I was speaking conceptually with a colleague about the Old Age Security clawback (OAS Clawback). We had come across a case where an elderly man earning $45,000 per year before tax wanted to invest $500,000 in such a way as to avoid the OAS clawback.
At the time of writing, OAS pays a monthly benefit of $490, which is approximately $5,880 per year. The OAS is reduced by way of a recovery tax of $0.15 per $1 when a person’s income is over $66,335 and is fully eliminated after $107,692.
There are 4.56 million people receiving OAS. This means that the Government of Canada is spending $2.68 billion dollars a year on OAS.
Eliminate OAS Sooner?
Now I agree that we need to provide seniors a minimum income level and programs such as OAS and GIS (Guaranteed income Supplement) fill this need.
Should Canadians continue to pay seniors earning over $60,000 per year OAS or reduce it? Can we reduce our deficit or divert this money to those who are more in need?
If we reduce the threshold to $35,000 and have OAS eliminated by $45,000 how much we save?
Should Canada continue to pay OAS at $60,000 or start reducing the pension when income reaches $35,000?
Do you think someone earning $60,000 needs an additional $6,000?
Please feel free to share your comments below.