Money & Career

What retirement benefits changes mean for you

Author: Canadian Living

Money & Career

What retirement benefits changes mean for you

Already started counting down the days until you retire? Well, you may need to add another 730 of them until you can call it quits. On March 29, 2012, the Conservative government announced in its annual budget that, starting in 2023, Canadians will have to wait two more years until they receive Old Age Security and Guaranteed Income Supplement payments.

The government pushed back the age of eligibility from 65 to 67, and while that won’t affect baby boomers, it will affect their kids. Many people rely on the payments of approximately $6,000 a year, so not being able to collect them for another two years means more people will have to continue working well into their sixties.

What the retirement benefit changes mean
The reason for the new rules is purely financial. With so many people set to retire in the next couple of decades, the amount of money the government will have to pay out is expected to skyrocket. The OAS program costs about $38 billion per year today, the government says. Its annual cost will hit $108 billion by 2030.

The delay in OAS payments doesn’t just affect people 50 and under -- it may also affect job seekers who will have to wait two years longer before certain positions open up.

"If you just let people work longer and they take away jobs from younger people, it is just aggravating a problem," said Jan Hein Bax, president of Toronto-based recruitment firm Randstad Canada to the Globe and Mail. But, he adds, "if you allow them to work and at the same time build up younger people in their skills, then it is fantastic."

How to prepare for the OAS and GIS changes
Fortunately, there’s still plenty of time until the change takes place, which means you should start planning for it now. If you still want to retire at 65, and know you’ll need the payments, you may want to set aside some money each month -- either in a RRSP or a tax-free savings account -- and use the cash to pay yourself what you would have received if the benefits age hadn’t changed. There’s no doubt the two-year delay will cause problems for some Canadians, especially those who will be affected by the new rules first. But be proactive and if all goes well, you won’t even notice that anything has changed.

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What retirement benefits changes mean for you

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