Total CPP and OAS Benefits for a Couple in Canada without Other Income

Understanding the total Canadian Pension Plan (CPP) and Old Age Security (OAS) benefits you and your partner may receive is an important aspect of retirement planning. In this article, we will discuss the eligibility criteria, key factors affecting the benefits, and how these benefits can be optimized for a couple with no other income sources.

Eligibility for Old Age Security (OAS)

Old Age Security (OAS) is a federal government initiative that provides income support to eligible seniors. The payment of OAS benefits is conditional on certain criteria, including years of residency and age.

Residency Requirement

Minimum Years of Residence: To qualify for any Old Age Security benefits, one must have resided in Canada for at least 10 continuous years after the age of 18. Maximum Residency: If one has resided in Canada for 40 or more years after the age of 18, they qualify for the maximum benefit. If the residency is less than 40 years, the benefit is prorated according to the number of years lived in Canada. For example, 30 years of residency would entitle the recipient to 75% of the maximum benefit.

Payment Eligibility

OAS benefits are paid to individuals who have reached the age of 65. If a couple both qualify for OAS benefits, each will receive their individual payment. It is important to note that OAS payments cannot be taken earlier than the age of 65; however, they can be deferred to increase the benefit amount.

Increased OAS Benefits

For each month the OAS benefit is deferred beyond the age of 65, the amount of the benefit increases by 0.6% per month. For instance, deferring the benefit until you are 70 would result in an increase of 60% (60 months x 0.6%) of the original benefit amount.

Canada Pension Plan (CPP)

The Canada Pension Plan (CPP) is a very important income source during retirement, and its benefits can be optimized by taking into account the timing of when the plan is accessed.

CPP Optimal Access Points

Early Access: If you choose to take the CPP benefit before the age of 65, you will receive a reduced amount. For each month you take the benefit earlier than age 65, your monthly benefit is reduced by 0.6% of the full retirement age benefit. For instance, if you start receiving the benefit at age 60, you would receive only 64% of the amount you would have received at age 65. Deferred Access: Deferred access to the CPP benefit can increase the amount you receive. For each month you defer beyond the age of 65, your monthly benefit increases by 0.7%. This means that waiting until age 70 would result in a 70% increase in the benefit compared to taking it at age 65.

It is crucial to consider these factors when deciding when to start receiving CPP benefits, as it can significantly impact your retirement income.

GIS Benefits

In addition to OAS, there is another important benefit that can enhance the overall financial support for a couple: the Guaranteed Income Supplement (GIS). GIS supplements the OAS benefit for low- and modest-income seniors, helping to ensure that their income is more stable during retirement.

GIS benefits are automatically calculated for OAS recipients based on their family income, after-tax income, and marital status. There is no need to apply separately for GIS benefits, as the government handles the calculation and payment seamlessly.

Example Scenario

Let's consider a couple, both of whom qualify for OAS and CPP benefits without other income. Sarah, who is 70 years old, and Mark, who is 67. If they both claim their OAS benefits now, they will receive the standard OAS benefit amount at 65, adjusted according to their years of residency.

Suppose both Sarah and Mark had sufficient years of residency to qualify for the full OAS benefit and the full GIS benefit. Their monthly OAS benefit would be around CAD 600, and with a full GIS benefit, their monthly income would be significantly higher.

Now, let's consider the possibility of deferring Margaret's CPP benefit to age 70. If she defers her benefit to age 70, her monthly benefit would be approximately 70% higher than if she had taken it at age 65. This means her monthly benefit would be about CAD 1,120 more than the standard benefit at age 65, reducing the financial strain on her and Mark.

Conclusion

Optimizing the combination of OAS, GIS, and CPP benefits requires careful planning and understanding of the eligibility criteria and timing options. By strategically timing the start of these benefits and considering the supplement of GIS, a couple can secure a more stable and comfortable retirement without other income sources.