# Delaying OAS/CPP as an alternative to purchasing annuity



## markbryn (Oct 23, 2013)

I've read advice on purchasing an annutiy with part of your retirement funds to provide a level of guaranteed funds to cover fixed expenses. I am looking at possible delayed OAS and CPP as an alternative to purchasing an annutiy. The delayed OAS/CPP comes with a built in cost of living increment provided. I do not really feel positive on purchasing annuties because of the loss of control of funds used and the decreased returns as you add on any guaranteed period. It seems to me that delaying OAS and/or CPP could be used as a strategy replacing purchase of annuties. I wouls appreciate any thoughts, pros or cons of this strategy. Thanks
markbyrn


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## pwm (Jan 19, 2012)

I turn 65 next year and I just sent in my request to Service Canada to delay receiving my OAS. I'm planning to wait until 70 to apply for it. I will be in OAS clawback territory due partly to the dividend gross-up and according to my calculations, it won't take many years after 70 to catch up. Normally it would take around 14 years, but when you're over the clawback threshold the picture looks much better. 

I agree with your statement that deferring OAS for a larger payment is very much like purchasing an annuity, because it's really a longevity bet. In both cases you make out well if you live a long time.


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## 6811 (Jan 1, 2013)

Interesting. I knew that postponing CCP would increase the monthly payout but thought that OAS was the same no matter when applied for. Hope you guys are right as it won't be long before I'm applying for this benefit and putting it off with increasing monthly payout is worth considering.


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## pwm (Jan 19, 2012)

OAS increases by 0.6% per month for a total of 36% after 5 years at age 70. It was in the last budget along with the increase of eligabilty to age 67.


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## 6811 (Jan 1, 2013)

pwm said:


> OAS increases by 0.6% per month for a total of 36% after 5 years at age 70. It was in the last budget along with the increase of eligabilty to age 67.


Thanks for the info PWM. I will turn 65 in early 2015 so this is very relevant to my situation.


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## pwm (Jan 19, 2012)

Another change they made recently is the fact that you no longer need to apply for OAS. They automatically enroll you if you qualify. I received a letter in June 2013 from Service Canada explaining that fact and also explaining the OAS deferral option. I'll be 65 in June 2014. On the back of the form letter there was a place to sign and date if you wanted to defer. I took that letter to my local Service Canada office. 

6811: Did you get that letter?


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## Dogger1953 (Dec 14, 2012)

I agree totally with everything said so far about the benefits of deferring OAS, especially pwm's comment that if you're subject to the clawback (especially if you would be having it mostly clawed back) the payback is much quicker.

The only caution that I like to point out is that if you're only eligible for a partial OAS (if you have less than 40 years of residence in Canada after age 18), you can't have the deferral count as both an extra year of residence and get the 0.6% per month increase. In that case, you have to choose between which is more beneficial for you.

If anyone is interested, here's a link to an article that I wrote on deferral of OAS: http://retirehappy.ca/voluntary-deferral-of-oas/


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## pwm (Jan 19, 2012)

Thanks for the update Doug. I use the current 2012 version of Ufile to model my taxes after I turn 65, by changing my DOB. It looks like I will only get about 40% of the benefit if I take it next year.

One reason that it works out better to wait is the fact that the clawback threshold is indexed. I have the numbers in a spreadsheet and it's been increasing at an average rate of 2.1% since 2001. I'm projecting a 2% increase for the next 5 years. That may or may not prove to be true, but with the threshold increase, and the OAS payment at 36% more, it could take as little as 4 years to catch up according to my spreadsheets.

One thing that could derail my plan is government medling. They could de-index the threshold, or increase the 15% clawback rate. Either one would hurt.


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## sprocket1200 (Aug 21, 2009)

Funny enough it is an actuarial issue. If you are male, take it early, if female, don't touch it.

There is no equality...


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