The Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) in Canada are programs exclusive to seniors or retirees. But there is a distinction between the two long-standing programs.
OAS is the largest pension program in Canada. Whether you were employed or not, you will automatically receive a taxable pension when you reach 65 years old. If you are receiving the OAS and your annual income is lower than the yearly maximum threshold, you will receive the non-taxable GIS.
OAS and GIS changes
The 2020 pandemic is altering the federal budget for government-sponsored programs. Seniors across the country are suddenly facing significant health, economic, and social challenges with the emergence of coronavirus.
Since seniors or retirees are most vulnerable to COVID-19, the Trudeau administration included emergency measures to support the elderly citizens. To provide greater financial security during the pandemic, OAS and GIS recipients will receive a one-time boost.
On the week of July 6, 2020, OAS pensioners will receive an extra payment of $300. For those eligible to receive GIS, the special subsidy is $200. If you’re receiving both, the total amount is $500.
The federal government will be spending $2.5 billion to boost the payments to around 6.7 million OAS pensioners and 2.2 million GIS payees. This COVID-related financial support will help Canadian seniors cover increased costs during the lockdown period. High-income seniors are entitled to the OAS boost.
OAS and GIS amounts
For April to June 2020, the maximum combined OAS and GIS monthly payments from April to June 2020 is $1,514.78. You will reach the maximum if you have no income besides the OAS and GIS.
Other retirees delay receiving the OAS to increase the payments by 36%, or a 7.2% increase per year from age 65. Remember, however, that if you take the delay option, you will not be eligible for the GIS.
Canadian seniors should welcome the one-time combined OAS and GIS payments, as they are hard to come by. If you were to invest to earn $500 monthly, you would need savings of around $130,750. The income-producing asset must be safe and a reliable dividend payer.
Assuming you have the same amount available, the no-brainer buy is Royal Bank of Canada (TSX:RY)(NYSE:RY). This top-tier bank stock pays a 4.59% dividend. Your annual earning is $6,001.43, or $500.12 monthly. The potential windfall matches the OAS and GIS top-up.
More so, it will be like receiving a lifetime pension. If you hold the stock for 15 years, it will compound and nearly double to $256,326.87. RBC is the dream investment of retirees.
Apart from being the largest banking institution in Canada, its dividend track record is 150 years. You’re investing in a dependable income provider and boosting your OAS and GIS at the same.
Almost everyone is experiencing a financial crunch in 2020 due to the novel coronavirus. Money is tight, and whatever help the government extends is appreciated. In particular, seniors should be looking after their financial health after the pandemic in case another one comes along.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned.