Should you delay your OAS pension?

Last summer, Old Age Security (OAS) benefits permanently increased for the first time in almost 50 years. The payment increase is 10% and applies to seniors aged 75 and older.

This increase gets a further boost when seniors delay starting their OAS benefits. Monthly payments increase by 0.6% for each month you delay payments beyond the traditional age 65 start date. That’s a 7.2% increase for a one-year delay and a 36% increase for the maximum five-year delay at age 70.

Reasons to delay OAS payments

If you work beyond age 65, it often makes sense to delay OAS payments since you likely don’t need the pension income.

If you have retired by 65, the main reason to delay OAS payments is simply to gain additional financial security at older ages. You’ll receive a higher monthly benefit that’s indexed to inflation and guaranteed for life.

Why start at age 65?

Anyone who needs OAS benefits at age 65 to help support their retirement has an easy decision to begin when eligible.

Even if the income isn’t needed, there are several reasons to start at 65. It means drawing down less from retirement savings, which may leave more assets as an inheritance. Beginning payments at 65 ensures money isn’t left on the table if a retiree doesn’t live long enough to benefit from increased payments at older ages. In addition, retirees who expect their mandatory Registered Retirement Income Fund (RRIF) withdrawals to result in a clawback of OAS benefits at age 71 may want to start receiving OAS payments at 65.

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