Mixed feelings about the eligibility change to OAS
But phase-in period from age 65 to 67 gives those affected time to adjust
When Châteauguay resident Rhonda Madsen first heard the federal government was contemplating bumping back the age of eligibility for Old Age Security (OAS), her initial thought was “that’ll upset a lot of people because they figured they’ve put in their years.”
But it didn’t upset her then, and it didn’t upset her Thursday, even after learning her official eligibility date has been moved back slightly to 65 and three months.
“I’ve never thought in terms of retiring at a specific age. I’ll probably work until I die. I always have to be doing something,” said Madsen, who at 53 fell just a few months shy of being com- pletely unaffected by the government’s new OAS eligibility timetable.
What interested her more than how soon she could collect OAS (which currently pays Canadians 65 and older a maximum of $6,481 a year) was how she could get more by voluntarily deferring the payments for as long as five years. The government said that, starting in July 2013, it will enhance the annual benefits by an “actuarially-adjusted amount” for those who elect to delay receiving them.
“That’ll help make up for the (private) pension I don’t have,” said Madsen, who was a single parent for more than 20 years, providing for three daughters by juggling several jobs, including waitress, nurse’s aide and wood splitter.
Retiring early would not have been in her plans even if she’d been able to accumulate a nest egg, Madsen said.
She saw what early retirement did to her father, forced to the sidelines by his company at 55. “He was devastated.”
She knows she’d be happier working as long as she can, “but I know it’s not that way for everyone. I’m selfemployed (doing landscaping and remodelling). If you work for somebody else, you might not feel so good about it or even have the option.”
Linda Ialenti, 56, won’t be affected by the change, but that didn’t make her any happier about it. The medicalimaging technologist thinks 65 is a reasonable retirement age and raising OAS eligibility to 67 will drain the budgets and/or energies of Canadians who’ve already “paid their dues.”
The changes relating to age of eligibility for OAS will be phased in starting in 2023, and therefore won’t affect anyone currently 54 or older. The transition from age 65 to 67 will be complete in 2029.
“That gives people lots of time to adjust,” said Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth Management.
But the enhancement for deferring starts next year, and is another wrinkle to be taken into consideration as Canadians in their mid-50s and older map out their per- sonal retirement strategy. The Quebec and Canada Pension Plans also have added incentives in recent years to reward those who put off collecting for up to five years after age 65.
For high-income earners who don’t mind working a few years beyond 65, it may be advantageous from a tax standpoint to defer both OAS and QPP/CPP.
“Everyone will have to take a look at their own situation, but there is flexibility now that some people can take advantage of,” said Murray Pituley, director of taxation and estate planning at Investors Group.
“Clearly, people will need to sit down and do their math,” said Albert De Luca, tax partner for accounting firm Deloitte Touche. “Canadians aren’t known for their willingness to do the calculations, but more than ever it’s important to do so.”