How to minimize OAS clawback

By Jacqueline Power | May 25, 2017 | Last updated on September 21, 2023
4 min read

Higher-income senior clients are often disappointed when their Old Age Security (OAS) benefit gets clawed back – and as their advisor, you could bear the brunt of that disappointment.

Here’s how to answer common client questions about OAS reductions, and how to help them avoid the clawback in the first place.

What is OAS?

OAS is a taxable monthly social security payment program available to most seniors aged 65 and older. Since the benefit is not based on employment history, it may be available even if a person has never worked in Canada.

Am I eligible for OAS?

In order for a person to be eligible for OAS pension, he or she must:

  • be at least 65 years old;
  • be a Canadian citizen or legal resident at the time the OAS application is approved; and
  • have resided in Canada for at least 10 years since age 18, continuously and immediately before approval of the OAS pension.

Read: Keep the claws off OAS

If someone leaves Canada, are they still eligible for OAS?

Yes, as long as they meet the first two criteria above. With respect to the third point, however, instead of residing in Canada for 10 years since the age of 18, they would have had to reside in Canada for at least 20 years (cumulatively).

If an individual doesn’t qualify based on the criteria above, they may still be eligible for OAS if they lived in a country with a social security agreement with Canada, or they’ve contributed to the social security system in a country with which Canada has a social security agreement. Examples include the U.S., Germany, France and Australia.

Read: What sixtysomethings expect from their advisors

Can I work while receiving OAS?

It is possible to work and receive OAS simultaneously, but the income earned may create a partial OAS benefit instead. The government applies the OAS recovery tax or clawback once a person’s net income (including employment and investment income) exceeds $73,756 (2016) or $74,788 (2017). The clawback is at a rate of 15% until OAS has been eliminated completely, which occurs once net income reaches $119,615 (2016) or $121,314 (2017).

Read: Should retirement age eligibility be based on life expectancy?

How do I minimize OAS clawback?

If you have clients who have income near or above the threshold, obtain a copy of their T1 personal tax return in order to decipher the types of income the client is reporting.

Consider these common OAS clawback reduction strategies:

  • If clients need to supplement income, they can consider making withdrawals from a TFSA. TFSA withdrawals are not taxable and are not included in the taxpayer’s income, making them exempt from clawback.
  • Look at the types of investment income your client is currently receiving. Do they have non-registered investments that are paying dividends? If yes, you may want to discuss limiting their exposure to dividend-producing investments or having them hold these investments in a registered account. OAS clawback is based on net income, which includes dividends received from Canadian corporations on a grossed-up basis. That gross-up increases net income and could expose the client to OAS clawback.
  • If you have clients who are working and have income between $73,756 and $119,615, they may want to delay receiving their OAS until income is lower. This is a new option that allows seniors to delay OAS until sometime between age 65 and age 70. If clients decide to delay OAS, they are able to increase their future monthly payments by 0.6% per month for every month they delay receiving OAS — to a maximum of 36% at age 70. If you have clients approaching 65 who are still earning income, be sure to explain their options.
  • Consider using corporate-class mutual funds within a non-registered account instead of mutual fund trusts, dividend-paying stocks or bonds. Corporate-class funds generally have lower distributions than their mutual fund trust equivalents. Making this change can help senior clients who have sizeable non-registered investment portfolios invested in mutual fund trusts or other higher-taxed investments.
  • Consider basing RRIF withdrawals on the younger spouse’s age to reduce the amount that is required to be withdrawn on an annual basis.
  • Check if your clients 65 or older are eligible to income split their RRIF, CPP or pension income with their spouse or common-law partner. If they are, doing so will help reduce net income and hopefully avoid or reduce clawback.

Read: What new tax brackets mean for your clients


OAS is a hot topic for many senior clients, and you will likely have clients impacted by the clawback. Take the opportunity to review their investments to determine if their current income mix is optimal.

Jacqueline Power is a tax director with Mackenzie Investments. She can be reached at

Jacqueline Power headshot

Jacqueline Power

Jacqueline Power is an assistant vice-president with Mackenzie Investments. She can be reached at