This is a recent question I received (January 2015):
“I read that if you wait until 70 to receive OAS you will collect more. What is your opinion on this?”
Here is my reply:
You are correct again.
The present monthly OAS payment is $563.74.
Assuming your annual income remains under $70,954 per annum, then you will receive the full benefit annually, ie there will be no claw back.
Waiting five years (60 months) to earn maximum OAS means you will forgo receiving $33,824.40 ($563.74 x 60 months), without getting fancy and calculating time value of money. In reality, you will forgo much more because $1.00 today is worth more than $1.00 in five years because of inflation.
If you elect to defer receiving OAS until age 70, in five years, the monthly payment increases by 36% (0.06% per month for 60 months) which calculates to be $766.69 per month.
To benefit from deferring OAS, you will need to recover more than $33,824.40, the amount you would have received over 5 years.
The monthly OAS increase at age 70 is $202.69 ($766.69 less $563.74). Therefore, it will take until you are 84 years young to fully recover $33,824.40. After that age, you start to benefit by $202.69 monthly.
My belief is you are better off to receive OAS immediately.
If you saved all of the OAS payments over 5 years at 2% per annum, total OAS plus interest will accumulate to $35,542.32 (not including tax on earned interest) by the time you are 70 years. You will be 85 years young by the time the monthly increase of $202.95 accumulates to $35,542.32.
Obviously, if your annual income were to exceed $70,954 then claw back starts. If your annual income reaches $114,815, all of OAS is clawed back.
My recommendation will be different if OAS is clawed back.
I hope this helps with your decision making.
Here is the link to apply for OAS:
http://www.servicecanada.gc.ca/cgi-bin/search/eforms/index.cgi?app=profile&form=isp3000
It is organized by Service Canada, there should be an office near you.
Regards,
Charles