OAS Clawback: When Your RRIF Minimum Starts Triggering It
A retiree turns 71 with a $700,000 RRIF, a workplace pension, CPP and full Old Age Security. Their income that year sits about $9,339 below the point where the government starts taking OAS back, so they repay nothing. Two decades later, having changed nothing about how they invest, what they spend or how much they withdraw, the same person is repaying $5,706.46 of OAS a year. That is more than half of the OAS they are being paid, and no mistake was made anywhere in between. The withdrawal formula simply did what the withdrawal formula does.
The OAS clawback gets filed under problems of the wealthy. That framing misses the more common version of it. For a great many Canadians with an ordinary registered nest egg, the clawback is not a windfall problem at all. It is a scheduled consequence of a minimum withdrawal percentage that climbs for more than twenty years while the retiree behaves exactly the same way every year.
What the recovery tax actually is
The colloquial name is the clawback. The formal name is the Old Age Security pension recovery tax, and it is worth using once because the mechanism is a tax rather than a cancelled benefit. You repay 15% of the amount by which your net world income exceeds the minimum threshold for that income year. CRA publishes a minimum and two maximum thresholds for each period.
| Recovery tax period | Income year | Minimum threshold | Max, age 65 to 74 | Max, age 75+ |
|---|---|---|---|---|
| July 2025 to June 2026 | 2024 | $90,997 | $148,451 | $154,196 |
| July 2026 to June 2027 | 2025 | $93,454 | $152,062 | $157,923 |
| July 2027 to June 2028 | 2026 | $95,323 | $155,109 | $161,088 |
One precision point on that bottom row, because CRA flags it and most write-ups drop it. The two maximum-threshold figures for the 2026 income year, $155,109 and $161,088, are estimates from January to September of the current tax year, based on maximum OAS pension amounts, and they become final only from October to December. The $95,323 minimum threshold does not carry that footnote.
The timing is the other thing people miss. The recovery tax runs on a July-to-June period built on the prior calendar year’s income, so income earned in 2026 sets the deduction that runs from July 2027 to June 2028. That is an eighteen-month lag between the year you earn and the month your pension shrinks. The repayment is divided monthly and deducted from OAS payments as a recovery tax, and Service Canada sends a letter setting out the deductions.
CRA works an example on its own page. Using the $93,454 threshold for the 2025 income year, an income of $100,000 gives $100,000 – $93,454 = $6,546, and $6,546 x 0.15 = $981.90 repayable over the July 2026 to June 2027 period.
There is a circularity here worth stating plainly. OAS is taxable income, and it counts in the net world income the recovery tax is tested against. The benefit is part of the test that takes the benefit away.
Why a RRIF is what pushes people over
A RRIF pays out on a schedule set in regulation rather than by the account holder. The minimum withdrawal factors in section 7308 of the Income Tax Regulations run 5.28% at 71, 5.82% at 75, 6.82% at 80, 8.51% at 85, 11.92% at 90 and 20.00% at 95 or older. Below 71 the factor is 1 divided by 90 minus your age. The percentage applies to the fund’s fair market value at the start of the year, using your age at the start of the year. You may always withdraw more, since an ordinary RRIF has no maximum. You can never withdraw less.
That climbing percentage is the engine behind everything below, and if you want the mechanics in full, including the spousal age election and how the factor interacts with a shrinking balance, we covered them in the RRIF withdrawal rules. For the clawback, one line of it matters: the withdrawal is forced, it is fully taxable, and the required share of the fund gets larger every year.
Set against that is a benefit that barely moves. For July to September 2026, the maximum OAS payment is $751.97 a month at ages 65 to 74, provided 2025 net world income is under $152,062, and $827.17 a month at 75 and over, provided 2025 net world income is under $157,923. The two rows differ because the pension was permanently increased by 10% for seniors 75 and over in July 2022. Annualised, and this arithmetic is ours rather than a published figure, those come to $9,023.64 and $9,926.04.
What it looks like on a $700,000 RRIF
The table below is illustrative arithmetic built from the factors and OAS amounts above. Four assumptions sit underneath it, and all four are worth naming before you read a single row.
First, a $700,000 RRIF balance held constant across every age shown. That is deliberately unrealistic, and it is there to isolate the effect of the rising factor. Second, $40,000 a year of other taxable income from CPP plus a workplace pension, which is a round assumed number rather than a source figure. Third, maximum OAS at the July to September 2026 rates, which is why the OAS column steps up from $9,023.64 at 71 to $9,926.04 from 75 on. Fourth, the 2026 minimum threshold of $95,323 applied at every age, which is also a simplification, since the threshold is indexed and rises each year exactly as the three rows of the CRA table show.
| Age | Factor | RRIF minimum | Plus other income | Plus max OAS | Net income | Over $95,323 by | Recovery tax at 15% |
|---|---|---|---|---|---|---|---|
| 71 | 5.28% | $36,960 | $40,000 | $9,023.64 | $85,983.64 | nil | nil |
| 75 | 5.82% | $40,740 | $40,000 | $9,926.04 | $90,666.04 | nil | nil |
| 80 | 6.82% | $47,740 | $40,000 | $9,926.04 | $97,666.04 | $2,343.04 | $351.46 |
| 85 | 8.51% | $59,570 | $40,000 | $9,926.04 | $109,496.04 | $14,173.04 | $2,125.96 |
| 90 | 11.92% | $83,440 | $40,000 | $9,926.04 | $133,366.04 | $38,043.04 | $5,706.46 |
At 71 this retiree is $9,339 clear of the threshold and pays nothing. At 80 they are over it, and the recovery tax is $351.46. By 90 it is $5,706.46 a year against an OAS entitlement of $9,926.04. Their spending, their portfolio and their withdrawal behaviour are identical in every row.
The obvious next question is what a different balance does, because the crossing age moves with the size of the fund and the other income beside it. Our RRIF minimum withdrawal calculator runs the same factor schedule against your own numbers, which is the only version of this table that says anything about your own situation.
The part where the table is wrong
A real RRIF balance does not stay at $700,000. It declines, because the money is being paid out. Holding it flat overstates the later minimums, and pretending otherwise would be dishonest.
The direction still holds, because the factor rises faster than the balance falls. A projection walked through our calculator’s test harness on 2026-08-30 makes the point: a $500,000 RRIF drawn at the minimum from age 71, at an assumed 4% return, pays $26,400 in the first year and is still climbing at 94, where the minimum reaches $30,146. The dollar amount of a forced withdrawal from a shrinking fund goes up, not down, for more than two decades. That is why the clawback arrives on schedule for people who never had a high-income year in their lives.
What actually helps
The most useful lever is pension income splitting. You can allocate up to 50% of eligible pension income to a spouse or common-law partner by joint election on Form T1032, signed by both and filed by the filing due date, with the information on both forms matching. Only one joint election is permitted per tax year, you choose who transfers and who receives, and the percentage can change from year to year. RRIF payments are eligible pension income if the transferring spouse is 65 or older at the end of the year, or receives them because of a spouse’s death. Tax withheld at source moves in the same proportion as the income allocated.
It bites on the clawback because the recovery tax is tested against each spouse’s own net income. Moving up to half the RRIF income onto a lower-income spouse’s return lowers the transferring spouse’s net income, and therefore the amount tested. It should not be oversold, though. The receiving spouse’s income rises by the same amount, so splitting helps when the two incomes are unequal and does nothing at all when they are already level. The two benefits many people would most want to split are also the two that cannot be: Old Age Security payments, and Canada Pension Plan or Quebec Pension Plan. Foreign pension income that is tax-free in Canada under a treaty, US IRA income, and RRIF amounts on line 11500 transferred to an RRSP, another RRIF or an annuity are excluded as well.
Two other levers exist. The spousal age election lets the minimum be based on a younger spouse’s or partner’s age, which selects a lower factor, and it cannot be changed once the first payment is made. Withdrawing more than the minimum in the early low-factor years is always permitted, since an ordinary RRIF has no maximum, and it flattens later income at the cost of paying tax sooner. That is a trade-off rather than a recommendation, and which side of it makes sense depends entirely on the numbers involved.
The TFSA point is worth understanding before any of the above. TFSA withdrawals are not income and are not part of net world income, so money moved into a TFSA and later withdrawn never enters the recovery tax test at all. If that distinction between a taxable registered withdrawal and a non-taxable one is new to you, it is the foundation the rest of this rests on, and our explainer on how a TFSA works sets out the contribution and withdrawal rules that make it behave that way.
None of these is a fix you apply at 80, once the table above has already crossed. The spousal age election is made once and locked. Splitting works best where someone has planned for a spread between two incomes. Drawing extra early only helps if it happens early. The years between 65 and 71, before the RRIF schedule is forced to begin, are the stretch where all of these choices are still open. After that, the percentage takes over.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. OAS recovery tax thresholds and the 15% rate from the Canada.ca Old Age Security pension recovery tax page; maximum OAS payment amounts (July to September 2026) from the Canada.ca Old Age Security payment amounts page; pension income splitting rules from the CRA pension income splitting page; minimum withdrawal factors from the Income Tax Regulations, section 7308. All fetched live 2026-09-07 to data/pf-sources/oas-clawback-2026-09-07/.
