Illustration by The Globe and Mail
Q: I am 68 and will retire at the end of February. I have a self-directed Registered Retirement Savings Plan (RRSP) of approximately $1.2-million, which I will turn into a Registered Retirement Income Fund (RRIF) in the coming months. My plan is to melt down my RRIF without triggering any Old Age Security (OAS) clawback going forward, including 2026-27. I also plan on deferring CPP and OAS to age 70. Can withdrawals of my pension or an RRIF be shared with a spouse for income tax purposes, and does this help reduce income to help avoid an OAS clawback?
We asked Quinton Chambers, an adviser at ScotiaMcLeod, to answer this one.
First, congratulations on your coming retirement. “Reaching this stage with a $1.2-million RRIF is no small accomplishment. It reflects decades of discipline and thoughtful decision making,” said Mr. Chambers.
He also confirmed that pension income-splitting can help reduce OAS clawback. “Once your RRSP becomes a RRIF, your withdrawals qualify as eligible pension income after age 65, which allows you to split up to 50 per cent with your spouse when you file your tax return.”
Mr. Chambers also points out how pension income-splitting really only happens on paper. “You don’t actually have to slide half of your RRIF income across the table to your spouse, even if they’ve already started planning how to spend it.”
A deep dive on the OAS clawback: How many people are affected, and how much does it cost them?
He calculated that, at age 68 with an RRIF of $1.2-million, your minimum withdrawal for the year would be about $54,600, based on the age-factor percentage of 4.55 per cent. That RRIF withdrawal is included in your taxable income – and he highlighted that taxable income is what matters for OAS.
OAS recovery tax is based on each individual’s net income, not the couple’s. For 2025 income, Mr. Chambers noted that clawback begins at $93,454 of net income, and you repay 15 per cent of every dollar above that. For 2026 income, the government’s current figures put the threshold at about $95,323, with the same 15 per cent.
To better understand it, he provided a simple scenario: Suppose your personal income for the year is $100,000. If the OAS threshold is around $95,000, you’d be about $5,000 over, and you’d repay roughly 15 per cent of that excess – about $750 – through clawback. If pension-splitting shifts enough income to your spouse to bring you back under the threshold, that clawback disappears.
That said, Mr. Chambers added this important reminder: “You still want to fund the lifestyle you worked so hard to afford. The goal is not perfection, it’s intention: spending meaningfully, drawing income strategically and using tools like pension-splitting to keep more of what supports the life you want to live.”
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