A large percentage of Canadian seniors are missing out on federal dollars by not waiting until they are older.
If you qualify for the Old Age Security (OAS) pension, you can start getting it when you turn 65, but you can get more money each month if you defer it.
OAS has been deferrable since 2013, and yet a new report by the federal government found only 4 per cent of seniors defer OAS and only 17 per cent even knew they could.
“OAS benefits represented 23% of seniors' after-tax income on average in 2015,” read the report.
Payments will increase by 7.2 per cent for each year you defer, up to a maximum of 36 per cent at age 70.
“It’s not well advertised that you can. Most Canadians are fixated on the age of retirement being 65.” Rubina Ahmed-Haq, a personal finance expert, told Yahoo Finance Canada.
Greater awareness would help seniors plan for retirement, especially since more are choosing to work during their golden years and don’t need the money as soon as they are eligible.
Deferring can also allow seniors to avoid having their OAS clawed back.
“Anyone working past the age of 65 should defer their OAS benefit, if they will be making more than $79,054 combined. This is when in 2020 your OAS benefit is clawed back,” said Ahmed-Haq.
“As well anyone who will be taking a retirement income of more than that amount would be better off deferring their OAS.”
Other ways to optimize retirement
The Canada Pension Plan (CPP) can also be deferred but it doesn’t work quite the same way as OAS.
“If you delay taking it until 70 you will derive almost 9% more benefit. For anyone still earning in their late 60s this can be a great option,” said Ahmed-Haq.
“CPP is not clawed back, when deciding what to defer, the OAS should be considered first.”
In addition to optimizing pension benefits, Ahmed-Haq suggests seniors downsize as much as they can.
“The house you raised your family in may have sentimental value. But it could be holding you back from affording what you really want. In the end it is much more expensive to maintain,” she said.
“If you’re on a fixed budget, that can mean being able to afford a nice holiday each year or helping your grandchildren out. You can choose how to spend your money.”
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.