Personal Finance

Ontario Retirement Pension and Semi-retirement question

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  • May 30th, 2017 9:50 pm
[OP]
Newbie
Jun 19, 2009
73 posts

Ontario Retirement Pension and Semi-retirement question

Hi
Would anyone with any idea about retirement in Ontario clear up some questions for me please. I'm no where near retirement age yet but my parents are. They are under the impression that if they don't stop working or significantly cut down their work hours after 65 years, the government will reduce their pension payout. They think they will get more from their government if they stop working. I think that is really stupid if it is true. Its almost like the government is penalizing those who are able to keep working and want to keep working. My parents are laborers and always worked slightly above minimum wage jobs. It is not my wish that they keep working their butts off even after retirement age. Fact is they are still strong, able and healthy and I think its stupid to just stop working suddenly once they've reached 65. Yes, stopping work significantly does lower their income quite a bit but they think if they keep working they will end up with roughly the same amount of money since they government will reduce their pension payout. My parents want to work but think the government will shortchange them.

Does anyone know if that is true? I wouldn't think the government would penalize those who still want to keep working.
4 replies
Sr. Member
Oct 22, 2006
791 posts
579 upvotes
Ontario
They're actually incorrect:

source: https://www.canada.ca/en/services/benef ... ility.html
As of July 2013, you can defer receiving your Old Age Security (OAS) pension for up to 60 months (5 years) after the date you become eligible for an OAS pension in exchange for a higher monthly amount. If you delay receiving your OAS pension, your monthly pension payment will be increased by 0.6 percent for every month you delay receiving it, up to a maximum of 36 percent at age 70.

If you choose to defer receipt of your OAS pension, you will not be eligible for the Guaranteed Income Supplement, and your spouse or common-law partner will not be eligible for the Allowance benefit for the period you are delaying your OAS pension.

In deciding when to start receiving your OAS pension, you should consider your personal situation, taking into account such things as:

current and future sources of income;
current and future employment status;
health; and
plans for retirement.

There is no financial advantage in deferring your OAS pension after age 70. In fact, you risk losing benefits. If you are over the age of 70, apply now.
However, neither of them can get GIS while they defer. Financially speaking, it might be best to retire but they have to look at the overall picture for them.
[OP]
Newbie
Jun 19, 2009
73 posts
dollarsign wrote: They're actually incorrect:

source: https://www.canada.ca/en/services/benef ... ility.html



However, neither of them can get GIS while they defer. Financially speaking, it might be best to retire but they have to look at the overall picture for them.
wow! That's an eye opener. Is it possible to work full time and not defer OAS pension? That would increase income from work and pension. I'm going to guess to receive pension payments one must stop working or only work part time. My concern is not so much the money my parents get but they seem to be bored out of their minds at home and sit at home most days even though they are healthy and capable. They haven't saved up much or get much that that they can go off on vacations or really enjoy their retired lives. They still have mortgage to pay.
Deal Fanatic
User avatar
Apr 11, 2008
5754 posts
472 upvotes
accesskb wrote: wow! That's an eye opener. Is it possible to work full time and not defer OAS pension? That would increase income from work and pension. I'm going to guess to receive pension payments one must stop working or only work part time. My concern is not so much the money my parents get but they seem to be bored out of their minds at home and sit at home most days even though they are healthy and capable. They haven't saved up much or get much that that they can go off on vacations or really enjoy their retired lives. They still have mortgage to pay.
It really depends on their income. Having income isn't always a choice. If they had $10M in the bank, they would have incomes regardless whether they work or not. The same goes for CPP. The set up in Canada is basically everybody gets a minimum income to survive and that income is clawed back when you have other incomes, not at 100%, but at a very high ratio.

For somebody who has no other income, you have the OAS and the GIS. Say $600 OAS and $400 GIS just for argument sake. GIS is clawed back as soon as you have income, say at 50% rate. So if you make $500/month, you would lose $250 in GIS, giving you $600+$150+500 = $1250. So no, you don't make less money, but the marginal tax rate on the income is very high, making it less worthwell. OAS, on the other hand, is not clawed back until a much higher amount (I think over $70,000/year in 2016). If you make less than that, you would still get your OAS in full. Above that, you lose 15%. Again, it's not 100%, so you wold always have more money working. However, it basically tag another 15% marginal income.

OAS clawback is usually not a concern. GIS clawback however can make it extremely hard to justify working and losing 50% the benefit.

I think both OAS and GIS are income based, not asset based. Therefore, somebody with $100M in TFSA (say he bought a penny stock which became the next Apple) and no other income would still enjoy for OAS and GIS despite earning $1M a year in interests/dividends.

In the end, I don't think this is really about money. What most seniors lack are health and time. They should do whatever makes them happy and healthy. Money shouldn't be a concern.

BTW, I think this should be moved to the personal finance forum.
[OP]
Newbie
Jun 19, 2009
73 posts
Archanfel wrote: It really depends on their income. Having income isn't always a choice. If they had $10M in the bank, they would have incomes regardless whether they work or not. The same goes for CPP. The set up in Canada is basically everybody gets a minimum income to survive and that income is clawed back when you have other incomes, not at 100%, but at a very high ratio.

For somebody who has no other income, you have the OAS and the GIS. Say $600 OAS and $400 GIS just for argument sake. GIS is clawed back as soon as you have income, say at 50% rate. So if you make $500/month, you would lose $250 in GIS, giving you $600+$150+500 = $1250. So no, you don't make less money, but the marginal tax rate on the income is very high, making it less worthwell. OAS, on the other hand, is not clawed back until a much higher amount (I think over $70,000/year in 2016). If you make less than that, you would still get your OAS in full. Above that, you lose 15%. Again, it's not 100%, so you wold always have more money working. However, it basically tag another 15% marginal income.

OAS clawback is usually not a concern. GIS clawback however can make it extremely hard to justify working and losing 50% the benefit.

I think both OAS and GIS are income based, not asset based. Therefore, somebody with $100M in TFSA (say he bought a penny stock which became the next Apple) and no other income would still enjoy for OAS and GIS despite earning $1M a year in interests/dividends.

In the end, I don't think this is really about money. What most seniors lack are health and time. They should do whatever makes them happy and healthy. Money shouldn't be a concern.

BTW, I think this should be moved to the personal finance forum.
thanks for the nice explanation. Yes, I think more than money, its doing whatever makes my parents happy, staying occupied and healthy. I'd hate to see them able and strong in their 65 sitting at home in front of a computer every day.

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