Liberals reject Bloc Quebecois plan to increase old age security payments: Here’s 3 simple ways to boost your retirement income without relying on Ottawa

The debate over Old Age Security

Canadians become eligible for Old Age Security at age 65; in most cases, they’ll be automatically enrolled by Service Canada. In addition, low-income seniors could potentially receive GIS benefits to supplement their OAS pension. The Bloc-sponsored private member’s bill, Bill C-319, would increase the OAS entitlement for seniors aged 65 to 74 by 10%, and raise the exemption for employment income or self-employment earnings considered in determining the amount of the Guaranteed Income Supplement (GIS) to $6,500 from $5,000.

However, the proposed changes could cost $16 billion over the next five years, according to the Parliamentary Budget Officer.

OAS expenditures are expected to steadily increase over the next four decades — and that’s without taking into account any increases to OAS payments. The government’s most recent actuarial report on the Old Age Security Program found that, as a result of the aging population, the number of OAS beneficiaries is projected to increase from 7.2 million in 2023 to 9.8 million by 2035, reaching 12.6 million by 2060.

Regardless, Canadians relying on OAS and GIS may be in for a rude awakening. For those aged 65 to 74, the maximum monthly OAS pension amount is $727.67 in 2024. For those over 75, the 2022 OAS top-up increased the maximum to $800.44 per month. For most Canadians, that’s not nearly enough to live on if you don’t have other sources of retirement income. OAS is also taxable, and if you exceed the earnings exemptions, those payments are clawed back.

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3 ways for Canadians to boost their retirement income

While all Canadians can receive Old Age Security so long as they meet eligibility requirements, the Canada Pension Plan (CPP) is available to Canadians who’ve paid into the program through payroll deductions. CPP has a maximum monthly benefit of $1,364.60; however, the average benefit is much lower, at $815 — and most Canadians won’t receive the maximum amount.

OAS and CPP won’t cover most Canadians’ retirement needs, but there are other ways you can take charge and boost your retirement income — without relying on Ottawa. Here are three of them:

1. Increase your RRSP contributions. Regularly contribute a portion of your monthly income to a Registered Retirement Savings Plan (RRSP). The earlier you start, the better, since you’ll benefit from the power of compound interest. Your RRSP deduction limit, or how much you can take as a deduction on your income tax, is 18% of your earned income from the previous year, plus any unused RRSP contribution room from previous years. The maximum amount you can contribute changes annually; for 2024, it’s $31,560. Regularly contributing to an RRSP can help to grow your retirement savings over time. Plus, your money grows tax-free.

2. Max out your workplace retirement savings program: If it’s available to you, it’s worth contributing to an employer-sponsored savings plan, even if you have personal savings and investments. That’s because these contributions are automatically deducted at source (which means they automatically come off your pay cheque), which could lead to lower taxes. It’s easier to save, since you don’t have to think about it. Plus, some employers offer RRSP matching as part of their group retirement savings plan. That means your employer will match your contribution, up to a certain amount or portion of your salary. However, not all group plans offer RRSP matching, so make sure to check.

3. Delay retirement. While you can claim CPP starting at age 60 for a reduced benefit, if you defer past age 65, you can boost your pension by 8.4% per year up until age 70. As an added incentive, if you have any years without earnings after age 65, that won’t impact the amount of your pension. So, if you keep working past 65, even part-time, you could bring in some extra cash, continue contributing to your retirement savings, and count on a permanently bigger CPP cheque.

Sources

1. Global News: Liberals vote against Bloc Quebecois’ old age security motion, by Laura Osman and Alessia Passafiume (Oct 2, 2024)

2. Parliament of Canada: An Act to amend the Old Age Security Act

3. Office of the Parliamentary Budget Officer: An Act to amend the Old Age Security Act (May 31, 2023)

4. Office of the Superintendant of Financial Institutions Canada: 18th Actuarial Report on the Old Age Security Program (Dec 31, 2021)

5. Government of Canada: Old Age Security: How much can you receive

6. Government of Canada: CPP retirement pension: How much you could receive

7. Government of Canada: How contributions affect your RRSP deduction limit

8. Government of Canada: MP, DB, RRSP, DPSP, ALDA, TFSA limits, YMPE and the YAMPE