In 1984, the U.S. and Canada finalized an agreement that allows a person to qualify for both U.S. Social Security and Canadian retirement benefits. This made it easier for people who worked in both countries to qualify for retirement benefits when they may not have been able to without the agreement. In the process, they have also thoroughly confused anybody trying to figure out what benefits they actually qualify. This post is meant to break down the U.S. and Canada retirement benefits for people who have worked in both countries.
The social security department actually does a nice job of breaking down the different benefits and eligibility here.
First, a basic rundown of the different retirement accounts in both countries.
U.S. Social Security
This U.S. retirement benefit is based on total wages earned and the number of years worked. The more you earn and work, the higher your benefit. A person can start social security as early as age 62, but your benefit increases each year that you delay taking it until age 70.
Medicare is the U.S. national health insurance for those over age 65. Medicare starts as early as age 65, for those who qualify. In 2022, basic Medicare costs $170.10 per month, although supplemental plans can cost extra.
Canadian Pension Plan (CPP)
The CPP is Canada’s version of U.S. social security. Like social security you can start drawing early, age 60, but receive a higher benefit if you delay. The CPP is also based on earnings and contributions made into the system by employee and employer. The more you earn and longer you work, the higher the benefit. However, the CPP does tend to be lower than social security.
Canadian Old Age Supplement (OAS)
Unlike social security and CPP, the OAS is not based on wages earned, or how much you paid into the system. OAS is available to Canadian citizens that have lived in Canada for a certain amount of time and earn under a certain amount of money. In 2022, the maximum OAS benefit is $642 and your individual income must be less than $133,141. To receive the maximum OAS benefit however, you would have had to have lived in Canada for 40 years after the age of 18. You can start collecting your OAS at age 65, but you can defer up to age 70, and receive a higher payment.
However, there are two big benefits of collecting an OAS benefit here in the U.S.:
- There is no claw back if your income is too high, like in Canada
- Although you need to have lived in Canada for 20 years to collect OAS outside of Canada, you can use U.S. social security credits to also meet the residency requirement
Below is a chart that shows how to be eligible for the different benefits without relying on totalization agreement. This does not include eligibility based on any spousal or disability benefits, which may be an option in certain cases.
Non-Totalization Agreement Eligibility
As you can see above, a U.S. worker may have worked in the U.S. for 9 years, his job moved to Canada, and receive no social security benefits. However, the agreement in 1984 allows credits earned in Canada to apply to U.S. social security. Below is the eligibility breakdown if you have worked in both the U.S. and Canada.
Totalization Agreement Eligibility
There is a lot to unpack here but the bottom line is this: There is a very good chance that if you worked in both the U.S. and Canada you will have a combination of benefits that consist of social security, CPP, and OAS. However, as I have written here, there is a very good chance that your CPP will actually reduce your social security benefit. If you have worked in the U.S. and Canada, you should be thankful for the Totalization Agreement. That doesn’t mean you have to necessarily understand it.
Need More Help?
RetireMitten Financial LLC specializes in working with families that have lived and worked in the U.S. and Canada. We can help you determine which benefits you qualify and how to best maximize those benefits. Schedule a complimentary meeting at the button below.