If you’re receiving Old Age Security (OAS) and considering continuing to work, understanding how this affects your benefits is crucial. This article provides detailed information on working while receiving OAS, including how it impacts your pension and the OAS Recovery Tax.
Overview of OAS
OAS, or Old Age Security, is a monthly pension provided by the Canadian government for those aged 65 and older. Most people are automatically enrolled by Service Canada, but if they lack sufficient information, you may need to apply manually.
Can I Work While Receiving OAS?
Yes, you can work while receiving OAS. There are no restrictions on working after reaching age 65. However, you must keep your income below a certain threshold to avoid paying back part of your OAS pension.
Income Thresholds and Recovery Tax
The OAS Recovery Tax is applied if your income exceeds a set threshold. Here’s a breakdown of the income limits and how the recovery tax is calculated:
Income Thresholds
| Year | Minimum Threshold | Maximum Threshold (Aged 65-74) | Maximum Threshold (Aged 75 or More) |
|---|---|---|---|
| 2022 | $81,761 | $134,626 | $137,331 |
| 2023 | $83,200 | $137,626 | $140,200 |
| 2024 | $86,912 | $142,609 | $148,179 |
Recovery Tax Rates
| Year | Recovery Tax Rate | Calculation Method |
|---|---|---|
| 2022 | 15% | 15% of the amount exceeding the threshold |
| 2023 | 15% | 15% of the amount exceeding the threshold |
| 2024 | 15% | 15% of the amount exceeding the threshold |
Example Calculation
If you earned $96,000 in 2022, here’s how you would calculate the recovery tax:
- Income in 2022: $96,000
- Income Threshold for 2022: $81,761
- Difference: $96,000 – $81,761 = $14,239
- Recovery Tax Rate: 15%
- Recovery Tax Amount: 15% of $14,239 = $2,136
You would need to repay $2,136 in the OAS recovery tax for that year.
Delaying OAS Pension
Delaying your OAS pension can increase your monthly payment. You can delay OAS for up to 5 years, and delaying it past age 70 offers no additional benefits and may affect other supports like the Guaranteed Income Supplement (GIS).
Impact of Income on OAS
| Income Range | Impact on OAS |
|---|---|
| Below Threshold | No repayment required |
| Slightly Above | Small repayment amount |
| Significantly Above | Larger repayment amount |
OAS Recovery Tax Details
For those exceeding the income threshold, the OAS Recovery Tax is calculated as 15% of the difference between your income and the threshold. Here’s a table showing how the recovery tax is applied:
Recovery Tax Calculation Table
| Income | Threshold | Difference | Recovery Tax |
|---|---|---|---|
| $96,000 | $81,761 | $14,239 | $2,136 |
| $105,000 | $81,761 | $23,239 | $3,486 |
| $120,000 | $81,761 | $38,239 | $5,736 |
Conclusion
You can work while receiving OAS, but be mindful of income limits to avoid the OAS Recovery Tax. Understanding these rules can help you manage your finances and optimize your benefits. If you choose to delay your OAS pension, it can result in higher monthly payments, but delaying beyond age 70 may not provide additional advantages.
FAQ’s
Can I work while receiving Old Age Security (OAS)?
Yes, you can work while receiving OAS. There are no restrictions on continuing to work once you reach the age of 65. However, your income should not exceed the annual threshold to avoid repayment of part of your OAS pension.
What happens if my income exceeds the OAS income threshold?
If your income exceeds the set threshold, you will need to pay back part of your OAS pension through the OAS Recovery Tax. The recovery tax is calculated as 15% of the amount by which your income exceeds the threshold.
Is there any benefit to delaying my OAS pension?
Yes, delaying your OAS pension can increase your monthly payments. You can delay it for up to 5 years to receive higher benefits. However, delaying beyond age 70 offers no additional advantages and may affect other benefits like the Guaranteed Income Supplement (GIS).
