Pitfalls, Protection and Official Sources
OAS clawback and RRIF withdrawals: how RRSP, RRIF and TFSA money affects Old Age Security
How the 15% OAS recovery tax interacts with RRIF minimums and RRSP withdrawals, why TFSA withdrawals do not count, a worked 2026 example and drawdown tactics to consider.
Old Age Security is reduced by the OAS recovery tax (often called the clawback): 15 cents for every dollar of net income above a threshold, which is $95,323 for 2026 income. RRSP withdrawals and RRIF payments, including the mandatory minimums, are fully counted in net income, so a large RRIF can push a retiree into the clawback zone in their seventies and eighties. TFSA withdrawals do not count as income, so they never reduce OAS or the Guaranteed Income Supplement. Managing the order in which you draw from each account is therefore one of the most valuable retirement-account decisions you make.
This guide is part of the mistakes and official sources hub. It is general information, not financial advice; OAS rules and thresholds are set by the federal government and indexed each year.
How the recovery tax works
| Element | 2026 rule |
|---|---|
| Threshold | $95,323 of net income (line 23400) for 2026 |
| Rate | 15% of net income above the threshold, up to the full OAS received |
| When it is recovered | Through your tax return for the year, and as reduced monthly OAS payments from July of the following year to June of the year after |
| What counts | Employment and pension income, CPP/QPP, RRSP and RRIF withdrawals, interest, taxable dividends (grossed up), taxable capital gains, OAS itself |
| What does not count | TFSA withdrawals and income, qualifying FHSA withdrawals, the return of your own capital from non-registered accounts |
Eligible dividends are grossed up by 38% for net income, so a large non-registered dividend portfolio can also push income upward, more than the cash received.
Worked example: a RRIF minimum crossing the threshold
An illustrative 75-year-old in Ontario receives in 2026:
| Income source | Amount |
|---|---|
| Workplace pension | $48,000 |
| CPP | $14,000 |
| OAS (aged 75+, rounded) | $9,000 |
| RRIF minimum: $650,000 × 5.82% | $37,830 |
| Net income | $108,830 |
| Recovery tax step | Amount |
|---|---|
| Net income above $95,323 | $13,507 |
| × 15% | $2,026 of OAS recovered |
The clawback comes on top of regular income tax on those dollars (roughly 31% to 38% combined in this Ontario income range, before age and pension credits), so it adds 15 percentage points to the effective rate on the last $13,507 of income. Use the RRIF minimum calculator to see your own minimum.
Tactics to consider
These are general approaches discussed in retirement planning, not recommendations for any individual.
- Draw down the RRSP earlier. In the years between retirement and age 71 (or before CPP and OAS start), modest RRSP or RRIF withdrawals may be taxed at low rates and shrink the balance that would produce large minimums later.
- Use the younger-spouse election. Basing RRIF minimums on a younger spouse's age lowers the forced withdrawal each year; see the RRIF guide.
- Split pension income. From 65, up to 50% of RRIF income can be allocated to a spouse (Form T1032), which can bring both spouses below the threshold.
- Fill the TFSA. Move after-tax money (including surplus RRIF minimums) into a TFSA, whose future withdrawals do not affect OAS.
- Consider deferring OAS. OAS can start any time between 65 and 70; each month of deferral increases the payment by 0.6% (up to 36% at 70). Deferral can help if income is high in your late 60s, but it is a trade-off against years of payments.
- Be careful with one-off spikes. A large RRSP lump sum, a cottage sale or a big capital gain in a single year can cause clawback for that year. Spreading withdrawals across years can reduce it.
Comparing sources of retirement cash
| Source of $10,000 cash | Counts for OAS? | Tax withheld? |
|---|---|---|
| RRIF minimum payment | Yes, $10,000 | No |
| RRIF payment above minimum | Yes, $10,000 | Yes, lump-sum rates |
| RRSP withdrawal | Yes, $10,000 | Yes, lump-sum rates |
| TFSA withdrawal | No | No |
| Sale of non-registered investments | Only the taxable half of any gain | No |
| Eligible Canadian dividends | Yes, grossed up to $13,800 | No |
The Guaranteed Income Supplement
For lower-income seniors the GIS matters more than the clawback. GIS is reduced as other income rises, at much higher rates than the 15% OAS recovery, so even small RRIF withdrawals can cost GIS. For people likely to qualify for GIS, the TFSA is often the better savings vehicle in the years before retirement, and RRSP balances may be better drawn down before 65. GIS rules are complex; check Service Canada or ask a professional.
Quebec notes
OAS and its recovery tax are federal and apply the same way in Quebec. Quebec residents also receive QPP instead of CPP, which counts as income in the same way. Quebec has its own credits for seniors that are reduced with family income, so RRIF withdrawals can affect them too; check Revenu Québec.
Frequently asked questions
Does a RRIF minimum count toward OAS clawback?
Yes. Minimum and extra withdrawals are both included in net income.
Do TFSA withdrawals ever affect OAS or GIS?
No. TFSA income and withdrawals are not included in net income.
Is the threshold the same every year?
No. It is indexed to inflation each January. $95,323 is the 2026 figure.
If I pay the clawback, do I lose all my OAS?
Only if net income is high enough; the 15% rate applies until the full OAS amount is recovered.
Official sources
- Government of Canada: Old Age Security — OAS, deferral and the recovery tax
- CRA: indexation of 2026 amounts — OAS recovery threshold for 2026
- Canada Revenue Agency — pension income splitting (Form T1032)
- Revenu Québec — Quebec credits for seniors
