The 2026 OAS clawback threshold is $93,454. If you have a large RRSP, forced RRIF minimums will almost certainly push you over it. Here's what to do — years before it happens.
The "clawback" isn't officially called that — CRA calls it the Old Age Security Pension Recovery Tax. But the effect is the same: they take back part of your OAS if your income exceeds a threshold.
For the July 2026 to June 2027 payment period, the threshold is $93,454 net income. For every dollar your net income exceeds that, you repay 15 cents of OAS. The clawback continues until your OAS is fully eliminated — at $152,062 for seniors under 75, or $157,923 for seniors 75 and over (who receive the higher OAS rate).
The maximum OAS payment in 2026 is approximately $8,618/year for ages 65–74 (roughly $718/month), rising to about $9,456/year for those 75+ (roughly $788/month). Run the math: if you're earning $120,000 in retirement, you've exceeded the threshold by $26,546. That's 15% of $26,546 = roughly $3,982 in clawback — about 46% of your annual OAS gone.
Now add investment income, rental income, or a workplace pension to that second example and the clawback grows fast. The problem only gets worse as RRIF balances grow or CPP is maximized at 70.
Most Canadians think the clawback is based on "income." It's not. It's based on Line 23400 — net income before adjustments — and that distinction matters enormously.
Line 23400 is calculated before the dividend tax credit is applied and before most carryforward deductions. This creates two gotchas that catch people off guard:
When you receive an eligible dividend from a Canadian corporation (bank stocks, utilities, pipelines), CRA grosses it up by 38% before including it in your income. If you received $20,000 in eligible dividends, your Line 23400 income includes $27,600 — even though you only received $20,000 in cash.
You later receive a dividend tax credit that reduces your tax owing, but the clawback is already calculated on the grossed-up amount. A large dividend investor could lose OAS benefits worth thousands of dollars and only partially recover through the tax credit — a net negative outcome compared to holding growth-oriented assets instead.
Selling a rental property or a business in the year you're collecting OAS can push your Line 23400 income far above the threshold — even if your normal income is well below it. The taxable capital gain (50% of the gain for amounts under $250,000) counts in full for clawback purposes.
There is no smoothing mechanism. A $300,000 capital gain in one year can cause a full OAS clawback for that year while your regular income would have been fine. Planning large asset sales around this — or using the lifetime capital gains exemption where available — is one of the higher-value conversations to have with a tax professional.
What counts toward Line 23400 for OAS clawback: RRIF withdrawals, CPP, OAS itself, employment income, self-employment income, rental income, capital gains (50% inclusion rate for amounts under $250K/year), interest income, eligible dividends at 138% gross-up, non-eligible dividends at 115% gross-up.
What does NOT count: TFSA withdrawals, the non-taxable portion of capital gains, return of capital distributions, GIS payments.
Canadians who maximized RRSP contributions for 30 years and held a diversified portfolio often reach retirement with $1M–$2M in RRSP/RRIF. The government will take a significant portion of it — not through confiscation, but through high marginal rates and OAS clawback.
Here's the core problem: RRSP contributions reduce your tax bill during high-earning years at marginal rates of 40–53%. But RRIF withdrawals add to income in retirement, potentially at marginal rates nearly as high — and they trigger OAS clawback on top.
At $1.5M RRIF balance at age 71, the minimum withdrawal is 5.28% = $79,200. Add average CPP ($11,000) and OAS ($8,618) and you're already at $98,818 — above the clawback threshold the moment RRIF withdrawals start. And RRIF minimums increase as a percentage each year as you age, making this worse over time.
| Age | RRIF Min Rate | Withdrawal (on $1.5M) | With CPP+OAS ($19,618) | Clawback? |
|---|---|---|---|---|
| 71 | 5.28% | $79,200 | $98,818 | Yes — $804/yr |
| 75 | 5.82% | $87,300 | $106,918 | Yes — $2,019/yr |
| 80 | 6.82% | $102,300 | $121,918 | Yes — $4,269/yr |
| 85 | 8.51% | $127,650 | $147,268 | Yes — $8,072/yr |
| 90 | 11.92% | $178,800 | $198,418 | Full clawback |
RRIF balance assumed to be $1.5M at age 71 with 0% real growth for simplicity. Clawback calculation uses 2026 threshold of $93,454. CPP+OAS = $19,618/year assumed.
The solution isn't to not save in your RRSP — it's to draw it down strategically in the years before CPP and OAS stack on top. That's the RRSP meltdown.
The income gap between age 60 and 71 — when you've stopped working but RRIF minimums haven't started yet — is your best window to drain the RRSP at lower rates.
The target: draw RRSP income each year up to the top of a low federal tax bracket. In 2026, for a single filer, the 20.5% federal bracket extends to $57,375. Adding the basic personal amount (~$16,129) and CPP/OAS if not yet started, you can often pull out $35,000–$55,000/year from the RRSP at a combined federal+provincial rate of 25–32% — far below what you'd pay in your highest-earning years.
At 6% annual return, $1M RRSP at 60 becomes approximately $1.79M by age 71. RRIF minimum at 71 (5.28%) = $94,500. Add CPP $21,000 and OAS $8,618 = $124,118 total income. Heavy clawback every year. Marginal rate on RRIF withdrawals above threshold: ~50%+ combined (federal + provincial + 15% clawback).
Pull $45,000/year from RRSP from ages 60–70 (10 years = $450,000 drawn). Reinvest surplus in TFSA. Remaining RRIF balance at 71: approximately $900,000. RRIF minimum at 71 = $47,520. Add CPP $21,000 and OAS $8,618 = $77,138 — below clawback threshold. Save $2,000–$8,000+/year in clawback for 15+ years of retirement.
The lifetime OAS clawback saving from the meltdown strategy in this example can exceed $60,000–$100,000 in today's dollars — not counting the tax savings from drawing RRSP at lower marginal rates instead of higher RRIF-era rates.
The RRSP meltdown works best if: You have a meaningful income gap between retirement and when CPP/OAS/RRIF minimums start. You defer CPP to 70 (which also maximizes the income gap window). You have TFSA room to absorb the after-tax proceeds. You're not drawing a large workplace pension that already fills your lower brackets.
TFSA withdrawals don't count toward Line 23400. That single fact makes the TFSA the most powerful clawback avoidance tool in a retiree's toolkit.
The core TFSA clawback strategy: take your RRIF minimum each year, pay the tax on it, then contribute the available amount to your TFSA. The RRIF withdrawal reduces your RRIF balance (lowering future minimums), while the TFSA accumulates tax-free assets you can draw on later without any income impact.
For example, at age 72 with a $900,000 RRIF, your minimum is approximately $47,880. After tax (say 32% average rate), you net about $32,558. Contributing $7,000 (the 2026 TFSA room) to your TFSA adds to a tax-free pool that can supplement RRIF income in future years without triggering clawback.
Over 10 years, that's $70,000 in additional TFSA contributions plus growth — representing potentially $200,000+ in retirement income that never touches Line 23400.
| Withdrawal Source | Counts Toward OAS Clawback? | Best Used For |
|---|---|---|
| RRIF minimum | Yes | Required — manage timing and top-up TFSA with proceeds |
| TFSA | No | Supplemental income to stay below clawback threshold |
| Non-registered (capital) | Partial (gains only) | Draw principal first when possible; defer gain-realization |
| CPP | Yes | Consider deferring to 70 for meltdown window |
| OAS itself | Yes (counts against itself) | If above threshold, voluntarily defer OAS or split income |
At age 65, up to 50% of eligible pension income — including RRIF withdrawals — can be allocated to a lower-income spouse. This alone prevents OAS clawback for many couples.
The mechanics: using CRA Form T1032 (Joint Election to Split Pension Income), you elect to transfer a portion of eligible pension income from one spouse's return to the other. The transferring spouse's income drops; the receiving spouse's income rises. If the result keeps both spouses below $93,454, neither triggers clawback.
A concrete example: married couple, both 72. Spouse A has RRIF income of $85,000 plus CPP of $14,000 = $99,000. Spouse B has CPP of $8,000 and OAS of $8,618 = $16,618. Without splitting, Spouse A is above the $93,454 threshold. With 50% pension split, $42,500 of RRIF income shifts to Spouse B. Spouse A's income drops to $56,500 (CPP + half RRIF), well below clawback. Spouse B's income rises to $59,118 — still below clawback. Both keep their full OAS.
What qualifies for pension splitting: RRIF income (at any age, but typically converted by 71), defined benefit pension income, LIF withdrawals, annuity payments. CPP and OAS themselves do NOT qualify for pension splitting — they have their own CPP credit splitting rules (different concept).
RRSP withdrawals before RRIF conversion: Do NOT qualify for pension income splitting before age 65. This is why the RRSP meltdown strategy often involves converting to a RRIF voluntarily at 65 to access the splitting option.
CPP deferral and RRSP meltdown are synergistic. Deferring CPP to 70 does two things: it keeps income lower from 60–70, giving you more room to draw RRSP without exceeding bracket thresholds, and it results in a higher CPP at 70 that partially replaces RRIF withdrawals.
If you're pulling $45,000/year from your RRSP meltdown and you also start CPP at 62 ($10,000/year), your total income is $55,000 — still manageable. But that CPP income reduces how much RRSP room you have before hitting higher brackets. Deferring CPP to 70 keeps the income gap cleaner and lets you draw more from the RRSP at the same effective rate.
Once CPP starts at 70 at its enhanced rate ($21,000/year or more), it replaces some of the income you used to draw from the RRSP — but by then, the RRSP is smaller, so RRIF minimums are more manageable. The deferral enhances itself through this compounding logic.
OAS deferral is worth considering for similar reasons: deferring OAS from 65 to 70 adds 36% to the payment but more importantly keeps OAS out of your Line 23400 income during the meltdown window. Once your RRIF balance is reduced, the higher OAS payment from deferral may actually be small enough (relative to your lower income) that you keep more of it.
More on this strategy: Investing During the CPP/OAS Bridge Period: Ages 60–70
Enter your details to see projected net income by age, whether OAS clawback is triggered each year, and estimated lifetime clawback with and without the RRSP meltdown strategy.
| Age | RRIF Balance | RRIF Withdrawal | CPP | OAS | Total Income | Clawback |
|---|
If you draw down $35,000/year from your RRSP starting now (up to age 71 RRIF conversion), here's how the numbers change:
| Number | Value |
|---|---|
| 2026 OAS clawback threshold | $93,454 net income (Line 23400) |
| Clawback rate | 15 cents per dollar above threshold |
| Full clawback (OAS eliminated) — under 75 | $152,062 |
| Full clawback (OAS eliminated) — 75+ | $157,923 |
| Maximum OAS (ages 65–74, 2026) | ~$8,618/year (~$718/month) |
| Maximum OAS (age 75+, 2026) | ~$9,456/year (~$788/month) |
| Eligible dividend gross-up rate | 138% (38% added to actual dividend) |
| RRIF minimum rate at age 71 | 5.28% of January 1 balance |
| RRIF minimum rate at age 80 | 6.82% |
| RRIF minimum rate at age 85 | 8.51% |
| Pension income splitting max (T1032) | 50% of eligible pension income (at 65+) |
| TFSA impact on Line 23400 | Zero — withdrawals do not count |
Related guides on this site: Investing During the CPP/OAS Bridge Period covers the full bridge portfolio strategy in depth. RRIF Withdrawal Guide covers minimums, timing, and RRIF investment strategy.
The meltdown strategy works — but it requires starting a decade before the problem hits. The best time to act is while you still have the income gap window to use.
Bridge Period Strategy RRIF Withdrawal GuideThis content is for informational purposes only and does not constitute financial, tax, or legal advice. OAS clawback thresholds are indexed annually by CRA. Calculator projections are estimates only — actual results depend on investment returns, tax changes, and individual circumstances. Consult a fee-only financial planner for personalized advice. All figures based on 2026 CRA data where available.