What is OAS?

Old Age Security (OAS) is a monthly pension provided by the federal government to Canadians aged 65 and older. For many retirees, it offers a steady stream of income—up to roughly $735 per month (about $8,820 per year) for those aged 65–74 and closer to $808 per month once over 75, thanks to a 2022 boost. It’s designed to help support living expenses in retirement.

What Is the OAS Clawback?

If your net world income (Line 234 on your tax return) exceeds a certain yearly threshold, the government starts to recover your OAS benefits. This is called the OAS clawback or recovery tax.

• In 2024, the threshold is $90,997.
• In 2025, it increases to $93,454, and full clawback occurs around $151,668

Here’s how it works: for every dollar you earn above the threshold, you repay 15% of that amount in lost OAS benefits. If your income hits the maximum limit, your entire OAS can be clawed back.

Example: How Does That Look?

Let’s say your net income for 2024 is $100,000. For 2025:

• You’re $9,003 over the $93,454 threshold.
• 15% of that = $1,350.
• So in 2025, your OAS benefits will be reduced by $1,350 total—or about $112 per month.

Ways to Reduce or Avoid the Clawback

You don’t have to accept clawback as inevitable—there are smart strategies to minimize its impact:

1. Use your TFSA for withdrawals. Money taken from a Tax-Free Savings Account don’t count as taxable income (Line 23400) and won’t trigger clawback.
2. Spread RRSP/RRIF withdrawals. Instead of dumping a large withdrawal in one year, spread them out. This can help keep your net income under the threshold.
3. Delay OAS up to age 70. For each month you wait past 65, your OAS payment increases by 0.6%, up to 36%. That bigger monthly pension might still net you more—even after clawback—especially if your overall income during that period is low.
4. Pension income splitting. If you’re married or common-law, splitting eligible pension income can lower your personal taxable income and keep you below the clawback threshold.
5. Optimize your investments. Capital gains count only 50% toward taxable income, while interest and dividends can push you over the limit more easily. Consider favouring capital gains or TFSA holdings.

Final Thoughts

The OAS clawback doesn’t have to be a surprise—especially if you plan ahead. Monitoring your net income, adjusting your mix of withdrawals or investments, and considering timing strategies can help you keep more of your OAS and maintain a more comfortable retirement income.

If your income may be hovering near those thresholds, this is a great time to talk with a financial planner to create a personalized strategy.