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Thursday, April 17, 2014

OAS Change is No Big Deal

Posted by Tim Stobbs on March 30, 2012

Well the federal budget came down yesterday, which you can read here the official documents.  But perhaps the most significant change for future retirees is the shift to move the start of OAS from 65 to 67 by April 2023 (see chapter 4).  That means if you are 54 or older by March 31, 2012, you just won yourself a free pass on worrying about this issue, which means you can stop reading now if you like.

For everyone else, I want you all to take a deep breath and realize something very important: the maximum benefit you can receive from OAS is just $6481 per year in 2011.  So in reality you are out just under $13,000 in benefits, so let’s be blunt for a moment: it isn’t a big deal.  If your retirement plans are so tight that losing $13,000 screws them up you have more serious issues to worry about like saving a lot more.  Even if your a couple retiring you lost at most $26,000 of benefits, which becomes a slightly bigger number, but in the end I can make that up by delaying my plan by three months.  My goodness, that is nothing compared to what the stock market can do to my plan in a day at that point.

The reality is the federal government all did us a favour by giving us a 11 years heads up on a policy change so you can now adjust your plan for it.  Heck the even gave an extra five year phase in period on top of the 11 year notice so if your 53 today you don’t have to fully wait until 67 to collect OAS.  Then as an added bonus the gave people the option to take OAS later starting in 2013 and get a larger payout.  You can do that to a maximum of five years which in their example would raise the payout from $6481 to $8814 per year.

In the end the federal budget change despite all the negative media coverage on this issue just made my life easier.  In my plan, I had assumed I only got half of that benefit so with this change the program just got a little more stable, so perhaps I will luck out and get more than that.  Overall, it isn’t changing a damn thing for me and likely won’t for a lot of other people.

Comments

15 Responses to “OAS Change is No Big Deal”
  1. Zach says:

    You’re a writer… “Even if your a couple retiring you lost at most $26,000 of benefits”

  2. arrow says:

    You’re right, moving the date isn’t that big of a deal.

    My objections, which I can’t get over, to the changes are:

    1) That the framing of the issue was false. OAS is likely to be affordable in the long term. The change was not ‘necessary’, as was suggested, and I have nothing but anger for anyone who makes an argument about future costs using nominal dollars. That’s not a serious presentation of the facts, and I can’t feel but it is intended purely to mislead those who are stupid or ignorant.

    2) I haven’t seen any posts online regarding the increases in OAS clawbacks (reducing the clawback level) necessary to be revenue neutral to a 2 year increase in the age of retirement. I think if that choice was offered up to the Canadian people directly, the resulting vote would be 80+% for moving the clawback levels.

    The conservatives chose to do something that is not necessary and which is intentionally regressive. It’s not that big of a deal, but it stings.

  3. Claudia says:

    The research indicates there was no reason to make any changes to OAS. Unfortunately, Harper’s slogan is “Don’t confuse me with the facts, I’ve made up my mind.”

    Raising the elibility age isn’t nearly as effective as lowering the clawback threshold. At around $70k, it could easily be halved without causing any real hardship.

  4. Grugal Guy with Balance says:

    I have some objections which I can’t get over either,

    I think the OAS is hand out to everyone that receives the doe. Choices offered up to the Cdn People hah…so
    if you worked hard you would have us agree to OAS clawed back.

    You’d better get back on your soap box because that does not wash with me.

    The conservatives did the right thing something John C.
    did not have the balls to do.

  5. Canuckguy says:

    The slow implementation of the age increase can only result in insignificant savings. It was purely a political decision in order not to annoy large numbers of baby boomers so they did not have the guts to shorten the time; a more significant savings would have been made if turning 60 as of March 31,2012 had been the cut off. Also the clawback threshold should have been lowered down from the current $69,562 to perhaps $60,000 at least. If the goal is to help balance the budget in the future, the entitlements should have been reduced as I stated.

  6. Jacq says:

    I ride the bus in the mornings with someone who just made the cutoff age and wants to retire early (55 y.o.). He’s pretty happy about it.
    I’ve never counted it, so don’t really care.
    The clawbacks annoy me though – it feels like I’ll be penalized for saving. So sorry I lived below my means all these years.
    What I’d like to know is how the people who haven’t saved anything – and their kids aren’t able to save much and don’t want to take care of them – are going to manage.

  7. Frugal Guy with Balance says:

    Well clawbacks annoy me to

    I feel like I have also lived below my means but I will
    be penalized for having a few bucks when I retire.

    I am all in favor for raising the age limit that way everyone participates in the change.

    You touch the clawback and you are only hurting the
    Frugal Guys like me and rewarding the spend thrifts.

  8. Meghan says:

    The majority of people who read this blog will agree with you. The people who are really struggling are not going to read a blog about retiring early. I disagree with you however, for people who really do need this money it is a big deal, and the OAS has been attributed to reducing poverty in old age.

    My mother has been forced into retirement in her early 50s. A long illness and having to leave her previous career, followed by a recession has meant that she can’t find a job anywhere, not even a minimum wage job at a grocery store. She lives in the States, so this doesn’t really effect her. But it has made me see that things don’t always go according to plan.

    It would be good though to see some actual debate on this issue, maybe not here but somewhere. Unfortunately many people have the attitude that they’re fine, so it is not an issue. It’s sad to see us move away from a society that looked out for the less fortunate, to an “every man for him/herself” kind of place.

  9. lorain says:

    Well, I just squeeked in….will get my OAS at 65. The whole question of who should get it, at what point do we claw back…it is a toughie!!
    How fair is it to reward (and i know this is not always the case) those who waste money, spend too much money, or are just not wise with money and to reprimand those who save, scrimp, and manage their accounts?
    IT is an issue that can really never be resolved. This brings to mind my inlaws. They feel that since we own our home and have some money that we should be cut out of their will…this because the others in the family have not worked, have spent everything and now go to the parents for money..it is pure evil what is going on. We don’t care about the money but we certainly care about why…..

  10. Jacq says:

    I take back my comment on the clawbacks. Given the income level they’re set at, the clawback threshold should probably be lower. If they did that, they wouldn’t have to touch the age factor. Or do both.

  11. Stu Lach says:

    The gov’t was quik to state how much it was going to cost if left alone but haven’t said anything about waht the savings or new cost will be. Is it maybe because this only postpones the $108B cost for 2 years?

  12. Canuckguy says:

    Lorain comment “..since we own our home and have some money that we should be cut out of their will”

    Well that sucks and I am not being facetious. It is unfair to treat you like that. And will cause a rift, I would think, between your husband’s siblings and you and your husband. If his parents had treated everybody equally, there would be no fuss or bother. However if you and your husband are millionaires, I can understand his parents’ reasoning.

  13. Judy says:

    Well, it may not be a big deal to you, but I was hoping to retire at 65, part of my income being OAS. Looks like another two years of work for me.

  14. Pauline says:

    Hello…does this change to the OAS mean that Canadians who elect to take CPP at 60, can continue taking CPP till 67?
    Thank you for your response

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