Retirees: Here’s How to Boost Your OAS Payments in 2024

The average Old Age Security (OAS) payment in Canada can vary depending on a few factors. As of 2024, the maximum monthly OAS payment for someone aged 65 or older is around $615. Many Canadians receive a reduced amount if they have been living outside of Canada for a significant time or if their income exceeds a certain threshold. Overall, OAS is a crucial part of many seniors’ retirement income, providing a financial boost to help cover living expenses. But, there are ways to boost it.

How to get started

Boosting your OAS payments can be a great way to enhance your retirement income. One effective strategy is to ensure you have lived in Canada for at least 40 years after the age of 18. OAS benefits are based on how long you’ve lived in the country, so if you’ve spent time outside Canada, it could affect your payments. If you’re nearing retirement and have lived in Canada for less than 40 years, consider staying longer to maximize your OAS eligibility.

Another tip is to manage your income wisely. OAS payments are reduced if your annual income exceeds a certain threshold, which was about $83,000 for the 2024 tax year. If you’re close to this limit, consider strategies like income splitting with a spouse or partner to lower your taxable income, thus keeping more of your OAS benefits. Additionally, contributing to your Canada Pension Plan (CPP) can also enhance your overall retirement income, providing you with a more substantial financial cushion during your golden years.

Use investments

Investing can be a fantastic way to increase your OAS payments by enhancing your overall financial situation and potentially boosting your retirement income. While OAS itself is based on residency and income, a solid investment strategy can help you manage your taxable income effectively. For example, if you invest in tax-efficient vehicles like a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP), you can grow your wealth without impacting your OAS payments directly. By keeping your taxable income lower through these investments, you can avoid the clawback on OAS benefits, thereby ensuring you receive the full amount you’re entitled to.

Additionally, investing wisely can provide you with supplementary income that can be used to cover living expenses in retirement. Whether you choose stocks, bonds, mutual funds, or real estate, a well-diversified investment portfolio can generate income – whether through dividends, interest, or rental payments. This additional income stream can be crucial in offsetting any potential reductions in OAS payments due to high personal income.

Consider CIBC

Canadian Imperial Bank of Commerce (TSX:CM) stands out as a prime candidate for boosting OAS payments, particularly because of its attractive dividend yield and solid financial performance. With a forward annual dividend rate of $3.60 and a yield of 4.3% at writing, CIBC provides a steady income stream that can significantly enhance your retirement funds. The bank’s strong profit margins, at around 29.6% and impressive revenue growth of 19.6% year-over-year indicate a healthy and growing institution – one capable of maintaining and potentially increasing its dividends. Furthermore, CIBC’s payout ratio of 51.7% suggests that it retains a sufficient portion of its earnings to reinvest in growth while still rewarding shareholders.

Plus, CIBC’s commitment to financial stability and shareholder returns aligns well with long-term investment goals aimed at increasing OAS payments. The bank’s robust cash position of $263.2 billion showcases its ability to weather economic fluctuations and support ongoing dividend payments. As Canada’s economy continues to evolve, CIBC’s strategic initiatives and market position within the banking sector make it an appealing choice – one for investors looking to bolster their OAS through reliable dividend income.

Bottom line

In fact, if you were to use those $615 monthly payments totalling $7,380 and invest into CIBC stock, here is what you could get, through both dividend income and from returns in one year. This is based on a compound annual growth rate (CAGR) of 5.2% in the last decade.

Now you’ve added $316.80 in dividends, and $381.60 in returns for another $698.40 in passive income!