Talking Cash: Federal government proposes changes to Old Age Security
The federal government has
been proposing changes to Old
Age Security (OAS). Details of
such changes may be released in
March's federal budget, but the
most controversial change that is
garnering news coverage is the
idea of raising the age when someone
can start receiving OAS from
65 to 67.
The way OAS works is that it pays a monthly benefit to all Canadians are who 65 years of age and older. It's a very small amount, meant to supplement the income of retirees from other sources, including Canada Pension Plan (CPP) payments. At the beginning of 2012, the monthly amount was $540.12. If a retiree has an income of $67,668 or higher, the amount of OAS received decreases. If income is over $110,878, the retiree doesn't qualify for any OAS.
Although $540 a month seems quite small, for many low-income seniors with little savings, it is one of their main sources of income. Many seniors do not have significant savings and rely on OAS, Canadian Pension Plan and another monthly government payment called the Guaranteed Income Supplement (GIS) to make ends meet. Critics of the federal government's plan to raise OAS from 65 to 67 argue that low-income seniors between 65 and 67 will need to rely on welfare, which is paid by the provincial governments. This increases the cost burden on the provinces, so although the federal government is attempting to cut spending by trimming OAS back by two years, critics claim that the cost is merely being shifted to the provinces.
What does this have to do with students? Everything, really. Most of the people reading this paper are likely nowhere near retirement age (although I'm sure some of you are). However, changes to the system of income support for retirees has long term consequences. If, over the next few years, OAS is gradually moved from age 65 to 67, it seems possible that further changes could be made to one of OAS, CPP, GIS or all three. In other words, the way retirement functions now may not be the way it functions when many of us retire.
The structure of income sources like OAS, CPP and GIS become even more important because so many Canadians have so little retirement savings and are going to be forced to rely on these income streams in retirement, simply because they have no other choice. The best thing a young person can do is to pay down debt and save for retirement. Starting your retirement savings as early as possible adds many years' worth of compounding, increasing the amount of self-reliance in retirement. The best way to do this is to start an RRSP. That way, you're not being forced to rely on what may become inadequate government income supplements in retirement.
Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honours Bachelor of Arts from the University of Western Ontario.
The way OAS works is that it pays a monthly benefit to all Canadians are who 65 years of age and older. It's a very small amount, meant to supplement the income of retirees from other sources, including Canada Pension Plan (CPP) payments. At the beginning of 2012, the monthly amount was $540.12. If a retiree has an income of $67,668 or higher, the amount of OAS received decreases. If income is over $110,878, the retiree doesn't qualify for any OAS.
Although $540 a month seems quite small, for many low-income seniors with little savings, it is one of their main sources of income. Many seniors do not have significant savings and rely on OAS, Canadian Pension Plan and another monthly government payment called the Guaranteed Income Supplement (GIS) to make ends meet. Critics of the federal government's plan to raise OAS from 65 to 67 argue that low-income seniors between 65 and 67 will need to rely on welfare, which is paid by the provincial governments. This increases the cost burden on the provinces, so although the federal government is attempting to cut spending by trimming OAS back by two years, critics claim that the cost is merely being shifted to the provinces.
What does this have to do with students? Everything, really. Most of the people reading this paper are likely nowhere near retirement age (although I'm sure some of you are). However, changes to the system of income support for retirees has long term consequences. If, over the next few years, OAS is gradually moved from age 65 to 67, it seems possible that further changes could be made to one of OAS, CPP, GIS or all three. In other words, the way retirement functions now may not be the way it functions when many of us retire.
The structure of income sources like OAS, CPP and GIS become even more important because so many Canadians have so little retirement savings and are going to be forced to rely on these income streams in retirement, simply because they have no other choice. The best thing a young person can do is to pay down debt and save for retirement. Starting your retirement savings as early as possible adds many years' worth of compounding, increasing the amount of self-reliance in retirement. The best way to do this is to start an RRSP. That way, you're not being forced to rely on what may become inadequate government income supplements in retirement.
Jeremy Wall is studying Professional Financial Services at Fanshawe College. He holds an Honours Bachelor of Arts from the University of Western Ontario.
