Wednesday, 23 August 2017

No Frills Retirement using OAS

To continue with the discussion of OAS, here is a good example on how one can structure his or her retirement planning using just income from OAS. Please email me if you think this is useful or not as I would really appreciate your feedback. My email address is

Assuming you are aged 65 or above, does not have Canada Pension Plan (CPP) income or willing to defer to age 70 before collecting, have no other sources of taxable income, but have lived in Canada for 40 years after the age of 18, you would be eligible to receive $1,455.60 per month tax free.

If you are Married, both of you will receive $2,217.18 per month in total tax free.

I have prepared various cash flow budgeting scenarios, tax planning, stress-testing and even turned my spreadsheet upside down to conclude that a couple can live reasonably well on $2,200 per month tax free, inflation adjusted. And in Toronto! And still keep my RRSP, TFSA and other assets intact, at least until age 71!

The caveat is that you need to own your own home (or be willing to share a place and pay no more than $800 per month in rent), in reasonably good health and must be a NON-SMOKER. I included an occasional drink in my budget as well as a no-frills senior discounted gym membership – both are keys to maintaining good health.

Willingness to work part-time to earn no more than the magical $3,500 per year to afford a cruise every now and then. Read the next paragraph to figure out why. Note, too, that there are other social programmes such as Ontario Trillium Drug Benefit plan, Hydro Rebate, Property tax credits and other tax benefits that you and your spouse can qualify for at this income levels.

If you receive CPP and/or other income, the GIS benefit is reduced by $1 for every $2 earned (Single) and by $1 for every $4 earned (Couple). In addition, there is also a 15% clawback provision on OAS for net income above $73,756. Note that if you are employed, the first $3,500 of income is also exempted from the GIS calculation.

Note that the information is effective July 1, 2017: Payments are adjusted each quarter based on changes in the Consumer Price Index (CPI) (i.e. goes up). There is also a form of assistance called Allowance for Spouse aged 62 to 64.


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