The OAS (Old Age Security) clawback is officially called the OAS recovery tax.
Here is how it works. The CRA (Canada Revenue Agency) sets an income threshold each year and adjusts it for inflation.
For 2025, the net income threshold is $93,454. Canadian residents who earn more than $93,454 must repay $0.15 of OAS for every extra dollar. This recovery tax is taken straight off your OAS cheque.
For October to December 2026, the maximum OAS payment is $762.50 a month for seniors aged 65 to 74, which works out to $9,150 a year. Do the math, and the entire pension is gone once net income reaches roughly $154,000.
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How do RRSP withdrawals count toward the OAS clawback?
Not all retirement income is treated the same way.
Money you withdraw from a Tax-Free Savings Account (TFSA) is not included in your taxable income.
RRSP (Registered Retirement Savings Plan) withdrawals are the opposite. Every dollar shows up on your tax return as income. It sits alongside your CPP, your OAS, and any workplace pension.
The RRSP is a tax-deferred account and helps you reduce the tax liability during employment. However, a large RRSP balance at retirement would mean a higher withdrawal rate and could trigger an OAS clawback.
Why RRIF minimum withdrawals can trigger the clawback
An RRSP can’t stay open forever. By December 31 of the year you turn 71, you must turn it into a Registered Retirement Income Fund (RRIF) or use it to buy an annuity.
Moreover, you have to withdraw a minimum amount every year, whether you need the money or not.
That minimum withdrawal amount keeps rising. At age 72, it’s 5.4% of your balance, according to the federal RRIF schedule published by TD, which climbs to 6.8% at 80 and 11.9% at 90.
Now, let’s take the example of a former retired teacher aged 72 who earns a pension of $55,000 a year. Add in a $12,000 CPP and a $9,000 OAS, and the total annual payout is around $76,000, below the OAS clawback threshold.
Say the teacher has an RRIF of $700,000. At 72, the required withdrawal is $37,800, pushing the total income to $113,800. Here, the retiree could lose more than $3,000 tied to the OAS clawback.
How to protect your OAS from the clawback
There are a few ways to protect the OAS from a clawback.
- Once you’re 65, you can move up to half of your pension and RRIF income onto your spouse’s tax return. That splits one large income into two smaller ones.
- Many people earn very little between retirement and age 65, which is a good time to withdraw some money from the RRSP. Notably, the account will be smaller when the required RRIF withdrawals begin at 72.
- You don’t have to begin the OAS at 65. If you delay the payout until 70, the OAS cheque increases by 36%.
Why a TFSA dividend stock like Fortis can help
One top TSX dividend stock to own in the TFSA and benefit from tax-free returns is Fortis (TSX: FTS). The Canadian regulated electric and gas utility has raised its dividend for 52 straight years.
CEO David Hutchens said Fortis is on pace to invest $5.6 billion in 2026 and forecasts the rate base to grow by 7% annually through 2030.
During the earnings call, Hutchens explained:
Our dividend remains a core component of our investment thesis. We have demonstrated that we can grow our dividend responsibly, having increased it for the past 52 consecutive years while maintaining a disciplined approach to balance sheet strength.
Over the last two decades, FTS stock has returned more than 340% to shareholders, after adjusting for dividend reinvestments. Despite these inflation-beating returns, it offers you a tasty yield of 3.5% in October 2026.
The Foolish bottom line
The RRSP is still one of the best tools Canadians have. Just plan your withdrawals as carefully as your contributions. Start mapping out your RRIF years now and put your best income stocks where the CRA can’t touch them.
