Should OAS Be Clawed Back Sooner or Eliminated

by Tax Guy - Burlington Accountant on August 11, 2009 Print This Post Print This Post

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?

Your Thoughts?

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.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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