If you've spent decades saving diligently for retirement, there's a good chance you've heard the warning: "Watch out for the OAS clawback." And it's valid. The Old Age Security (OAS) Recovery Tax can quietly erode thousands of dollars in retirement income every year, often catching people off guard.

But here's what rarely gets said: losing some or all of your OAS isn't always a bad thing.

For some retirees, it's a sign that their income is healthy, their savings strategy worked, and their financial position is strong. For others, it's a genuine problem that strategic planning can solve. The difference between those two groups comes down to context, and the real question isn't whether you'll face clawback. It's whether you've planned for it.

What Is OAS and How the Clawback Works

Old Age Security is a monthly benefit paid to most Canadians aged 65 and older. Unlike the Canada Pension Plan (CPP), you don't earn OAS through contributions. It's funded from general tax revenue, which means every working Canadian helps fund the programme through the taxes they pay.

In 2026, the maximum OAS payment is $742.31 per month ($8,908 per year) for those aged 65 to 74, and $816.54 per month ($9,799 per year) for those 75 and older.

Here's where the clawback enters the picture.

If your net income exceeds $95,323 in 2026, the government begins recovering your OAS at a rate of 15 cents for every dollar above that threshold. That's the OAS Recovery Tax.

At maximum clawback, a retiree aged 65 to 74 loses the full $8,908 per year. For a couple where both partners face full clawback, that's nearly $18,000 in annual income gone. Those numbers add up over a 25- or 30-year retirement.

The Hidden Culprit: Mandatory RRIF Withdrawals

Here's what frustrates so many retirees: they're not spending lavishly. They're not earning massive investment returns. They're simply being forced to withdraw money they don't need, and that forced income is what pushes them over the clawback threshold.

When you turn 71, your Registered Retirement Savings Plan (RRSP) must be converted to a Registered Retirement Income Fund (RRIF). From that point on, you're required to withdraw a government-mandated minimum percentage of your balance every year.

Now imagine you've done everything right. You maximised your RRSP contributions during your working years and accumulated a balance of $800,000 by age 72. Your mandatory minimum withdrawal that year is $43,200 (5.40% of $800,000). Add CPP, a modest pension, or any other income, and you're well past the $95,323 threshold before you've made a single discretionary spending decision.

This is the structural trap. The very discipline that built your retirement savings is now generating the income that erodes your OAS.

And the problem compounds. As RRIF minimums ratchet upward with age, the clawback deepens, even if your actual spending needs haven't changed at all.

When OAS Clawback Actually Hurts (And What You Can Do About It)

For retirees with net income in the $80,000 to $120,000 range, OAS clawback isn't just an annoyance. It's a real financial hit. These are Canadians whose retirement income is comfortable but not extravagant, and losing $5,000 to $9,000 per year in OAS benefits meaningfully changes what their retirement looks like.

If that's you, the good news is that this is one of the most solvable problems in retirement planning. The key is managing when and how your income shows up on your tax return.

Optiml's OAS Clawback Reducer Strategy

This is exactly the kind of problem Optiml was built to solve. The OAS Clawback Reducer is a strategy that works in two distinct phases to protect your OAS benefits through smarter withdrawal sequencing.

Phase 1: Pre-OAS Drawdown. In the years before you start receiving OAS (typically between ages 60 and 65, or later if you defer), Optiml accelerates withdrawals from your registered accounts. The goal is to reduce your RRSP and RRIF balances while you're in a lower tax bracket, so that by the time OAS kicks in, your mandatory minimums are smaller and less likely to trigger clawback.

Phase 2: Income Capping. Once OAS is active, the strategy shifts to keeping your net income as close to the clawback threshold as possible. Optiml sequences your withdrawals across account types (TFSA, non-registered, RRIF) to smooth your taxable income year over year, minimising the amount of OAS that gets recovered.

The strategy also incorporates several important guardrails:

• LIF-first priority: If you have a Life Income Fund (LIF), Optiml prioritises drawing from locked-in accounts first, since those funds have mandatory withdrawal windows and limited flexibility
• Spousal coordination: For couples, the strategy balances income between both partners to keep both individuals below or near the threshold, not just one
• GIS guard: For lower-income retirees who may qualify for the Guaranteed Income Supplement (GIS), the strategy avoids inadvertently increasing income past GIS eligibility thresholds
• Marginal rate cap: Optiml ensures that accelerated drawdowns in Phase 1 don't push you into a tax bracket where the cure is worse than the disease

The result? For Canadians in that critical $80,000 to $120,000 income range, the OAS Clawback Reducer can meaningfully improve after-tax retirement income over the full span of retirement. Not by earning more, but by being smarter about when each dollar flows through your tax return.

With Optiml, you can model this strategy directly, compare it against your current plan, and see the lifetime difference in both taxes paid and income received.

When Clawback Is Not the Enemy

Now, let's talk about the other side of this.

If your net income is consistently above $150,000 in retirement, full OAS clawback is essentially a certainty. And while it's natural to feel frustrated about "losing" a benefit you've been paying into through your taxes, it's worth stepping back and reframing what that actually means.

If your retirement income is high enough that OAS gets fully clawed back, your financial plan worked. You built enough wealth to fund your retirement without needing a government safety net. That's not a failure of planning. It's a success.

Think of it this way. Canada has several social programmes that most of us collectively fund through our taxes but not everyone draws from. Employment Insurance (EI) is one that most people understand intuitively. You contribute to EI throughout your working career, but if you never lose your job, you never collect a penny. Nobody feels cheated by that. It means things went well.

OAS works on a similar principle, even though the funding mechanism is different (OAS comes from general tax revenue rather than dedicated premiums). The broader idea is the same: it exists as a floor of support for those who need it. If your income places you above that floor, the programme is working as intended.

There's a widespread, reasonable view that OAS was always designed as a safety net, not a universal entitlement regardless of wealth. Whether or not you agree with the policy, the practical reality is clear: spending time and energy trying to engineer your income below the clawback threshold when you're earning $160,000 or $180,000 in retirement is almost always counterproductive. You'd be reducing your income to save a benefit worth less than the income you'd be giving up.

For high-income retirees, the better focus is on holistic lifetime tax minimisation, not OAS preservation specifically. And that's a different (but equally important) planning conversation.

The Bottom Line

OAS clawback is real, and for a significant number of Canadian retirees, it's worth planning around deliberately. If your income sits in that zone where OAS makes a meaningful difference to your quality of life, strategic withdrawal sequencing can protect thousands of dollars per year.

But if your income puts you well above the threshold, losing OAS isn't something to lose sleep over. It means you're in a position of strength. Direct your planning energy where it has the biggest impact: minimising your total lifetime tax burden across every account, every year, across your entire retirement.

Whether OAS matters a lot to your plan or a little, the underlying principle is the same. It's not just about how much you saved. It's about how intelligently you draw it down.

That's where Optiml comes in. Model your full retirement picture, test strategies like the OAS Clawback Reducer, and see exactly what tax-efficient withdrawal sequencing means for your after-tax income over the decades ahead.

The plan that feels right isn't always the plan that's optimal. Now you can see the difference.