OAS Elegibility going up to 67

[GP_Matt]

So it is starting to look like the requirements for collecting OAS are going to go up in the upcoming federal budget.
http://ca.finance.yahoo.com/news/fin...180040182.html
They list raising the eligibility as the most likely outcome but also mention reducing the eligibility criteria based on means. Apparently 98% of Canadians over 65 currently qualify for roughly $500 per month. Maybe it should be clawed back if you have assets over a certain amount or high enough income. I think with pension splitting and such in place now a couple can make $140000 a year before they get any clawbacks.

[Muffins]

Something has to be done and this should just be the start.

It was all fine and dandy having it at 65 when life expectancy was 70ish (1965 when they set it to 65), but with life expectancy in Canada now over 80, it's nowhere near affordable for us taxpayers to foot the bill for it anymore.

[albertGQ]

I'm only okay with it if MPs pensions get reduced as well.

[Cheese]

I think the value should be doubled and the age dropped to 60.
That way all of you young people can find good jobs, <read have my job>, and help pay for my retirement!

Get to work and quit posting on a hockey message board!

[Knut]

Originally Posted by Cheese

I think the value should be doubled and the age dropped to 60.
That way all of you young people can find good jobs, <read have my job>, and help pay for my retirement!

Get to work and quit posting on a hockey message board!

You just say that because you are almost 65 and now you have wait a few years.

[Red]

You would think that with all the smarts that newer generations give us someone would figure out a way to keep pensions going without raising taxes. And that's exactly what they are doing here.

And yes, I expect the politicians to have to wait longer for their gold pensions too.

Won't happen though.

Why not change policies to enable the masses to save more? The last decade or two have been all about consumerism. Most of it fueled by cheap credit. Are we better off with cheap credit?

[Azure]

We should try to educate our youth more to save money for retirement so the taxpayers don't have to support them as much.

Raising the age won't solve the problem by itself. If you made a certain amount of money during your career or have a certain amount of assets you shouldn't qualify at ALL for OAS. The program should be designed for people over 67 who need a bit more help after they retire. Everyone else should collect CPP, which they paid for, or some other pension.

Not sure how they calculate it now, but anyone who made more than $50,000/year should not qualify, IMO. Or their payout should be reduced.

[Red]

Originally Posted by Azure

We should try to educate our youth more to save money for retirement so the taxpayers don't have to support them as much.

Raising the age won't solve the problem by itself. If you made a certain amount of money during your career or have a certain amount of assets you shouldn't qualify at ALL for OAS. The program should be designed for people over 67 who need a bit more help after they retire. Everyone else should collect CPP, which they paid for, or some other pension.

Not sure how they calculate it now, but anyone who made more than $50,000/year should not qualify, IMO. Or their payout should be reduced.

There are some problems with that right now. People are discouraged to save in registered plans because that's tracked by the government and if you have too much you loose some of the money you would get from the government.

It makes sense that more needy should get more, but at the same time that punishes the savers.

In the end some of the policies are counter productive.

[Azure]

I know what you mean, but there has to be some kind of middle of the road solution where OAS isn't such a big burden down the road.

Obviously we don't want people to simply stop receiving OAS without having some other form of retirement fund to help them once they reach that age, so I don't think its fair for the government to simply cut the age or the benefits for anyone until they make sure that other registered retirement plans can be properly utilized for people who might not qualify for OAS down the road, WITHOUT them being penalized by the government for ANY reason.

But face it, OAS is designed as a welfare program for the 'needy.' It shouldn't be given to people who can get by with other savings/pensions.

[SebC]

This debate is being framed as a change to benefit people down the road, but that's completely wrong. Increasing the retirement age and grandfathering it in is basically a wealth transfer from the young to the old.

Young people today are paying taxes to support a benefit level that they won't receive. We should lower the eligibility threshold/increase clawback instead.

See: http://www.theglobeandmail.com/globe...rticle2339875/

Spoiler!

The government could either increase the percentage amount of OAS benefits that are clawed back by a modest amount, or it could apply the current clawback rate at a somewhat lower income level. Another option is to de-index the annual income level at which the clawback applies.

It’s a messier approach than raising the minimum OAS age to 67, but it’s also a fairer approach in a generational sense.

The key question here is why today’s younger Canadians – the seniors of tomorrow – must settle for OAS at 67 so current seniors can get it at 65. OAS is not a pension, like the Canada Pension Plan, where you pay premiums in your working years that essentially buy you a certain level of income. OAS is paid on an as-we-go basis out of general government tax revenue, which means people in the work force pay a big part of the OAS benefits that retirees receive.

Frankly, retirement at 67 or even later makes good sense in that it reflects today’s longer lifespans and low levels of retirement savings. But, again, there’s a generational angle to be considered. Seniors would be staying on the job longer, and that could mean fewer opportunities for young workers.

[Slava]

First a few points about OAS (I find a lot of misconceptions when talking to clients)

- You don't "pay into" or "contribute to OAS. The funding is provided by the government which of course comes from taxes and such, but what I mean to say is there is no direct funding like CPP.

-Second OAS is income tested. The clawback begins at $67,667 and for every $100 in income over that the OAS benefit is reduced by $15. After you earn an income of about $108k (going from memory here) you get zero OAS.

- There are also stipulations where you can earn partial pensions depending on how long you've been in Canada and you can also receive OAS even if you live abroad.

I think OAS should be stopped entirely. I know thats a harsh stance and would be less than appreciated by people older than me and many of my clients. The reality is that the baby-boomers are poised to retire and leave the next generation with huge debts. Its a generation that doesn't want taxes increased, doesn't want services cut and doesn't want to work any longer than is absolutely necessary. (Obviously I'm generalizing here and painting a generation with a broad brush). Its hard for someone my age not to think "so what if you have to work an extra few years? Work until the debts are cleared up and you can retire after that."

I know....its not going to be popular with some, but thats my opinion.

[chemgear]

Originally Posted by Slava

Its a generation that doesn't want taxes increased, doesn't want services cut and doesn't want to work any longer than is absolutely necessary. (Obviously I'm generalizing here and painting a generation with a broad brush). Its hard for someone my age not to think "so what if you have to work an extra few years? Work until the debts are cleared up and you can retire after that."

I know....its not going to be popular with some, but thats my opinion.

Agreed. Problem is that there are too many people from that generation. Given the whole voting numbers/democracy thingy, governments will be heavily encouraged to continue to spend more and get further into debt.

We need those boomers to die off faster . . . (and if the green text isn't clear enough, I'm not overly serious.)

[GP_Matt]

I couldn't imagine canceling it now as many people are counting on it, but I could live with it being eliminated over a decade or two. It would be nice to see something like voluntary additional contributions to CPP to compensate.

There is an issue with mandatory retirement though. There are quite a few companies that still have policies that force people out at 65 although those companies likely pay more than average so maybe it isn't an issue.

[Slava]

Originally Posted by chemgear

Agreed. Problem is that there are too many people from that generation. Given the whole voting numbers/democracy thingy, governments will be heavily encouraged to continue to spend more and get further into debt.

We need those boomers to die off faster . . . (and if the green text isn't clear enough, I'm not overly serious.)

Ya, and people vote with their wallets, myself included. Lets face it; evidence would have to be overwhelming to vote for someone to increase your taxes, or the alternatives would have to be completely incompetent. Money talks.

[Slava]

Originally Posted by GP_Matt

I couldn't imagine canceling it now as many people are counting on it, but I could live with it being eliminated over a decade or two. It would be nice to see something like voluntary additional contributions to CPP to compensate.

There is an issue with mandatory retirement though. There are quite a few companies that still have policies that force people out at 65 although those companies likely pay more than average so maybe it isn't an issue.

Quick quiz, how much is it per month at the full amount though?

People need to be better prepared in general if thats the difference between eating and not. Or they could always work longer!

[chemgear]

http://business.financialpost.com/20...ast-66-survey/

Most Canadians expect to work past the age of 66 — and the majority of those workers say it will be because they need to, not because they want to, a new survey suggests.

As the federal government tries to sell Canadians on changes to Old Age Security, a survey by Ipsos Reid for Sun Life Financial has found that only 30% of Canadians expect to be fully retired at 66.

[Red Ice Player]

Originally Posted by Slava

Quick quiz, how much is it per month at the full amount though?

People need to be better prepared in general if thats the difference between eating and not. Or they could always work longer!

I figure its around 500 bucks a month. I'm all for raising the eligibility age, but not in favour of scrapping the program. Getting rid of it would really hurt low income seniors. Instead, radically alter the means requirements. Too many are collecting it that don't really need it. I come from the later portion of the baby boomer generation, so this proposed legislation means my eligibility starts 14 years from now instead of 12. I'm not going to lose sleep over that. I would suggest to the people in my situation and to those who are younger to start contributing as much as they can to the best savings vehicle available today, the TFSA. I used to strive to max out my RRSP, but I won't do that again until my Tax free savings account is maxed. I am assuming that you are some sort of investment consultant Slava. It would be a great benefit to the members of CP if you could expound on the TFSA and its advantages. Most people give me a blank stare when I ask them if they have a TFSA. I wish the TFSA had been around much earlier in my working life.

[SebC]

Drop the eligibility income. There's no need to give more money to people making $70K a year.

[SebC]

Originally Posted by chemgear

Agreed. Problem is that there are too many people from that generation. Given the whole voting numbers/democracy thingy, governments will be heavily encouraged to continue to spend more and get further into debt.

We need those boomers to die off faster . . . (and if the soilent green text isn't clear enough, I'm not overly serious.)

fyp

[Slava]

Originally Posted by Red Ice Player

I figure its around 500 bucks a month. I'm all for raising the eligibility age, but not in favour of scrapping the program. Getting rid of it would really hurt low income seniors. Instead, radically alter the means requirements. Too many are collecting it that don't really need it. I come from the later portion of the baby boomer generation, so this proposed legislation means my eligibility starts 14 years from now instead of 12. I'm not going to lose sleep over that. I would suggest to the people in my situation and to those who are younger to start contributing as much as they can to the best savings vehicle available today, the TFSA. I used to strive to max out my RRSP, but I won't do that again until my Tax free savings account is maxed. I am assuming that you are some sort of investment consultant Slava. It would be a great benefit to the members of CP if you could expound on the TFSA and its advantages. Most people give me a blank stare when I ask them if they have a TFSA. I wish the TFSA had been around much earlier in my working life.

Ya, I do agree that for low income seniors there should be a program; there is also the Guaranteed Income Supplement (GIS) for low income seniors. I suppose if they dropped the clawback to start at about $30k and it was totally clawed back at about $65k I could see that working.

The TFSA is a great account and I do think that it will be a large factor for financial planning going forward. Even this year the limit is at $40k for a couple, plus growth. Thats a significant sum of money for most people and soon enough it will be enough to build a reasonable portfolio with. A few years ago there were quite a few people who used the account for either really low risk investments (because it is called a savings account and many didn't realize it could be invested), or high risk or speculative investments (because it was only five grand). Now I see more planning and thought given to these investments though and as the amounts rise I think you will see more of that.

Overall there are a few major benefits to the TFSA. You don't pay taxes on gains, or on withdrawals. That is a huge benefit over an RRSP; while the RRSP gives you a tax break when you invest, it really defers that tax until you withdraw it. The other major benefit is that you can withdraw funds from the TFSA and not lose the room. So if you take $5000 out for something you can reinvest that again the next calendar year. In an RRSP (unless its a specific program) you don't have that flexibility and once you withdraw that contribution room is gone.

Feel free to ask any questions you have or send me a PM if you prefer.