OAS Clawback Strategy in Ontario: The $94K Threshold and How to Plan Around It

In 2026, a retired couple in London, Ontario filed their first joint return after retiring. They thought they'd structured things well: each spouse around $75,000 of income, a paid-off house, modest TFSA, healthy RRSPs. Their accountant flagged a problem at the bottom of the husband's return — the OAS clawback owed for the previous year was just over $4,000. The wife's was zero.

The reason: a one-time RRIF withdrawal he'd made the prior year, on top of CPP and OAS, pushed him just over the threshold. His income looked moderate. The clawback didn't care.

The OAS clawback is one of the most expensive accidents in Canadian retirement planning — and one of the easiest to design around if you know how. This is a complete guide for Ontarians: what the clawback actually is, how it gets triggered, who pays it, and the planning moves that keep you below the threshold.

What the OAS clawback really is

The Old Age Security clawback — formally the Old Age Security Recovery Tax — is a federal mechanism that takes back OAS payments from retirees whose income is "too high." It is not a bracket. It is not a phase-out. It is a flat 15 cents on every dollar of net income above an annual threshold, applied through your tax return.

The threshold for 2026 is approximately $94,000 of net income (line 23600). The threshold rises each year with inflation. Once you hit it, every additional dollar of income costs you 15 cents of OAS until OAS is entirely clawed back, which happens around $152,000 of income for someone aged 65 to 74. Once you're 75 or older the upper limit shifts slightly higher because the maximum OAS payment is itself larger.

A few important features:

• The clawback is based on net income, not taxable income. That includes CPP, OAS, RRIF withdrawals, employment income, half of capital gains, and most other taxable receipts.
• It's calculated individually for each spouse. Couples don't get a combined threshold.
• It's applied with a one-year lag. Your 2025 income determines your 2026 OAS reductions. A one-time spike in one year means a full year of reduced OAS the next.
• TFSA withdrawals, return of capital from non-registered accounts, and proceeds from loans don't count. This is where the planning lives.

For a 65-year-old Ontario retiree at the full OAS rate (~$734/month in 2026), full clawback costs about $8,800 a year of after-tax retirement income. Over a 25-year retirement, that's roughly $200,000 of lifetime income — even before factoring in inflation indexation on what you would have received.

Who actually gets hit by it

For most working Canadians, OAS clawback doesn't come up. The threshold sits above the average retirement income. For Ontarians with $500,000+ in RRSPs and a normal CPP entitlement, however, the clawback is a real planning constraint — and gets bigger the more registered savings you have.

The math: at 71, RRIF minimums begin at 5.28% of the balance. A $1.5M RRIF generates roughly $80,000 of mandatory annual withdrawals from the start, climbing each year. Add max CPP ($17,400/yr) and max OAS ($8,800/yr) and you're at $106,000 of forced income — already $12,000 over the 2026 threshold, costing $1,800 in clawback. By age 75, the same retiree's RRIF minimums climb to nearly $90,000, and the clawback approaches $4,500/year.

Ontarians most likely to face the clawback share three features: large RRSP balances at retirement, no large defined-benefit pension to flatten the curve, and a single high-earning spouse with much less income on the other side. Each one of those features narrows the planning room.

The structural drivers

Three structural forces produce the clawback even for retirees who think they've planned well:

1. Forced RRIF withdrawals. You don't choose them. They climb every year. By 85, the RRIF minimum is 8.51% — for a starting balance of $1.5M growing at 5%, that means roughly $135,000 a year of forced taxable income alone. The threshold is irrelevant; the formula doesn't care.

2. Income lumpiness. A single large event — selling a rental property, terminating a deferred profit-sharing plan, taking a commuted pension value — gets folded into one tax year. Even one year above the threshold reduces OAS the following year, which is then lost forever.

3. Imbalanced spouse income. When one spouse has all the registered assets and pension entitlements, their net income concentrates above the threshold while the other spouse's stays low — and the household pays a clawback that a balanced couple wouldn't.

The planning moves work by attacking each of these directly: shrink the RRSP base before 71, spread one-time events across multiple tax years, and equalize income between spouses.

The planning moves that actually work

1. RRSP meltdown coordinated with the threshold

The RRSP meltdown — paced withdrawals between retirement and age 71 — is the most important defence against OAS clawback. The goal is to shrink the RRSP base before RRIF conversion so future mandatory withdrawals stay under the threshold, while keeping current-year withdrawals themselves under the threshold.

The math is straightforward: project your RRIF minimum at age 80 using your current balance and 5% growth. If that projected minimum plus CPP plus OAS pushes you 20% or more over the threshold, the meltdown isn't optional — it's the only thing standing between you and a permanent clawback.

2. Pension income splitting at 65

Starting at age 65, you can split up to 50% of eligible pension income — including RRIF withdrawals — with your spouse on the tax return. For couples where one spouse has all the registered assets, this is the single most powerful tool. It can move $40,000+ of income from above the threshold to below it, eliminating tens of thousands of dollars in clawback over a 20-year retirement.

Pension splitting is an annual election made at tax time, not a one-time setup. You can choose the optimal split each year based on actual incomes.

3. CPP pension sharing

Separate from pension income splitting, CPP pension sharing is a Service Canada mechanism that lets a couple equalize the CPP each spouse receives. It applies for life once set up and is most useful when one spouse has a much larger CPP entitlement. Almost no one uses it because almost no one knows it exists.

4. Time large gains and unusual income into non-OAS years

If you're going to sell a rental property, cash out a corporate share account, or commute a pension, the year you do it matters. Two strategies:

• Sell before age 65 (before OAS starts) — the gain doesn't trigger clawback because there's no OAS to claw back.
• Spread the gain across multiple tax years using a reserve, a staged sale, or an installment structure. Each year stays under the threshold even though the gain itself is large.

5. Prioritize TFSA withdrawals for spending needs

TFSA withdrawals don't count toward net income. Period. If you have spending needs above what your taxable income can comfortably cover, the TFSA is the right account to tap. Every dollar of spending funded from the TFSA is a dollar of taxable income you didn't need to generate.

This is also why filling the TFSA during the RRSP meltdown years matters. The room you create now becomes spending flexibility later.

6. Loans against non-registered accounts

For high-net-worth retirees with substantial non-registered portfolios, a securities-backed line of credit can fund short-term spending without triggering income. The interest is a real cost — but for someone facing $8,800/year of OAS clawback, a 6% loan against $150,000 of need ($9,000/yr in interest) can be a wash in cash flow with the added benefit of preserving capital. This is a specialized strategy, not a default move, and depends on portfolio composition.

The four most common mistakes

1. Realizing capital gains in retirement without modeling the clawback. A $50,000 capital gain creates $25,000 of taxable income — enough to push many retirees over the threshold. Capital gains realization should be paced and modeled, not opportunistic.

2. Letting one spouse hold all the registered assets. If one spouse has $1.5M in RRSPs and the other has $50K, your household is going to pay clawback for 20 years on income that a balanced couple wouldn't. Spousal RRSP contributions during accumulation, or pension splitting in retirement, are the fixes.

3. Believing that OAS is "their money, not mine." Some retirees factor in OAS as essentially zero because they expect the clawback. The threshold is high enough — and the income mix flexible enough — that most retirees with $1M to $3M in assets can keep all or most of their OAS. The lost income from not trying is real.

4. Not adjusting CPP timing for the clawback math. Deferring CPP to 70 increases the monthly benefit by 42%, which sounds purely good — until that larger CPP, combined with mandatory RRIF withdrawals, pushes you over the threshold. The CPP and RRIF decisions need to be made together, not separately.

How to actually run it

1. Project your net income at 65, 70, 75, and 80 using realistic assumptions for RRIF minimums, CPP and OAS at your planned timing, and any other income.
2. Identify the years above the threshold. Those are your problem years.
3. Quantify the cumulative clawback at 15 cents on the dollar across those years.
4. Test planning moves in sequence: RRSP meltdown sized to threshold, pension splitting at 65, CPP sharing if entitlements are uneven, capital gains timing.
5. Re-run the projection. The right plan moves more years below the threshold without creating new tax bills somewhere else.
6. Update annually. Threshold indexation, your portfolio values, and tax law all change. A static plan from age 60 will not be the right plan at 70.
7. Document the plan. Without a written schedule, retirees default to "whatever the bank suggests" — which is usually the worst outcome.

Working with a planner on this

The OAS clawback is most expensive when it surprises you and most manageable when it's planned around explicitly. Marc Pineault is a financial planner in London, Ontario who builds integrated retirement projections that show the clawback math year by year, then designs the income mix to keep you below the threshold where possible.

The clawback isn't a tax bracket — it's a 15-cent surcharge on every dollar you didn't have to earn. For most Ontarians with substantial retirement assets, the planning conversation pays for itself many times over. If you're between 55 and 70, this is exactly the right time to model it. The years you have left in the planning window are the most valuable years you'll ever have for these decisions.