Old Age Security (OAS) is a government pension that most Canadians begin receiving at age 65. However, if your net income exceeds a certain threshold, part or all of your OAS is clawed back through the OAS Recovery Tax. For 2026, the clawback begins when net income exceeds approximately $90,997.
How the OAS Clawback Works
The clawback rate is 15 cents for every dollar of income above the threshold. This means if your income exceeds the threshold by $10,000, you lose $1,500 in OAS benefits. OAS is fully clawed back at approximately $148,000 in net income (the exact amount changes annually with indexing).
Income Sources That Affect OAS
- RRSP and RRIF withdrawals are fully included in net income.
- CPP and QPP pension benefits are included.
- Employment and self-employment income are included.
- Investment income (interest, dividends, capital gains) is included.
- TFSA withdrawals are NOT included — they do not affect OAS clawback.
Strategies to Minimize the Clawback
The RRSP meltdown strategy (drawing down your RRSP before OAS begins) is one approach. Converting some RRSP savings to a TFSA over time can also help, since TFSA withdrawals don't count as income. Pension income splitting with a spouse may reduce both partners' net income below the threshold.
Using a Calculator for Planning
Retirement planning calculators can help you model different withdrawal strategies and their impact on OAS. By adjusting your RRSP withdrawal amounts, you can see how different scenarios affect your estimated net income and potential clawback amount.
Official Resources
Disclaimer: This article is for informational purposes only. OAS thresholds and clawback rates are subject to change annually. All projections and calculations are estimates. Consult a qualified financial planner and tax professional for advice tailored to your retirement plan.
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