Is Old Age Supplement (OAS) a Right?

The recent talk of a slight modification to the Old Age Supplement in Canada has stirred up quite the controversy.  I’ve gotten into some pretty intense chats with other bloggers, and with older co-workers about the legitimacy of this debate.  To be frank, I can’t believe the negative press that Harper and the boys are getting over this.  In my opinion, as a young person who wanted to live in this country for the next 8 decades or so, the current government should be commended for taking this issue on, and making some true sustainable choices going forward!

On the flip side, it appears that the opposition parties are taking a page out of the Conservative’s own playbook and running a myth- and fear-based smear campaign on the issue.  Here are a few of the common misconceptions:

1) The pension age is being moved from 65 to 67.

I actually wish this were true.  It makes a lot of sense when you look at how long we are living these days, but alas, it is not politically palatable.  Due to our increased Canadian Pension Plan (CPP) rates, the pension plan is actually just fine.  This is just a complete lie that is being pushed by fear-mongering interest groups.  Old Age Supplement IS NOT CPP!

2) Poor seniors will suddenly have no money as a result of this.

I don’t even know where to start with this one… If seniors worked during their lives they should have a decent CPP cheque coming in.  I routinely get told, “Well what if they have a mortgage.”  Then they shouldn’t have purchased a house they couldn’t pay off before they were 65!!!  Common sense people.

3) “We paid for this retirement and now they’re taking it from us.”

No.  You Didn’t.  CPP gets paid into, the Old Age Supplement just comes out of the yearly budget.  You did not pay into this, and no it is not your due simply because you happen to be included in one of the weirdest demographic shifts of all time and you live in a government structure (democracy) that allows you to take advantage of this.

4) “Well, we supported our parents, so now it’s your turn.”

Um, ok.   Have you seen a demographics chart lately?  There were lots of you, few of them, and most of your parents died “young.”  There are lots of you, few of us, and you guys are going to live forever (which is a good thing, but maybe you could work for an extra year to help pay for it?).  This doesn’t add up to you retiring at the same age your parents did.

What Happened To Teaching A Man To Fish?

Obviously this is an issue I’m a little bit passionate about, and I guess it is because it strikes one of my most basic beliefs – we should be responsible for ourselves.  At what point did it become acceptable to believe the government should just take care of us cradle-to-grave?  If you want to retire early, go ahead and retire early, just earn the money, save it, invest it, and then reap the rewards.  That’s the beauty of this thing we have called a free market.  Instead, we somehow believe that money should be taken out of the economy, taken away from areas that desperately need the funding such as health care, education, and infrastructure, and put it into the pockets of people who decided they needed a large new house at the age of 50?!  Why is there not more outrage on this issue?  It’s getting crazy to me how little responsibility we all accept for our own financial positions these days.  Students want their student loans to disappear, parents believe they shouldn’t have to pay taxes because they have kids, and now people who are about to have a 25-30 year retirement believe they should be supported by the government dollar as well.  Then we wonder how Europe got into the mess they are in?!

Ah… I See, Greens Fees Are Climbing These Days

Baby Boomers, I’m pleading with you here.  Yes, you sort of helped build this country (ok, so you’re parents actually did, but you guys like to take credit for it, so let’s go with that), and now your children and grandchildren are begging you not to tear it all down in order to pay for your winters in Florida and golf club fees.  A recent article in the Globe and Mail by Margaret Wente highlights the fact that seniors actually have the lowest poverty rate (5.9%) of any part of the population.  Furthermore, did you know that anyone over 65 gets at least some OAS money, even if they earn $110,000 already?!  Why is giving people with an income that is double the median income for all Canadians a priority?  The ONLY reason this has not been addressed is because of demographics, and the fact that Boomers vote in much higher percentages.  Logically it makes absolutely no sense.

You Want This To Be Your Legacy?

Please help us here guys.  Maybe we can keep the guaranteed income supplement GIS in order to make sure that seniors don’t have to live in poverty (taking away that whole ridiculous argument) and the rest of you can actually just forego the OAS all together?  If you are already earning more with your CPP and savings (yes savings, the part of our retirement that is supposed to be our own responsibility) than the median income in Canada, maybe you don’t need a large handout from the government, and maybe you don’t need to collect it for 20-30 years after your retire?  Our roads are crumbling, our education system is taking a beating, our medical care is seemingly always on the brink, and as of right now our unemployment rates are steadily climbing (and this is before Europe comes crashing down), but you honestly believe that topping up your retirement should be a priority?  Come on guys, you taught us better than to be that selfish.

What are your thoughts on the Old Age Supplement / Security issues?

26 thoughts on “Is Old Age Supplement (OAS) a Right?

  1. I am just curious, how much tax do you pay in Canada? Do you think it is more acceptable to think that the State will support it’s weaker members in welfare state countries where people pay higher tax? I will be rather upset if I continue to pay 40% tax and 6% national insurance (NI is a fund that in theory is used to support people in times of trouble) if the State withdraws this support.

    This sounds not simply unjust but a mid-day robbery.

    1. My tax rate is a little lower than SPF’s, but in the ballpark. I too am worried about paying into benefits that won’t be there for me either Maria, but we must change things slowly or it will definitely be unsustainable going forward (how did I not work a clever pun into the article based on the name of this website?).

      1. Well, this is the point you see. I have accepted that I will have to look after myself – otherwise my pension will not be enough for a hot dog dinner. But there has to be a gradual transition so people who can’t do much about changing their situation are protected. This is what makes us civilised – the way we look after the weaker members of society.

  2. That’s a large tax rate SPF. I had an interesting conversation with my father-in-law about taxes in the U.S. and it sounds similar. Believe it or not, I am generally (generally, not always) for helping people out by paying my taxes because I know that the people who take unemployment or other benefits are not always freeloaders. There are lots of people who needs help. Anyways, in talking with him, I realized my error. He mentioned that the only problem is that he will probably be able to retire years earlier because of changes in taxes and healthcare instead of having to work later to the normal age. When I thought of how I would be funding his early retirement, it has changed my perspective a little. Anyways, all of that to say that it sounds similar.

  3. I don’t mind helping out the people that need it either Corey, in fact, I’m fine with my tax rate right where it is (although no higher). My thing is, we have SO MANY areas that desperately need funding, and yet we are held hostage by a voting block that is forcing us to give out money every year to the part of the population that statistically has the least problems with poverty? Does this make sense to anyone?

  4. It’s all about the baby boom… and there not being enough boomlets to fund their retirement. I fully agree with pushing back OAS until we’re 67, but I wonder if I would think differently if I was a few decades older. It’ll all about perspective.

    1. At the same time, baby-boomers have contributed immensely to our life style; and they continue to contribute. Think PCs, Apple and the Beatles (or this is stretching it a bit?).

  5. Interesting article. I am one of those annoying “boomers” (almost 61) and have worked all my life. Neither my husband or myself has been fortunate enough to have one of those workplace-related “gold plated pensions”(that I believe you have, Mr.SF ?)to look forward to, to augment our retirement income. My husband often worked 2 jobs to get ahead, (he is now retired) and saved consistently. I have also saved regularly (and still work, and save a good portion of each paycheque) and have some investments and RRSP’s, as a result. However, despite all of this, we still have to be careful and watch what we spend. We recently downsized our home to cut down on our overhead.
    We certainly do not live elaborately, still shop the sales and use coupons, and eat out (an inexpensive meal) perhaps once a week (these are our choices, and also our regular lifetime habits). We both drive 12 year old cars, bought used, and paid for in full. We take modest vacations, as our budget allows.

    So yes, I am a little upset to think that the government is now thinking of pushing the OAS pension back to age 67. I have worked full-time since age 20, and we have done our best to live within our means, often doing without the little luxuries that others considered their due, in order to provide for ourselves. We have never drawn unemployment, or received government assistance of any kind, (and I am proud to say that)!!

    So while I am sympathetic to your situation to a point (ie. with regard to demographics) you also need to realize that not all boomers and retirees are wealthy, and that many have worked hard and saved all their lives, and do not have the luxury of work-related pensions. Once I quit work, my only income will be government pensions, and the income my own portfolio can provide (not a lot with current interest rates, and stock market volatility.

    So please – it is not a “one size fits all” situation, on either side – each of us, young and old, have some legitimate beefs!!!!!!!

    1. I’ll have Teacherman address this one Diane. He authored the article.

      To answer your question, yes, I do have a pension – assuming it is still there 22 years from now – which to be perfectly honest, I am not putting all of my eggs into that basket.

      That being said, I am of the opinion there is a sustainability issue regarding OAS. Do I know the solution? No, I do not. If I did I might have one of those uber-platnium-work-for-6-years-as-a-MP-and-get-full-pension jobs.

      My parents are not in all that different a situation than yourself. Lots of folks are in the same boat.

      I do think Teacherman brings up a good point about how everyone gets OAS. I think that those who need it should get it – not an across the board “right” for all Canadians. The family getting $110k in retirement does not “need” this money. The model won’t work long term and needs to be fixed – but not disposed of.

      1. Oh I definitely have a pension… I’d rather control my money (along with my employer’s contribution) within an investment account, but that’s another story for another time. I do hope to retire early (before my pension kicks in) based on my own personal financial moves.

    2. @ Diane

      Definitely some valid points Diane. I do appreciate the fact that you are taking responsibility for your own financial situation and have taken the steps necessary to be able to provide for yourself in retirement. Plainly you are not a “cradle-to-grave” type.

      As far as a “gold plated” pension goes, I recently wrote an article on pension envy. My pension will not magically appear out of the blue. I get a large amount of money taken off of my cheque every month to fund this retirement. It is matched by employer. This is fairly standard even in the private sector. My money is invested for me at decent rates of return (although inferior to what I honestly I believe I could achieve through passive ETF investing). The money coming to me has been earned. Just ask my accountant and the cost of my two degrees.

      I understand the negative feeling of seeing a finish line pushed back (although I’m almost certain you will fine from everything I have read), but really, isn’t this a sacrifice that makes sense in the big picture? Look at the incredible way that post-secondary costs have outpaced inflation over the last few decades. Take a look at how huge mortgages (on “reasonable” houses) stretch young families to the brink. My main issue is that there are many other areas of our democracy that could use a boost. While working another couple of years will suck for many boomers, they could still expect a longer retirement than their parents achieved (the REAL greatest generation).

      As a society we would be much better served by reaffirming our commitments to infrastructure, education, and job mobility amongst other things. Unfortunately my frustration mounts from the fact that we as a society seem to have forgot the whole JFK “Ask not” speech, and I happen to be part of the smaller group of askers, so this is not good for me at all.

  6. I am not necessarily against Harper’s government bumping the minimum age to receive OAS from 65 to 67. I selfishly want more ‘free’ money sooner, you know when I am 65 (assuming it still exist in 30 ish years), not 67. Just like you, I am a strong believer that we are responsible for our selves and that we shouldn’t buy stuff we can’t afford. I know healthcare is all together a separate subject but Canadians’ mentality toward healthcare need to change. It’s not that the government is not spending enough on health care, it’s the individuals who don’t look after themselves (health, exercise, and diet wise) and get themselves in terrible health when they are older (sorry don’t mean to offend the ones who don’t fall into this category), they then expect that government to inject billions of dollars to cure them. What I am saying is that if we look after ourselves and stay healthy, then the Canada can spend less dollar on healthy and we can keep the age to receive OAS at 65. Just saying.

    1. Now that is a really interesting proposal! Of course there are all kinds of health-related variables that we have no control over. But you’re right, if we all stopped smoking and weren’t obese we could probably give everyone OAS!

  7. Like Diane, I’m also another one of those terrible “boomers.” And, like her, I’ve worked since I was 18, both in the States and here. Am I terrible because I just recently purchased a small little bungalow because I had to sell my house after my husband passed away (with very little equity because we’d only lived there 2 yrs)? Yes, I’ll have a mortgage but it’s a LOT smaller than I would be paying in rent…..but I shouldn’t do that?

    I agree with the consensus that people making $110,000/yr. shouldn’t be drawing OAS, so drop the eligibility requirements, not all of it. It always comes down to the middle/lower-class to fund things when they are the ones who can least afford it. Does it not bother anyone here that the gaps between the rich and the poor increases to such an degree that it’s ludicrous? There are many of us who live responsibly – using coupons, shopping sales, doing without, looking for other avenues of income, driving less, not traveling and especially not feeling we’re entitled to any of that. My dribs and drabs that will trickle in when I reach retirement will make for even leaner living and between the crash of the markets taking a lot of my investments and an incident that happened with my husband’s previous employer when he was desperately ill, those dribs and drabs will be even less.

    So, as Diane said, not everything or everyone is a “cookie cutter” situation and some thought should be given to the other side sometimes.

    Mary

  8. So would you agree then Mary that if we say increased the GIS to a level of say slightly above the poverty line (after factoring in the CPP), then we could do away with the OAS all together? I definitely agree thought should be given to all sides of a situation Mary. What I find is that thought is being disproportionately driven away from the struggles of young, and towards people retiring. Listen, I don’t want to be a jerk, and I don’t want to overly criticise anyone, but please tell me why my tax dollars should go toward your personal financial decision of not buying a house until 2 years ago? I just don’t understand why this falls on me?

  9. Oh dear boy, no one is asking you to pay my mortgage…..my social security or my survivor’s benefit will pay that….not even taking anything else into consideration. And you’re no different than my generation was or even my parent’s was…..we all assisted our parents one way or another. And no, I don’t think it’s fair to completely take something away from the formula that so many have calculated their savings and investments on. You look at the big picture when you’re setting aside savings to help you get through the retirement years and then pray the market holds.

    I still feel that the income requirements should be adjusted, it’s ludicrous that someone can make $65,000 and still draw OAS….and if they need it to get by, then they need to adjust to a more sustainable lifestyle. Like you, I’m not looking for an argument but do feel strongly that I’m closing in on early retirement age and have done my calculations for savings while working with my financial adviser. To change those rules this late in the ballgame is only going to cause a lot more seniors to live a harder life.

    Just my opinion…:-)

    Mary

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  11. My thoughts in a post I did recently on the subject. :) Reducing OAS payouts to those with higher incomes makes more sense to me than raising the age.

    I also believe that CPP needs to go as well, by being made optional. There is no reason to force lower-income earners to pay a 10% tax so that the government can “invest” their money at a low rate of return, payout to be determined in decades from now when the situation might be very different.

    GIS is the most justifiable of the programs; OAS… is completely not what I expected it to be.

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