I am single, 65 years old and my annual income is in the 60s before taxes. There is all this buzz around delaying getting your old age security at age 65 as it increases if you wait. Receiving payments now would allow me to visit my grandkids more often, but I’m looking for some guidance on whether it makes sense financially to delay them. I have a small RRSP of a little over $100,000 and am afraid to draw it down earlier, particularly if I live to a ripe old age. Is there an income threshold that determines if it makes sense financially to wait?
If you’re healthy and expect to live to a “ripe old age,” the most financially prudent answer may be that it’s better to wait. But I think you already understand that you’re asking a deeper question.
The U.K. Institute for Fiscal Studies put out a report back in 2018 with some interesting findings: Compared with official life table rates, individuals in their 50s and 60s tended to underestimate their chances of survival to age 75 by about 20 percentage points. Later in life, irrational pessimism is replaced by irrational optimism. Men interviewed at age 80 overestimated their chance of getting to 95 by 15 percentage points (women were slightly more realistic).
“This whole question around when to take Old Age Security and Canada Pension Plan is very much psychological,” said Steve Bridge, an advice-only planner with Money Coaches Canada in West Vancouver, B.C. It can be a challenge for most people to think about, and make plans around, predictions of their own mortality.
Death is part of the psychological equation, but so is life. If delaying the OAS means that you won’t get to see your grandkids as much for the next five years, that is a major non-financial consideration that needs to be weighed against the dollars and cents.
The financial equation is more straightforward. Delaying OAS means increasing your monthly payments by 0.6 per cent each month, or 7.2 per cent per year. If you start receiving OAS at 65, your maximum monthly payment at the moment would be $751.97. If you delay OAS to 70, this number would increase to $1,022.68. Both numbers rise 10 per cent when you turn 75.
In short, delaying until you turn 70 means a 36-per-cent increase in monthly payments for life – and these payments are indexed to inflation, which means fewer worries about the rising cost of living.
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“If anyone could offer me a guaranteed 7 or 8 per cent per year, plus inflation on top of that, I would give them all my money,” Mr. Bridge said.
“Most of us these days don’t have defined benefit pension plans, so this is a way of creating our own defined benefit pension plan, our own guaranteed income for life.” If, as your question suggests, you are still working and drawing an income, it makes sense to wait.
Mr. Bridge said there’s one big exception to this. If you have severe health concerns or a shortened life expectancy, there is no financial argument for delaying.
That isn’t to say that delaying OAS will lead to bigger gains over time. If we assume a conservative annual rate of return, someone who delays for five years won’t catch up with someone who doesn’t until their early-to-mid 80s.
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There is also the Guaranteed Income Supplement to think about, particularly given the size of your RRSP. Taking OAS at 65 makes you automatically eligible for GIS payments of up to $1,123.17 per month if, as a single person, your annual income falls below $22,800. If you expect to qualify for GIS after retiring, this may shift the math in favour of taking OAS now.
If you expect to be eligible, be aware that withdrawals from your RRSP or RRIF will reduce your GIS. It can sometimes make sense to draw from those accounts early to contribute to a TFSA, where future withdrawals won’t count toward income.
As for an income threshold, the main consideration for delaying is the minimum income recovery or “clawback” threshold – but the figures you’ve supplied suggest it’s not likely to be relevant. If you’re drawing a salary at 65 and near the threshold of $95,323 for the 2026 income year, the argument for delaying is stronger.
So much of this comes down to what other sources of income you can rely on and especially when the money will be most useful to you. Financially speaking, there may be a good argument for waiting.
But in your position I don’t know if I’d trade $1 and five years with grandkids for $1.36 in five years’ time.
E-mail your questions to agalbraith@globeandmail.com. I’m not able to respond personally to e-mails but I choose certain questions to answer in my column.