If you’re nearing retirement or already receiving the Old Age Security (OAS) pension, there’s one crucial detail you can’t afford to ignore: the OAS clawback, officially known as the Old Age Security Recovery Tax. While OAS is a key support system for Canadian seniors, earning above a certain income threshold can mean giving some—or all—of it back.
Table of Contents
With the OAS clawback threshold rising to $93,454 in 2025, understanding how it works, how it affects your monthly payments, and what strategies you can use to protect your retirement income is more important than ever.
🧾 What is the OAS Clawback?
The OAS clawback is a repayment mechanism that reduces your monthly OAS pension if your annual net income exceeds a specific limit set by the federal government. The clawback is applied gradually, based on how far your income exceeds this threshold. It’s not an outright penalty but a phased reduction of benefits.
OAS Clawback Basics:
- Trigger Threshold for 2025: $93,454
- Clawback Rate: 15% on income above this limit
- Maximum Income Threshold:
- Age 65–74: $151,668
- Age 75+: $157,490
- Full Repayment: If your income exceeds the maximum threshold, your OAS is entirely clawed back
CPP Boost 2025: Understanding the 2.6% Pension Increase and Its Real Impact on Canadian Retirees
How Much will BC Teachers’ Pension Increase in 2025? A Comprehensive Guide
Quebec Teacher Pension Payment Dates 2025: RREGOP Schedule, Contribution Rates, and Key Information
ATRF Pension Payment Dates 2025: Alberta Teachers’ Retirement Fund Schedule, Rates & Key Updates
OTPP Payment Dates 2025: Full Ontario Teachers’ Pension Plan Schedule & Contribution Details
📈 Example: How the OAS Clawback Works in 2025
Let’s say you’re 68 years old and earned $120,000 in 2024. Your OAS clawback for 2025 will be calculated based on this income.
Step 1: Calculate Excess Income
bashCopyEdit$120,000 – $93,454 = $26,546
Step 2: Apply 15% Clawback Rate
bashCopyEdit$26,546 × 15% = $3,981.90
Step 3: Adjust Annual OAS Assuming a full OAS entitlement of $8,000 annually:
bashCopyEdit$8,000 – $3,981.90 = $4,018.10
Monthly OAS after Clawback:
bashCopyEdit$4,018.10 ÷ 12 = $334.84/month
If your income was above $151,668, your entire OAS would be clawed back and you would receive $0 in OAS payments for the year.
⌛ Should You Delay OAS Until Age 70?
You can begin receiving OAS at age 65, but if you choose to delay until 70, your monthly payments increase by 0.6% per month deferred, up to 36% more at age 70.
Why delay?
- Helps you avoid early clawback if you’re still earning high income after 65
- Larger future payments can offset smaller or clawed-back benefits
- Useful for those with long life expectancy and other income sources
Caution: Even higher OAS payments at age 70 are still subject to the clawback if your income exceeds the threshold.
🌎 What Is the Old Age Security Recovery Tax?
The OAS clawback is formally administered as a recovery tax. If your income is above the threshold, the Canada Revenue Agency will automatically reduce your OAS the following year.
This also applies to Canadians living abroad, especially in countries that apply a 25% or higher withholding tax on Canadian pension income. In that case, you may face OAS recovery even with a lower income.
💡 How to Avoid or Minimize the OAS Clawback in 2025
Here are smart, actionable strategies to help you stay below the OAS clawback threshold:
1. Manage Your Taxable Income
Control when and how you receive income:
- Delay RRSP withdrawals until lower-income years
- Avoid large one-time bonuses or asset sales in high-income years
- Spread taxable income across multiple years, especially before and after retirement
2. Use Income Splitting
Married or common-law couples can split eligible pension income (like RRIF or private pension payments) to:
- Lower the higher earner’s taxable income
- Possibly bring both partners under the $93,454 clawback threshold
3. Prioritize TFSA Over RRSP or Non-Registered Investments
Withdrawals from a Tax-Free Savings Account (TFSA):
- Do not count as income
- Have no effect on your OAS clawback
- Offer tax-free growth and flexibility
Invest in TFSAs aggressively, especially in early retirement, to reduce dependence on taxable sources later.
4. Delay OAS to Maximize Future Income
Waiting until age 70 to start OAS:
- Increases your monthly payments up to 36%
- Can avoid clawbacks during high-income years (e.g., early retirement work or RRSP drawdown phase)
- Offers long-term inflation-protected income
5. Work With a Financial Planner
A qualified planner can help:
- Build an income projection to time your withdrawals wisely
- Help you rebalance between taxable and non-taxable income
- Create a custom tax-efficient withdrawal strategy
✅ Summary of OAS Clawback 2025 Key Numbers
| Criteria | Value (2025) |
|---|---|
| Clawback Threshold | $93,454 |
| Full Clawback (Age 65–74) | $151,668 |
| Full Clawback (Age 75+) | $157,490 |
| Clawback Rate | 15% of income over threshold |
| Max OAS Benefit (est.) | $8,000/year (approx.) |
📅 Important Timing Tip
Remember: OAS clawback for 2025 is based on your 2024 net income. Your income this year determines your benefit next year. It pays to plan early and act fast to manage your reported income effectively.
🧭 Take Control of Your Retirement: Plan Around the OAS Clawback
The OAS Clawback 2025 doesn’t have to catch you off guard. By understanding the rules and applying smart strategies, you can retain more of your retirement benefits and avoid giving back money unnecessarily.
Now is the time to:
- Optimize your income streams
- Leverage tools like TFSAs and income splitting
- Consider delaying OAS for a more tax-efficient retirement
- Get professional help if your situation is complex
Book a consultation with a retirement planner today to build a plan that protects your OAS, minimizes taxes, and maximizes your peace of mind.