Unlock Thousands in Benefits! The Ultimate Guide to Applying for OAS and CPP
Today we dive into the process of applying for OAS and CPP, two vital government benefits that significantly impact your financial future!
Knowing the opportune moment to apply or defer CPP and OAS benefits becomes increasingly critical later in life. Throughout this piece, we’ll explore the application timeline, procedures, post-application steps, and strategies for rectifying any potential mistakes. Join us as we navigate the complexities of securing these essential benefits.
Two Separate Benefit Programs
Let’s discuss applying for CPP and OAS, two distinct benefits. It’s important to note that you don’t need to apply for one if you’re applying for the other; they’re separate entities. To begin, let’s determine eligibility. In Canada, if you’re 16 or older and have made at least one contribution to the Canadian pension plan, you qualify for CPP benefits. For OAS eligibility, you must have resided in Canada for a minimum of ten years and be aged 65 or older. However, if you’re applying for OAS from abroad, different rules apply. You must have lived in Canada for at least 20 years. Make sure to check the specific regulations based on your location.
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When You Apply Matters
Now, If you’ve qualified for both plans, the next thing you need to consider is when to apply. For CPP, applications are accepted as early as age 60 and as late as 70. This means you have a window between your 60th and 70th birthdays to begin receiving your benefits. Interestingly, most individuals tend to default to the earlier range of 60 or 65. The age of 65 often serves as a default retirement age for many, partly due to the issuance of OAS statements at this age. Since OAS automatically begins at 65, many opt to initiate their CPP benefits at the same time. BUT, that may not ALWAYS be the best course of action.
Get A Financial Projection!
Before proceeding with your application for these benefits, it’s really important to get a financial projection in place. You really need to consider consulting with an investment advisor portfolio manager to determine the optimal timing for taking your old age security and CPP benefits. While individual circumstances will vary depending on the person, deferring your CPP and OAS benefits generally proves to be the best thing to do. Remember, the key is to initiate these benefits at a time that aligns with your tax and income objectives, not just because you’re eligible. So make sure you get a projection done so you know how best to optimize your benefits.
The Application Process
So both CPP and OAS applications can be submitted up to 12 months before your intended start date, and I generally suggest that you submit your applications no less than 3–4 months in advance. With your old age security, expect to receive a formal package approximately one year before your 65th birthday, around the time of your 64th birthday.
You CAN DEFER IT!
Now when you receive your OAS package, it's going to seem quite official and formal. This package often gives off the impression that you have to begin receiving old age security benefits once you turn 65. However, this isn’t the case. Despite the very official-looking appearance of the package, you have the option to defer your OAS benefits. If you take no action, your benefits will start automatically at 65. To defer your benefits, you must actively communicate your intention to the government. There are various reasons why deferring OAS might be beneficial, including avoiding potential clawbacks. For more insights on OAS I will be writing a future article on OAS clawbacks so stay tuned!
If you anticipate falling into OAS clawback territory, deferring your OAS benefits for as long as possible is generally the best choice. While OAS typically starts automatically, you have the option to defer it by completing the necessary paperwork or accessing your My Service Canada account. Speaking of which, let’s take a moment to highlight the importance of My Service Canada. If you haven’t already done so, it’s crucial to sign up and log in to this platform. By the way, you might have some issues when you initially try to sign up for it, because when I tried signing up for it, it didn’t work for me so I had to call the 1–800 number to talk to someone about getting it going, but its pretty important that you do get access. Once you are in and you have access it is more convenient. Here, you can conveniently manage your CPP and OAS benefits, including applying for them and pausing if necessary. My Service Canada can serve as a vital communication tool, ensuring you stay informed about your benefits, application status, and more. For easy access, we’ve included a link to the My Service Canada website below.
Regarding the timing of the CPP application, it’s a decision that can significantly impact your retirement income, potentially amounting to over $100,000 difference in income. That’s why it’s essential to formulate a well-thought-out financial projection to make sure you are making the most of your benefits. Consider your individual circumstances — whether you require early access due to financial needs, health concerns, or other factors. While some may feel the need for immediate cash flow, it’s essential to weigh the long-term implications. Taking CPP before 65 results in a reduction of 0.6% per month, while deferring past 65 increases the benefit. For an in-depth understanding of CPP and OAS, refer to my comprehensive article that covers the entire process.
Sign Up For My Service Canada
Now when you are applying for benefits, opting for the online application via My Service Canada is widely considered the most efficient method.
Applying directly on the My Service Canada website generally offers the quickest turnaround time, typically ranging from 7 to 14 business days. After submitting your application online, you’ll receive confirmation of receipt within this timeframe. However, please note that payment initiation occurs only when you specify your desired start date.
Conversely, opting for the traditional mail-in method can significantly prolong the process, taking up to 120 days for completion — an enormous disparity compared to the efficiency of online applications. Therefore, it’s strongly advised to utilize the online platform for expedited processing. However, if mailing is necessary, ensure to track your submission to avoid potential delays and complications. When applying for both OAS and CPP, prepare essential personal details such as your address and SIN number.
When applying for CPP, it’s important to note that if you’re applying for child-rearing years, you’ll need to provide information about your children born post-1958. This includes details such as their birth dates and SIN numbers. CPP eligibility for child-rearing years is determined by cross-referencing your children’s information with their ages. Therefore, ensure you have this information handy to qualify for this benefit. Additionally, if you’re considering pension sharing, you’ll need your common-law partner’s SIN number and pertinent information.
Now, the intricacies of integration won’t be covered in this article, just know though, that if you have integration or receive government benefits from other countries with tax treaties with Canada, it’s essential to gather relevant information when applying for CPP. For instance, if you’re receiving a pension from another country, ensure you have the necessary details ready, as CPP applications may require this information for processing. Having all the required data readily available will help expedite the application process. Additionally, for OAS applications, if you weren’t born in Canada, you’ll need to provide specific details such as the date and city of your arrival in Canada. Be prepared with this information, including who you arrived with and any other relevant details, to avoid delays in receiving your OAS benefits. The more comprehensive your information, the smoother the application process will generally be.
Handy Tips
Now, I’d like to share three important tips with you. First, if you’ve deferred old age security but later realize you should have started it earlier to avoid clawback and could benefit from the extra funds, there’s an option available. You can apply for OAS retroactively once you’re past 65 and receive up to 11 retroactive payments. For example, if you just turned 66 and wish you had started receiving OAS at 65, you can apply and receive payments for the past 11 months. While the amount may be smaller due to the deferred period, it provides an opportunity to recoup some payments. Additionally, if you’ve already started receiving OAS but later realize it was a mistake, perhaps due to experiencing full clawback, you have options. You can choose to stop OAS payments within six months of starting them, although you’ll need to repay any received payments. This allows you to reconsider and adjust your strategy as needed.
If you’ve come to the realization that it doesn’t make sense to continue receiving OAS benefits at the moment, you have the option to stop them within six months of starting. This allows you to reassess your situation and potentially defer OAS payments to a later time. However, it’s important to note that if you’ve received six or fewer OAS payments, you’ll need to repay them in full. To initiate this process, you’ll need to contact the government directly. This flexibility enables you to make adjustments to your retirement strategy as needed.
Similarly, for CPP benefits, you have the option to stop them within 12 months of starting. Many individuals find themselves in a similar situation where they wish they had waited longer to start CPP payments after conducting thorough research. If you find yourself in this scenario, consider stopping your CPP payments, repaying any received amounts, and deferring the benefits for a more optimal timing.
If you find yourself beyond the 12-month window, unfortunately, you’re unable to halt CPP payments and must continue as planned. However, if you’re within this timeframe, you have the opportunity to stop CPP payments, albeit with the requirement to reimburse any collected benefits. This allows you to reassess your strategy and potentially defer CPP benefits for a more suitable time.
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The Bottom Line
Understanding how to apply for OAS and CPP is crucial for securing your financial future. By knowing the basics, like eligibility and timing, you can make smarter decisions. Remember to seek advice if needed and stay informed about your options. OAS benefits commence automatically at age 65 if no action is taken. However, if you wish to defer OAS, you must formally request it. Unlike OAS, CPP benefits do not commence automatically, emphasizing the importance of proactive planning and decision-making. When it comes to CPP though, remember that you’ll need to reapply for it. The application window spans from age 60 to 70. From my experience crafting financial projections, I can confidently say that deferring CPP and OAS benefits makes the most sense in most cases. If you’re considering early withdrawal, it’s essential to reconsider, as it could potentially cost you tens of thousands of dollars in the long run.
We hope this article has helped simplify the process for you.
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Joe A. Macek, FMA, CIM, DMS, FCSI
Investment Advisor, Portfolio Manager
iA Private Wealth
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This information has been prepared by Joe Macek who is an Investment Advisor Portfolio Manager for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Advisor Portfolio Manager can open accounts only in the provinces in which they are registered. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
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