Canada OAP and US Social Security

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Canadian Newbie
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Canada OAP and US Social Security

Post by Canadian Newbie »

Sorry if this has been asked before. For some reason my search function does not seem to be working.

After two long years, Canada Service has determined I qualify for OAP. They used some of my US Social Security wages to qualify me for OAP. My question is, does this OAP reduce my Social Security benefit since they used some of my US credits? Also, I assume it is a reportable event and I need to contact US Social Security that I am receiving OAP.

Thanks for any help regarding this.
formerpatriot
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Re: Canada OAP and US Social Security

Post by formerpatriot »

By OAP do you mean OAS, the Old Age Security pension?

My understanding is that the OAS pension will not affect your US Social Security benefits. It's the CPP (Canada Pension Plan) that would cause a reduction of your US Social Security benefit via the WEP.

But do not take my word for the truth. I'll let more knowledgeable people give you the correct answer to your question.
FormerPatriot in Montreal
nelsona
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Re: Canada OAP and US Social Security

Post by nelsona »

As formerpatriot mentioned, OAS has no impact on your social security benefits, and need not be reported to SSA. Once you begin taking BLOTH SS and CPP/QPP you will need to advise SSA, so that WEP can be applied.
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Canadian Newbie
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Re: Canada OAP and US Social Security

Post by Canadian Newbie »

Thanks. That is what I thought after researching it but I was not sure since my previous US Social Security credits factored into my Canadian OAS benefit.
Canadian Newbie
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Re: Canada OAP and US Social Security

Post by Canadian Newbie »

formerpatriot wrote:
> By OAP do you mean OAS, the Old Age Security pension?
>
> My understanding is that the OAS pension will not affect your US Social
> Security benefits. It's the CPP (Canada Pension Plan) that would cause a
> reduction of your US Social Security benefit via the WEP.
>
> But do not take my word for the truth. I'll let more knowledgeable people
> give you the correct answer to your question.

Thanks. Yes I meant OAS. It will not affect my US SS per nelsona. I researched it and could not find where it could reduce my SS benefit. I was not sure since Canada used some of my US SS credits for me to qualify.
nelsona
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Re: Canada OAP and US Social Security

Post by nelsona »

For our followers, would you mind explaining your situation?
How old were you when you applied for OAS?
How many years had you lived in Canada at the time?
And, what credit were you needing? (I.m assuning it was to nake up the 20 year requirement)

Thanks
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Canadian Newbie
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Re: Canada OAP and US Social Security

Post by Canadian Newbie »

I applied for OAS a little over six months before I turned 65. I was 64.
I had been a full time resident for almost exactly five years when I applied.
Since I was living in Canada when I applied and was to receive OAS while I was a Canadian resident, I believe I only needed credits from my US Social Security for four years and some months to make up for the shortfall. Not 20 years since IIRC that applies to those that want to receive it when they are not currently living in Canada or when they leave Canada for an extended period of time. Correct me if I am wrong.
I knew I might have a chance qualify for a very small amount but I was not sure because I did not bother to read exactly how my Social Security history figured into the calculation. I was surprised when I recently was approved.
nelsona
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Re: Canada OAP and US Social Security

Post by nelsona »

Thanks for the update.

Indeed, you will collect about 5/40th of the OAS maximum, because you "made up" the missing 5 years with SS contributions. You may need to be careful if you leave Canada that you may not meet the 20-year requirement for foreign payment.

A little tip for others:

If you wait past 65, your OAS is increased for every month you wait. Howev er, if you are not collecting the maximum (because you have not spent years in canada, by waiting you add a full 40th to your OAS, A sort of double-whammy.
I don't normally recommend waiting for "normal" Cdn residents, but for those who are missing years, it may be worth waiting to add more slices as well as the delayed start reward.
For example, in our posters case, if he waited til 70, he would then get 10/40ths of the maximum, PLUS the extra 36% for waiting 60 months.
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Canadian Newbie
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Re: Canada OAP and US Social Security

Post by Canadian Newbie »

Thanks for the info.

I decided not to wait until I turned 70 due to health reasons. Each year I live past 70 I realize I will lose money. Actually it is probably more like 73 because it will take three years to catch up for the money I did not receive from 65-70.
You are correct in that I am receiving 5/40 of the maximum. I got an increase for the COLA though of about 10%.

One last question if you don't mind....

My wife will have 12 years of residency when she turns 65. Will she be able to use any of her US Social Security years to get her higher than 12/40?
Or does the borrowing from SS just apply to the extent to qualify you for the 10 year minimum?

Thanks!
nelsona
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Re: Canada OAP and US Social Security

Post by nelsona »

No. The SS is only used to add years to qualify, not add years of Cdn residence.

Btw, the normal breakeven year is much later than 73, so no worries, there.
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nelsona
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Re: Canada OAP and US Social Security

Post by nelsona »

Rerunning numbers for your case, you are right that if you waited til 70, you would be caught up in 3 years, maybe a bit sooner. But as you say, health factors need to be considered.

If you areplanning to return to US, I would consider waiting until then, since that amount would be less taxed in US.
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MaggieA
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Re: Canada OAP and US Social Security

Post by MaggieA »

A few posts above, nelsona commented:

If you wait past 65, your OAS is increased for every month you wait. Howev er, if you are not collecting the maximum (because you have not spent years in canada, by waiting you add a full 40th to your OAS, A sort of double-whammy.
I don't normally recommend waiting for "normal" Cdn residents, but for those who are missing years, it may be worth waiting to add more slices as well as the delayed start reward.
For example, in our posters case, if he waited til 70, he would then get 10/40ths of the maximum, PLUS the extra 36% for waiting 60 months.

If I'm not misreading the above, I think it's not correct.

The law is at https://laws-lois.justice.gc.ca/eng/act ... lText.html
Look below Section 7.1. I'm pasting the relevant text below, then I'll comment more in a follow-up comment.

Voluntary deferral — partial monthly pension

(2) If a person applies for their pension after they become qualified to receive a partial monthly pension, the amount of that pension, as it is calculated in accordance with subsection 3(3) without regard to subsection 7(5), at the time that they become qualified for that pension, is increased by 0.6% for each month in the period that begins in the month after that time and that ends in the month in which the person’s application is approved.

Marginal note:Greatest amount of pension

(3) A person who is qualified to receive a monthly pension shall, unless they decide otherwise, receive the greatest of the following amounts:

(a) the amount of the full monthly pension as it is increased under subsection (1), if the person is qualified to receive a full monthly pension,

(b) the amount of the partial monthly pension as it is increased under subsection (2), and

(c) the amount of the partial monthly pension as it is calculated under subsection 3(3) at the time that the person’s application is approved.
MaggieA
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Re: Canada OAP and US Social Security

Post by MaggieA »

So the way it works is if you are entitled to reduced OAS because of years out of the country, and you defer past age 65 to start collecting, then you are entitled to the greater of the following
- an extra 1/40 per year of deferral
- an extra 0.6% per month of deferral

So after any reasonable length of deferral, the extra 0.6% per month is more.

After reading the law I made a spreadsheet for my own case. I was entitled to 32/40 of full OAS at age 65 (having spent over 14 years in the US). I was back in Canada and still working at that point so I deferred my OAS for 19 months, as it turned out. At that point I would have been entitled to either 85% (by the first calculation) or 89.12% (by the second). Of course the latter was more beneficial. The letter I received from Service Canada confirmed my figures exactly. It also pointed out they were giving me the larger amount, but if I preferred the smaller, I could request that. (Why would anyone?)
MaggieA
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Re: Canada OAP and US Social Security

Post by MaggieA »

I belatedly realized the above could be more clear.

You're entitled to the greater of the following:
- an extra 1/40 of the full OAS amount, per year of deferral (making up for years outside Canada)
- an extra 0.6% of your reduced entitlement, per month of deferral.

So in my case, since I was entitled at age 65 to 32/40 = 80% of full OAS, I could get either
- an extra 1/40 (2.5%) per year of deferral (note this notches up only annually, in whatever month you reach an extra year in Canada)
- an extra 0.6% of 80% = 0.48% per month of deferral

Thus after 19 months of deferral, I'd passed 2 anniversaries adding a year to my time in Canada, so I was entitled to an extra 2 x 2.5% = 5% by the first calculation, or an extra 19 x 0.48% = 9.12% by the second calculation. Therefore choice of 85% of full OAS or 89.12% of full OAS.
nelsona
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Re: Canada OAP and US Social Security

Post by nelsona »

Actually, I think you have explained it quite well. It is not a both proposition as I had thought, it is an either or, with your partial amount starting point (for the purpose of delaying) being on the day you turned 65.
Good work.
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