Families & Retirement — Guide
Between $95,323 and ~$152,062 of retirement income, tax plus clawback takes 58%+ of every extra dollar. The fix isn't earning less — it's changing what counts.
What is the OAS clawback?
Formally the OAS recovery tax: Old Age Security is reduced by 15 cents for every dollar of net income above $95,323 (2026). Full OAS of roughly $9,024/yr at 65 is completely clawed back near $152,062. Stacked on income tax, the zone between those numbers carries an effective marginal burden above 58% in Ontario.
Most retirement projections treat OAS clawback as weather — unfortunate, unavoidable. It's neither. The clawback tests one specific number, line 23400 net income, and net income is a design output. Two retirees spending an identical $110,000 a year can sit on opposite sides of the threshold, because what counts toward that line depends on where each dollar comes from.
| Income source | Counts toward clawback? |
|---|---|
| RRIF/RRSP withdrawals, pensions, CPP | Yes — every dollar |
| Eligible Canadian dividends | Worse than yes: $1.38 per $1 (the gross-up counts) |
| Interest, rents, realized capital gains (taxable half) | Yes |
| TFSA withdrawals | No |
| Loans against life insurance cash value | No — borrowing isn't income |
| Return-of-capital distributions (until ACB exhausted) | No (deferred, not eliminated) |
The dividend row surprises people most: the 38% gross-up on eligible dividends inflates net income before the credit gives the tax back — so a "tax-efficient" dividend portfolio can be the worst thing to hold in the clawback zone. Blue-chip dividend investors retire into this trap constantly. Check where your projected income lands in LAB 02.
RRIF minimums after 71 force income whether you want it or not — and they grow with age (preview your own future RRIF tax in LAB 06). Retirees with large RRSPs often benefit from deliberate withdrawals in their 60s at 30–43% rates, before minimums push them into the 58% zone later. Paying some tax early to avoid a higher rate forever is the least intuitive, highest-value move in retirement planning.
Pension splitting moves up to half of eligible pension income (RRIF income from 65) to the lower-income spouse — two $95K thresholds instead of one. Couples routinely protect $5,000–9,000 of combined OAS with paperwork alone. Free money; do it first.
Conventional wisdom says spend taxable accounts first and let the TFSA compound. In the clawback zone the logic flips: TFSA withdrawals fund spending without touching net income, precisely in the years RRIF minimums are peaking. The right order is personal arithmetic, not a rule of thumb.
In the zone, swap gross-up-heavy dividend holdings toward deferred-growth or return-of-capital structures; hold the income-heavy assets in the TFSA/RRIF instead. Asset location quietly moves thousands of dollars of income off line 23400 without changing what you own.
This is the decade-ahead lever: participating whole life cash value can be accessed in retirement via a collateral loan from a third-party lender, secured by the policy — spendable cash that never appears as income under current rules (an insurer policy loan is different: taxable above the policy's adjusted cost basis). It's the same mechanism business owners use in an IFA, pointed at retirement instead. It requires 5+ years of runway, which is why it appears on this page as lever five and in your fifties as lever one.
Fair warning
Clawback planning is worth real money between $95K and $152K of retirement income. Below the threshold it's irrelevant; far above it, OAS is gone regardless and chasing it wags the dog. An honest diagnostic sometimes concludes: leave it.
At $95,323 of net income (line 23400). OAS is reduced by 15% of income above that threshold and is fully eliminated at roughly $152,062 for a 65–74 year old.
No. TFSA withdrawals are not income and never appear on line 23400 — which makes TFSA-first drawdown one of the most effective clawback strategies in the $95K–$152K zone.
Because the clawback tests grossed-up income: $1.00 of eligible dividends counts as $1.38. The dividend tax credit refunds tax later but does not undo the inflated net income, so dividend-heavy taxable portfolios accelerate OAS loss.
A collateral loan from a third-party bank, secured by the policy, is not income under current rules — that spending power never touches the clawback test. A loan taken from the insurer (a true policy loan) is different: it is tax-free only up to the policy's adjusted cost basis, and taxable above it. Retirement designs use the bank route for exactly this reason. Structure matters; get advice before drawing.
Deferral adds 0.6% per month (36% at 70) and can help high-income 65-year-olds whose income will fall later. But deferral also concentrates more OAS into years when RRIF minimums peak — the right answer comes from projecting net income year by year, not from a rule.
Book a Tax Diagnostic
The first conversation is free — your situation, our method, and whether we fit. Complex files quote a planning fee up front: you'll know before we start.
// the only variable in this plan that gets more expensive every year is your age