter from Service Canada letting him know that he could apply for Old Age Security payments and he asked me to help.  I soon learned that getting your OAS payments started on time is no easy feat for some.  As my uncle wasn’t born in Canada, he needed something to prove when he became a permanent resident in Canada – preferably his landing paper.  But since he landed over 35 years ago and had received his citizenship in 1977, you would think it would be understandable if he didn’t have it.  But Service Canada insisted that my uncle have something to prove when he first landed into Canada – which meant I needed to apply to Citizenship and Immigration Canada for a document called “Verification of Status” which would verify when my uncle landed in Canada, a document that takes six months to process and costs $30 (in 2013).

Once I have the document, only then am I able to apply for OAS for my uncle.  And since you can only receive back payments for up to 11 months after that date you want payments to start, it is critical to apply for OAS (and obtain supporting documents such as the Verification of Status) as far in advance as possible.

Thankfully hope is on the horizon – beginning last year, the government started proactive enrollment meaning that for those who are eligible, their OAS payments would start automatically on their 65th birthday unless otherwise notified.  You can also defer your OAS pension for up to five years – see below

To wait or not to wait – that is the question

For those approaching age 65 and who still want to work, you may want to wait before applying for OAS. Changes implemented in 2013 now allow applicants to defer OAS payments for up to five years after turning 65. By deferring your OAS pension, your monthly pension payment will be increased by 0.6% for each month that you delay in receiving it.

When might deferring be a good idea?  If you intend to keep working or have other sources of income, then this might be a good idea.  Since OAS payments are taxable, it might make sense to defer it until you need the additional income so that you pay less in taxes.  If you keep working and start receiving OAS pension payments, you will be taxed on the whole amount – better to defer it until you stop working.  But as the deferral benefit maxes out at age 70, you should, in all cases, make sure your OAS payments start no later than age 70 or you end up losing out on benefit payments.

Other considerations include your health and impact on other benefits.  Delaying your OAS pension will mean any linked benefits (such as the Guaranteed Income Supplement and the Allowance for your spouse/common-law partner) will be delayed as well.