Tax
Your RRSP deduction was a loan. Did anyone read you the terms?
A deduction does not save the tax. It moves it, to a rate neither of you has seen yet.
Retirement income
Which year's income is your OAS deposit actually reading?
The clawback is already reading a return you filed two years ago, which sounds like a nuisance and is the most useful thing about it.
You are somewhere between fifty-five and seventy. The RRSP is large enough that seventy-one has started to feel like a date rather than an age.
Most people meet the clawback the same way. A deposit shows up smaller than last month's, nobody warned them, and the explanation arrives afterwards.
By then the year that caused it is closed. The return is filed. There is nothing left to decide.
What it comes to
15 cents
Of OAS taken back for every dollar of net income above the floor
For the 2026 income year the recovery starts around $95,323, and OAS is gone entirely around $155,109 between sixty-five and seventy-four, or around $161,088 at seventy-five and over. These are indexed and they change every year.
Is it a cliff, or a slope?
Once your net income passes a floor, the government takes back fifteen cents of OAS for every dollar above it. Keep going and it takes back all of it.
For the 2026 income year the clawback starts around $95,323. OAS is gone entirely around $155,109 if you are between sixty-five and seventy-four, or around $161,088 at seventy-five and over.
It is not a cliff. Between those two numbers you keep part of your OAS, on a slope. Crossing the floor by a thousand dollars does not cost you the pension. It costs you a hundred and fifty dollars of it. Worth knowing before you panic and restructure everything.
$95,323
Where the 2026 recovery starts. Indexed. Confirm the current figure.
The 2025 income year figures, roughly a $93,454 floor with $152,062 and $157,923 ceilings, govern the OAS paid from July 2026 to June 2027.
Which income counts, and which counts for more than you think?
It is net income. Not taxable income after credits, and not just RRIF withdrawals.
Rent counts. Capital gains count. A dividend from your corporation counts, and eligible dividends count at their grossed-up amount, which is higher than what actually landed in your account.
That last one catches people every year. The deposit was one number, the return reads a larger one, and the OAS two summers later is set off the larger one.
TFSA withdrawals do not count as income at all, so they do not touch the clawback. Non-registered money is partly a return of your own capital, so only the growth shows up. A RRIF withdrawal is fully in.
What would you do with two years of warning?
Here is the bit that turns a nuisance into a lever. The clawback showing up in your deposit is driven by your income from the year before last. Your 2026 income governs the OAS you receive from July 2027 through June 2028.
A withdrawal you take this year sets a deposit two summers from now. You know today what next-next-year's answer will be, and you have a whole year to decide what to do about it. Almost nothing else in the tax system gives you that much runway.
The obvious move is smoothing. Rather than a quiet year followed by a big withdrawal year, spread the same money across both and stay under the floor in each. The less obvious one is the order you draw from, because the same amount of spending money produces very different net income figures depending on which account it came out of.
July 2027 to June 2028
The OAS your 2026 income is setting right now
This is one of very few rules where knowing it early changes the outcome rather than just explaining it afterwards.
What arrives whether you want it or not?
Two things. Your RRSP has to become a RRIF, or an annuity, by the end of the year you turn seventy-one.
From then on there is a minimum you must withdraw, set by age. At seventy-one it is 5.28%. By eighty it is 6.82%. By ninety, 11.92%. At ninety-five and over, 20%.
That is taxable income landing whether you spend it or not, and it goes straight into the net income figure the clawback reads. Left uninvested it can push you into a higher bracket entirely.
Which is why the decision about what happens to the excess, into a TFSA, into a non-registered account, or simply spending less than the minimum, is worth making before the first forced withdrawal rather than after it.
Is taking more out early ever the right answer?
Sometimes it is, and it is the one that surprises people. Draw the RRSP down in your sixties, before CPP and OAS and the forced RRIF minimums are all stacked on top of each other, and you can end up in a lower bracket across the whole retirement even though you paid more tax in year one.
We are not saying that is your answer. It depends on your numbers and it can easily be wrong.
We are saying it is a real option that almost nobody is shown, because it looks wrong from the inside of any single year.
This is general information and not a recommendation to withdraw from any account. Your own accountant should see the arithmetic on your own return before anything moves.
The arithmetic
| Age | Minimum you must withdraw |
|---|---|
| 71 | 5.28% |
| 80 | 6.82% |
| 90 | 11.92% |
| 95 and over | 20.00% |
| Prescribed under the Income Tax Act (Canada), so the same in every province. The minimum is taxable income whether you spend it or not, and it lands in the net income figure the OAS recovery tax reads two years later. | |
This week
None of them needs us, and none of them needs an appointment.
The numbers to check
When this is not your problem
For a good number of people the clawback never becomes a factor, and planning around it is time spent on a problem they do not have. If your net income in retirement is going to sit comfortably below the floor, leave the withdrawal order alone and stop reading about it. The lag is only a lever if there is something worth levering. It is also fair to say that smoothing income across two years is a small optimisation next to the larger question of whether the money lasts at all, and if that is where your file actually is, we would rather spend the fifteen minutes on the larger one.
Is this one actually happening on your file?
Fifteen minutes on the phone is usually enough to tell. You describe the structure, we ask questions, and nothing is presented at you. There is nothing to send in advance and nothing arrives afterwards unless you ask for it.
Find out which year you are settingFifteen minutes, with your notice of assessment in front of you.
Read next
Retirement
Why does your RRSP shelter less of your income every year you succeed?
RRSP room is eighteen percent of earned income up to a dollar cap, and the cap does not move with you.
The article
The OAS clawback runs two years behind you
Which sounds like a nuisance and is actually the most useful thing about it.
Sources and cautions
Confirm the figures before you act. OAS recovery tax thresholds are indexed and change every year. The 2026 income year figures quoted here govern OAS paid July 2027 to June 2028, and the 2025 income year figures, roughly a $93,454 floor with $152,062 and $157,923 ceilings, govern July 2026 to June 2027. Source: Canada.ca, Old Age Security pension recovery tax thresholds. RRIF minimum withdrawal factors are prescribed under the Income Tax Act (Canada). OAS and GIS amounts adjust quarterly; CPP adjusts annually. Whether drawing down an RRSP early is right for you depends on your full picture and can easily be wrong. This is general information, not tax advice, and it is not a recommendation to withdraw from any account. Talk to your own accountant about your own return. Prabhjit Virk is not a Canadian CPA. Life insurance licences are held in British Columbia, Alberta and Ontario; Quebec is pending. Provincial rates and rules quoted here are British Columbia figures unless stated. Alberta and Ontario differ.