A $20,000 Registered Retirement Income Fund (RRIF) withdrawal can lose more than $8,000 before it reaches the family vacation, renovation, or suspiciously expensive grandchild. The surprise isn’t merely income tax. One withdrawal can also shrink future Old Age Security (OAS) payments, turning an ordinary cash request into a rather ambitious CRA fundraiser.
Source: Getty Images
Every dollar counts as income
RRIF withdrawals are reported as taxable income in the year received. Minimum withdrawals generally have no withholding tax, while amounts above the minimum are subject to withholding. That deduction is only a prepayment. The final bill depends on total income, deductions, credits, province, and marginal tax rate.
The second cost arrives through OAS. For the 2026 income year, the recovery tax begins when net world income exceeds $95,323. The government generally recovers 15% of income above that threshold, up to the amount of OAS received. Understanding how an RRIF works therefore requires looking beyond the account itself.
One withdrawal, two bills
Consider a retiree with $90,000 of net income who takes an additional $20,000 above the required RRIF minimum. The withdrawal lifts estimated income to $110,000, placing $14,677 above the OAS threshold. That creates approximately $2,202 of recovery tax before ordinary income tax even enters the calculation.
| ILLUSTRATIVE TAX EFFECT | BEFORE WITHDRAWAL | AFTER $20,000 WITHDRAWAL |
|---|---|---|
| Estimated net income | $90,000 | $110,000 |
| Income above OAS threshold | $0.00 | $14,677 |
| OAS recovery tax at 15% | $0.00 | $2,201.55 |
| Income tax at an illustrative 30% | $0.00 | $6,000 |
| COMBINED COST | $0.00 | $8,201.55 |
The example produces a 41% cost on the withdrawal. Actual results will vary, and the OAS reduction generally affects later payments after the tax return is assessed. Still, the example shows why seeing 30% withheld at the bank doesn’t mean the tax story has ended.
Plan before pressing withdraw
I’d estimate full-year income before requesting a lump sum. Dividing a large withdrawal between calendar years may preserve a lower bracket or reduce OAS recovery tax. Couples may also elect to split up to 50% of eligible pension income, including qualifying RRIF income, when the rules are met.
After paying the tax, investors with sufficient contribution room could move unused proceeds into a TFSA. Unused room carries forward, while withdrawals generally return as new room the following calendar year. Growth and withdrawals inside a TFSA don’t affect OAS or other federal income-tested benefits.
RCI
Rogers Communications (TSX: RCI.B) could provide future Tax-Free Savings Account (TFSA) income and recovery potential. Rogers stock sells wireless, internet, television, and business connectivity services while owning major sports and media assets. Canadians may grumble about their phone bills, although they continue paying them with remarkable punctuality.
Second-quarter free cash flow increased 6% to $982 million as lower capital spending allowed more operating cash to remain available. That cash supports debt reduction and Rogers stock’s $0.50 quarterly dividend, which equals $2 annually and yields approximately 4% at a recent share price of $49.88.
A $10,000 investment buys 200 whole shares for $9,976 and produces $400 annually. The dividend arrives quarterly, although investors can divide the cash into monthly transfers or reinvest it while the TFSA continues growing.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| RCI.B | $49.88 | 200 | $2.00 | $400.00 | Quarterly | $9,976.00 |
Rogers ended the quarter with a 3.8-times leverage ratio and plans to pay $4.4 billion for the remaining 25% of Maple Leaf Sports & Entertainment. Wireless competition and falling revenue per customer add another complication. Stronger free cash flow must therefore fund deleveraging, not another corporate shopping spree.
Bottom line
Rogers won’t undo tax already triggered by an RRIF withdrawal. Its role is to move future dividends and potential growth into an account that won’t enlarge taxable retirement income. Planning the withdrawal before December arrives can preserve more OAS today, while a steadily growing TFSA creates more tax-free choices for tomorrow.
a
