If you're a snowbird dreaming of enjoying your retirement benefits while basking in the sun of Florida or Arizona, there are some factors to consider. While claiming Canadian Pension Plan (CPP) and Old Age Security (OAS) benefits abroad may seem complicated, many retirees can still access these benefits while living outside of Canada. Here's what you need to know:
CPP and OAS Abroad:
When you leave Canada to live in another country and sell your Canadian home, you are considered an emigrant for income tax purposes. Unless you maintain a home in Canada or your new country has a tax treaty with Canada, you may risk losing your benefits. OAS benefits are typically discontinued after six months abroad, unless you meet specific criteria, such as working in Canada for at least 20 years after turning 18 or residing in a country with a social security agreement with Canada for at least 20 years. To qualify for CPP benefits, you must have worked in Canada for a minimum of 10 years and contributed to the plan during that time.
Taxation and Payment:
Retirement benefits, including CPP and OAS, are subject to regular income tax for all Canadians. If you are a non-resident living elsewhere, the Canadian government will deduct non-resident tax from your payments, which can be up to 25%. The withholding amount depends on whether a tax treaty exists between Canada and your new country. You can request a lower tax rate by submitting a form to the Canada Revenue Agency, which also allows you to arrange automatic tax deductions. In some countries, you may receive your CPP and OAS benefits through direct deposit in the local currency.
Collecting Benefits from Multiple Countries:
If you have worked in multiple countries throughout your career, you may be eligible to collect retirement benefits from each country based on the time spent and contributions made. The specific requirements and agreements may vary, so it's essential to verify the details that apply to your situation before claiming your benefits.
Loss of Some Benefits:
While you can retain CPP and OAS benefits abroad, certain benefits such as the Guaranteed Income Supplement (GIS), which supplements the OAS, are no longer accessible if you are outside of Canada for more than six months. It is crucial to inform Service Canada about your absence to avoid overpayments, as they will be recovered later. Additionally, provincial health coverage may be affected if you are out of the province for an extended period. Each province has its own rules, but most require residency within the province for six to seven months to maintain health coverage. Private health insurance is recommended during your time abroad, and you may also qualify for some healthcare benefits in your new country.
Remember to consult the specific details and requirements that apply to your circumstances before claiming Canadian retirement benefits while living abroad. This article provides informational guidance and should not be considered as financial advice, and it is provided without any warranty.