A comfortable retirement can look suspiciously wealthy on a tax return. Add a workplace pension, Canada Pension Plan (CPP), Old Age Security (OAS), Registered Retirement Income Fund (RRIF) withdrawals, and investment income, and someone who still compares grocery flyers can suddenly become a high-income senior.
For 2026 income, the OAS recovery tax begins when net world income exceeds $95,323. The government claws back 15 cents for every dollar above that threshold, with the reduction applied to OAS payments from July 2027 through June 2028.
Net world income includes OAS, CPP, pensions, RRIF withdrawals, interest, taxable capital gains, and dividends. Eligible Canadian dividends are particularly sneaky because of the 38% gross-up. A $10,000 cash dividend adds $13,800 to taxable income, potentially increasing the OAS recovery calculation.
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A faster-feeling clawback
Consider a retiree with $90,000 from OAS, CPP, pension, and investment income. A $20,000 RRIF withdrawal raises net income to $110,000. That’s $14,677 above the threshold, producing an estimated $2,201.55 recovery tax. Nothing says “enjoy your savings” quite like returning more than $183 per month of OAS.
| 2026 NET INCOME | AMOUNT ABOVE THRESHOLD | ESTIMATED OAS REPAYMENT | APPROXIMATE MONTHLY REDUCTION |
|---|---|---|---|
| $95,323 | $0 | $0 | $0 |
| $100,000 | $4,677 | $701.55 | $58.46 |
| $110,000 | $14,677 | $2,201.55 | $183.46 |
| $120,000 | $24,677 | $3,701.55 | $308.46 |
It’s important to remember that a Registered Retirement Savings Plan (RRSP) must mature by the end of the year its owner turns 71, commonly through conversion to an RRIF. Minimum taxable withdrawals begin afterward and increase with age. A $500,000 RRIF subject to the 5.4% factor at 72 would require a $27,000 withdrawal, whether the retiree needs the cash or not.
Blindly preserving every RRSP dollar until 71 can therefore backfire. The account grows, mandatory withdrawals grow, and those withdrawals eventually collide with pensions, CPP, OAS, dividends, and other taxable income.
Smooth out income
Someone in a temporarily low tax bracket could consider withdrawing part of an RRSP before mandatory RRIF payments begin. The withdrawal is taxable and can’t be returned, but paying a manageable amount earlier may prevent larger withdrawals from landing in a higher bracket later. Individual tax modelling is important here.
After tax, surplus cash can move into a Tax-Free Savings Account (TFSA) when contribution room is available. TFSA dividends, gains, and withdrawals don’t increase taxable income or reduce OAS, making the account useful for both emergencies and long-term income.
ENB
Enbridge (TSX:ENB) is one stock I’d consider for that account. Its pipelines, gas-transmission systems, storage facilities, and regulated utilities generate largely contracted or regulated cash flow, providing considerably more income visibility than an ordinary energy producer.
Second-quarter distributable cash flow increased by $45 million year over year. Management also maintained 2026 distributable-cash-flow guidance of $5.70 to $6.10 per share and expects the business to produce approximately 5% average annual growth in cash flow, earnings, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) after 2026.
Enbridge stock pays a $0.97 quarterly dividend, or $3.88 annually. At a recent $70.22, that produces a yield near 5.5%. A $10,000 investment would purchase 142 full shares and generate approximately $550.96 annually if the dividend remains unchanged.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| ENB | $70.22 | 142 | $3.88 | $550.96 | Quarterly | $9,971.24 |
The annual dividend represents roughly 64% to 68% of current cash-flow guidance, within management’s target range. An analyst’s fair-value estimate near $76 suggests modest upside, although this isn’t a clearance-rack stock. Debt-to-EBITDA recently reached 5.1 times, while political and regulatory disputes surrounding major pipelines remain genuine risks.
Couples may split as much as 50% of eligible pension income, including qualifying RRIF income after 65. A younger spouse’s age can also produce smaller RRIF minimums when elected at setup. Someone still working at 65 might instead delay OAS, increasing the eventual payment by 0.6% per month, or as much as 36% at 70.
Bottom line
The OAS clawback doesn’t require a yacht. A solid pension, an oversized RRIF, and one inconveniently profitable year can be enough. Gradually smoothing taxable income while building tax-free income from an investment such as Enbridge stock can help retirees keep more of both their portfolio cash flow and government benefits.
