How the OAS clawback works
Old Age Security is a federal pension paid to most Canadians over 65, funded from general tax revenues. The maximum OAS at 65 in 2024 is about $713 a month. The catch is the recovery tax (clawback). For every dollar of net income above the 2024 threshold of roughly $90,997, CRA claws back 15 cents of OAS. Above roughly $148,541, OAS disappears entirely. RRSP withdrawals and RRIF income count toward this threshold; TFSA withdrawals do not.
You retire with $40,000 of CPP and OAS plus $80,000 of RRIF withdrawals, total income $120,000. That is roughly $29,000 above the clawback threshold, so OAS shrinks by 15% of $29,000, about $4,350 a year clawed back. If you had instead withdrawn $40,000 from your TFSA and $40,000 from your RRIF, your reportable income drops to $80,000 and you keep every dollar of OAS.
Hoarding RRSP contributions through your 60s, then triggering a giant RRIF withdrawal at 72 that erases your OAS. Drawing the RRSP down through your 60s, before CPP and OAS kick in at 70, often saves more in clawback than the small tax deferral cost.
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