OAS Clawback: Will Your Benefits Be Reduced?

Old Age Security is one of the foundation pieces of retirement income in Canada. Unlike CPP, you do not need to have worked or contributed to receive it. If you meet the residency requirements, you get it. But there is a catch: if your income is high enough, the government takes some or all of it back through what is officially called the OAS recovery tax, but most people call it the clawback.

Understanding how the clawback works is critical for retirement planning. A few thousand dollars in extra income can trigger a surprising reduction in your OAS benefits. Here is what you need to know.

What Is Old Age Security?

Old Age Security, or OAS, is a monthly payment from the federal government available to most Canadians aged 65 and older. You qualify based on how long you have lived in Canada, not on your work history or contributions. Generally, you need to have lived in Canada for at least 10 years after age 18 to receive any OAS, and 40 years to receive the full amount.

For 2026, the maximum monthly OAS payment is approximately $727 before any clawback adjustments. That translates to roughly $8,724 per year. Payments are indexed to inflation and adjusted quarterly, so they rise slowly over time.

You can also delay starting your OAS, similar to CPP. For every month you delay past age 65, your payment increases by 0.6 percent, up to a maximum increase of 36 percent at age 70.

How the Clawback Works

The OAS clawback is based on your net world income, which is essentially your total income from all sources before deductions but after certain adjustments. This includes CPP, RRSP and RRIF withdrawals, employment income, investment income, rental income, and most other taxable income.

The government sets a threshold amount each year. If your net income exceeds that threshold, you start losing OAS. For the 2026 tax year, the threshold is expected to be approximately $91,000, though the exact number is confirmed annually by the Canada Revenue Agency.

The clawback rate is 15 percent of the amount by which your income exceeds the threshold. This means for every dollar of net income above the threshold, you lose 15 cents of OAS.

Here is how that works in practice. If your net income is $100,000 and the threshold is $91,000, you are $9,000 over. Fifteen percent of $9,000 is $1,350. That is how much OAS you would have to repay. If your annual OAS is $8,724, the clawback reduces it to $7,374.

If your income is high enough, the clawback can eliminate your OAS entirely. This happens when your income reaches roughly $149,000 to $150,000. At that point, the full OAS payment is recovered and you receive nothing.

Strategies to Minimize the Clawback

The good news is that there are several strategies to manage your income and reduce or avoid the clawback.

Time your RRSP and RRIF withdrawals carefully. Large withdrawals from your RRSP or RRIF in a single year can spike your income above the clawback threshold. Spreading withdrawals more evenly across years keeps your income below the threshold and preserves more OAS. If you have significant RRSP savings, consider starting withdrawals before you turn 65 so you can draw down the balance before OAS begins.

Use your TFSA for withdrawals. TFSA withdrawals do not count as income and do not affect the clawback at all. If you have savings in both an RRSP and a TFSA, drawing from the TFSA in years when your other income is near the threshold can help you stay below it.

Consider pension income splitting. If you have eligible pension income, including RRIF payments and annuities, you can split up to 50 percent of it with your spouse for tax purposes. This reduces the income on the higher-earning spouse's return and can bring both spouses below the clawback threshold. Pension income splitting is one of the most effective tools for couples to manage the OAS clawback.

Delay your OAS start date. If you are still working at 65 or have other high income, consider delaying your OAS until age 70. The higher payment you receive later might be worth more than the smaller payments you would lose to the clawback now. Each situation is different, so run the numbers with our retirement calculator to compare the lifetime value of starting at different ages.

How the GIS Interacts With OAS

The Guaranteed Income Supplement, or GIS, is an additional benefit for low-income seniors who receive OAS. If your income is low enough, GIS tops up your monthly payment. However, GIS is also income-tested and is reduced based on your combined income.

Unlike OAS, the GIS reduction is steep. Even modest income can significantly reduce or eliminate your GIS. RRSP withdrawals, investment income, and CPP all count toward the income test for GIS. TFSA withdrawals do not.

If you might qualify for GIS, the strategy shifts. You want to keep your taxable income as low as possible. Drawing from a TFSA instead of an RRSP, delaying CPP to keep those years of income low, and careful planning of all withdrawals can help you maximize GIS.

The interaction between OAS, GIS, CPP, and your personal savings creates a complex optimization problem. Use our retirement calculator to enter your specific income sources and see how different withdrawal strategies affect your total benefits.

Planning Ahead Makes a Difference

The OAS clawback is not something you should discover after the fact. If you receive OAS and your income ends up above the threshold, you will get a bill from the CRA. For some retirees, this comes as an unwelcome surprise during tax season.

The better approach is to plan your retirement income strategy years in advance. Know what your income sources will be, estimate your total net income, and adjust your withdrawal plan to stay below the clawback threshold when possible.

For a detailed analysis of how your income sources interact with OAS and other benefits, try our retirement income calculator with your actual numbers.

Key Takeaways

• OAS is available to most Canadian residents aged 65 and older regardless of work history
• The clawback starts when your net income exceeds approximately $91,000 and eliminates OAS entirely around $149,000
• The recovery rate is 15 cents of OAS for every dollar of income above the threshold
• Strategies include timing RRSP withdrawals, using TFSA withdrawals, pension income splitting, and delaying OAS
• GIS has its own income test with even steeper reductions, so low-income retirees should plan carefully

The OAS clawback is one of the easiest retirement pitfalls to avoid, but only if you know it is coming and plan around it.