Turning 65 has benefits
This year brings many opportunities to those turning 65. If you are not sure about the retirement thing, then here are some facts to show you have lots of company. In 2011, the first baby boomers turned 65, which is normally thought of as the age of retirement. For the next 18 years, boomers are turning age 65 at increasing rates. There are benefits to turning 65. If you are eligible for the full Old Age Security (OAS) pension amount, the federal government currently pays over $570 per month after you turn 65. That sounds like a nice perk. First you need to meet some qualifications regarding residency and legal status. Eligibility is not based on your employment history. You can receive OAS if you have never worked or are still working. The amount depends upon how long you have resided in Canada continuously before approval. Depending upon your circumstances, you may be eligible to receive partial OAS.
If you currently live outside Canada, the criteria are different. One example is to be eligible for OAS you must have resided in Canada at least 20 years after turning age 18. Receiving OAS is not automatic. You must complete an application prior to your 65th birthday and this can be done six months in advance. In 2012, the federal government introduced some changes to the OAS. One is having the option of deferring the receipt of your OAS payments between age 65 and 70. If you are subject to OAS clawback, when your taxable income is over $73,756 for 2016, you might consider deferring past age 65. OAS is paid from general tax dollars. In 2012, the government paid out approximately $38 billion in OAS benefits to 4.9 million individuals. In 2015, the government reported OAS payments totalled over $44.1 billion. Another benefit of turning 65 is your eligibility to receive Canada Pension Plan (CPP). If you thought CPP could be received earlier, at age 60, you are correct. Taking CPP at age 60 means accepting a reduced rate, but you receive these reduced payments for up to 60 months, which is the length of time between age 60 and 65. Depending upon the monthly amount of CPP you are entitled to receive, your break-even point is roughly about 15 years. Of course, this depends upon the actual amount of CPP benefits you are entitled to receive, your age when payments start and whether you continue working after receiving CPP benefits. Another change is you can now receive CPP benefits and still continue working and contributing to CPP. If you want to see what CPP benefits you would be entitled to, go to the Service Canada website and access your CPP statement of contributions. This tells you what you will be entitled to receive if you apply for CPP benefits today. How long will you live? If you knew how long you would live, life would be easier to plan for. Statistical data indicates if you are an average Canadian, you will live to age 80. If you have already reached age 65 without suffering a serious illness, chances are you will live well beyond age 80. A 65-year-old woman can expect to see her 86th birthday, while a 65-year-old man can expect to live to age 83. So if you retire in good health at age 60, plan for 25 years or more of retirement. For most individuals, retirement can be up to 35 or more years. Having a smart plan in place makes the transition from work to retirement more enjoyable and less stressful.
Marion Wahl is a Kelowna chartered professional accountant. Reach her at info@wahlcga.com.