“I can travel more!” That was the first thing Anne said when we discovered that she should be receiving an extra $610 per month from Canada. It was a benefit, that her U.S. and Canada financial advisors had missed. The Canadian Old Age Supplement (OAS) is a big part of many retiree’s income plan, however there is a lot of confusion about the benefit. As a cross-border financial planner I see people make mistakes all the time regarding their OAS benefit. This article is meant to clear up that confusion. If you have worked and lived in the U.S. and Canada, don’t miss out on all your retirement benefits.
What is OAS?
If you have lived in the U.S., you are probably familiar with social security. In Canada, your “social security” benefit is split into two parts; Canadian Pension Plan (CPP) and OAS. Your CPP benefit is based on how long and how much you paid into CPP during your working career. In order to qualify for OAS however, you just had to have lived in Canada after the age of 18. OAS is a flat monthly benefit, which is based on the amount of years you have lived in Canada.
The earliest that someone can start collecting their OAS benefit is 65. However, a person can delay starting OAS until age 70. OAS grows each year that it is delayed up to age 70.
Qualifying for OAS while in the U.S.
If you retire in Canada, in order to qualify for OAS a person just needs to live in Canada for 10 years after the age of 18. Now, if you are retiring outside of Canada, a person typically must have resided in Canada for 20 years after the age of 18. This makes qualifying for OAS more difficult if you are planning on retiring outside of Canada. However, if you are retiring in the U.S., the rules for qualifying for OAS are easier.
In 1984 the U.S. and Canada came to an agreement that made qualifying for retirement benefits easier if you have worked and lived in both countries. From the Social Security Administration:
To get OAS benefits, you must be age 65 or older and must have been a resident of Canada for at least 10 years after age 18 (or 20 years after age 18 to have benefits paid outside Canada).
Under the agreement, Canada will consider your U.S. Social Security credits earned after 1951 and after age 18, along with periods of residence in Canada after 1951 and after age 18, to meet the OAS residence requirements. However, to be eligible to have your U.S. credits counted, you must have resided in Canada for at least one year after 1951 and after age 18.
In short, you can use social security credits plus Canadian residency to qualify for OAS. I recently had a client that worked in Canada for only 17 years before moving to the U.S. As a result, she felt like she didn’t qualify for an OAS benefit as she was familiar with the 20-year residency rule. However, she worked and paid into U.S. social security for 15 years. When we add her U.S. social security credits to her Canadian residency, she does qualify for an OAS benefit. Next up, we discuss how much a person may receive from their OAS benefit.
How Much is My OAS Benefit?
The longer that you have lived in Canada after the age of 18, the higher your benefit. I mentioned before that you can use social security credits to help you qualify for an OAS benefit. However, those credits don’t also increase your benefit. Your benefit is based on the number of years you lived in Canada.
In 2022, the maximum OAS benefit is C$642. In order to receive the maximum benefit, you would have had to have lived in Canada for 40 years after the age of 18. If you had lived in Canada for less than 40 years, you will get a fraction of the maximum OAS benefits. For each year that you have lived in Canada, you will get 1/40 of the maximum OAS benefit. For example, if you had lived in Canada for 20 years, you are eligible for ½ of the maximum OAS benefit, or $321 in 2022.
The maximum OAS benefit also assumes that you start your OAS benefit at age 65. However, you can delay and grow your OAS benefit until age 70. Each month that you delay OAS, your benefit will increase by 0.6% (7.2% annually). If you delay until age 70, your OAS benefit will increase by 36%.
OAS Pension Recovery Tax
Lower federal taxes, lower state taxes, and potentially warmer weather are a few reasons people make the move to the U.S. from Canada. Let’s add one more advantage to retiring in the U.S.; no OAS pension recovery tax here in the U.S.
Typically, if your worldwide income exceeds a certain amount, your OAS benefit is reduced. In 2022, your OAS benefit starts to be reduced if over C$79,045 and is completely eliminated if over C$133,141. For each dollar in which your net income exceeds C$75,910, you will need to have a 15% repayment tax on your OAS. For example, if your income is C$86,000 in 2019, then your income repayment would be 15% on the difference between C$86,000 and $75,910. The result would be a $1,513.50 repayment would be deducted from your OAS benefit for the following year.
However, if you retire in the U.S., this repayment tax does not apply. From the OAS Return of Income Guide for Non-Residents:
Do you have to file the Old Age Security Return of Income?
To ensure that your OAS payments are not suspended in July, you have to file this return on or before April 30th each year even if your net world income is less than CAN$75,910. However, you do not have to file this return if, in 2018, you were a resident of one of the following countries and you have no plans to move to a non-listed country before July 1, 2020:
If you are a retiree with high income, not having this OAS income tax repayment could be a big benefit.
Taxation of OAS in the U.S.
Taxation of your OAS benefit in the U.S. is the same as the taxes on your U.S. social security benefit. There is no foreign tax withholding on your OAS benefit here in the U.S. Meaning that you will receive the full benefit, with nothing paid to Canada. In the U.S., there are tax advantages on social security income, compared to other types of income. For example, at least 15% of your social security/OAS benefit is completely free from federal taxation. In fact, depending on your income, all your social security/OAS may be free from federal taxation. Also, most states don’t tax social security either.
Please read, “Taxation of your RRSP, RRIF, CPP and OAS in the U.S.”, for a more detailed look of your Cross-Border taxation here in the U.S.
I can’t tell you how many times I have seen people not take full advantage of their U.S. and Canadian retirement benefits. Starting benefits at the wrong time and not collecting all of the benefit in which you qualify, can really hurt your cross-border retirement plan. OAS is one of the biggest culprits. If you have worked in Canada and the U.S., it is very possible that you will qualify for an OAS benefit. If that is the case, you will want to develop a game plan for starting your OAS, CPP and social security benefit. Cross-Border retirement planning can get confusing, and working with a financial planner that specializes in this area can ensure that you are maximizing benefits and minimizing cross-border taxation.
Need More Help?
Are you missing out by working with a financial advisor that doesn’t fully understand your cross-border financial planning needs? Are you interested in working with a financial planner that specializes in your cross-border financial planning situation? Schedule a complimentary meeting below, and let’s create your cross-border financial plan.
This is fascinating, I was not even aware that I might get CPP or that it would affect my US social security along with the OAS issue. I suspect I will be contacting you to get to know options (likely should have done this a few years ago).
Hi Bruce, thanks for the comment. Yes, many people don’t know what benefits they qualify and the best time to begin those benefits. Please let me know if you would like to discuss your options. Thanks.
Just learning about OAS. I lived in Canada for 12 years and my wife 13 years after age 18 and we both worked in the USA for over 10 years. Sounds like this qualifies both of us to collect OAS. Does this mean I will collect 12/40 of my OAS and my wife will collect 13/40 of her OAS, regardless of our income in the USA? If I understand your article correctly there is no requirement to file Canadian tax returns on OAS if living in the USA.
Yes, you are correct. It appears that you are eligible for 12/40 and your wife is eligible for 13/40 of C$614 in 2020. You do not need to file Canadian tax returns but you do have to report the income on your U.S. tax returns.
In the above example of Ed having lived 12 years in Canada and worked in the USA for more than 10 years, is his number of years (say hypothetically 11 years) of history of contributing to the US social security trust fund not counted in the calculation of his entitlement to the OAS ? In other words, is he not qualified for receiving 23/40 of his OAS ?
23 = 12 + 11
Yes, you are correct. Years worked in the U.S. helps you qualify for OAS but does not add to your Canadian residency for the OAS calculation. He would still only receive 12/40 of his OAS benefit.
Great informative post, thank you! I have a question. I was born in the US, moved to Canada and lived there for 20 years (worked there for 16 years) then returned to the US where I already have enough quarters to retire and plan to in about 4 years. It sounds as though I would be eligible to receive OAS? I already receive a very small CPP deposit each month. When do I need to apply and how much would I receive based on my years in Canada, and will my SS be lowered as a result of collecting from both? Thank you.
Thanks, Yael, I’m glad that you find it informative. Yes, if you were a resident of Canada for more than 20 years after age 18, you are eligible for an OAS benefit. It would be roughly C$320 per month. You will need to apply through Service Canada via a paper application being that you are a U.S. resident. Your SS or CPP will not be impacted by receiving OAS.
Bryan: I left a question about the impact of OAS on SS on a different blog post of yours and I and I found the answer here! This article is great. I have done all of the application for OAS … I am 3 years short of the 20 years for portability and they have requested a “quarterly” view of my Social Security contributions from the US Social Security Admin. That was 7 months ago. Last week, I received a letter from Services Canada stating there has been no reply from the US and they have re-submitted. They mentioned that I might try to reach out to get the information and then send it to them. I sent Services Canada a social security “annual” view 7 months ago but they need quarterly and who knows where I get that!! Anyway, for your readers, this process is not straightforward or fast!. Thanks, Tim.
Thank you. Found article very informative. I am Canadian living in US. Retired at 62 Collecting CCP. Left Canada age 28 after 10 years employment and worked 44 years in US. I’m sure I’m eligible but tax on it is probably not worth it.
Hi, you may not get a huge benefit but better than nothing. Might pay for a nice dinner once a month or so. CPP is typically taxed as social security income here in the states, so it is tax advantaged. Also, you don’t need to file Canadian income taxes for collecting CPP.