Old Age Security is not universal once your income rises. Above $95,300 of net world income, the CRA recovers 15 cents of OAS for every additional dollar — an effective marginal rate that can exceed 60% when stacked on ordinary tax.
What counts, and what does not
| Income source | Counts toward the threshold? |
|---|---|
| RRIF and RRSP withdrawals | Yes, in full |
| CPP and OAS | Yes |
| Employer pension | Yes |
| Interest and dividends | Yes — dividends at the grossed-up amount |
| Capital gains | Yes, the taxable half |
| TFSA withdrawals | No |
| Return of capital | No |
That table is the whole strategy. Two retirees with the same spending can differ by thousands of dollars of OAS purely on which account the money came from.
Five ways to stay below the line
- Draw down the RRSP in your sixties. Withdrawals before 71 are taxed, but they shrink the mandatory RRIF minimum that pushes you over the threshold later.
- Build the TFSA deliberately. It is the only large account whose withdrawals are invisible to the income test.
- Split eligible pension income. Moving up to 50% to a lower-income spouse can bring both partners under the threshold.
- Use the younger spouse’s age for RRIF minimums. This lowers the required withdrawal every year.
- Defer OAS, not just CPP. Deferring to 70 raises the benefit 36% and pushes the start past your highest-income years.
The dividend gross-up trap
Eligible dividends are grossed up by 38% before the dividend tax credit is applied. The clawback is tested on the grossed-up figure, so $30,000 of eligible dividends counts as $41,400 against your threshold. Retirees living on Canadian dividend income are caught by this constantly.
Run it on your own numbersRRIF withdrawalsSee how the mandatory minimum grows with age.Written against published 2026 federal and provincial figures. General information, not financial, tax, or legal advice — see the methodology and disclaimer.