Tax Planning for Seniors: RRIF Withdrawals and the OAS Clawback
How Nova Scotia retirees can keep more of their retirement income—and avoid surprise tax bills
When you reach retirement, your financial life should feel more relaxed—not more complicated. But if you’re drawing income from a RRIF and also receiving Old Age Security (OAS), you could end up facing higher taxes or even losing part of your OAS benefits to the clawback.
This happens more often than people expect—and often comes as an unpleasant surprise.
The good news: with the right planning, you can avoid the worst of it and keep more of your retirement dollars working for you.
What Happens When You Convert Your RRSP to a RRIF
By the time you turn 71, you’re required to convert your RRSP into a RRIF (or another retirement income vehicle). The government then requires you to withdraw a minimum percentage every year, based on your age—and those withdrawals are fully taxable.
Let’s say you’re 72 in 2025 and you have $400,000 in your RRIF. You’ll be required to withdraw just over $21,800 that year. That amount gets added to your income at tax time—even if you don’t need all the money right away.
These withdrawals, when added to your other income sources like CPP, investment income, or private pensions, can quickly push you into a higher tax bracket. And once your total income reaches a certain threshold, that’s when the OAS clawback kicks in.
Understanding the OAS Clawback
OAS is a monthly benefit available to Canadians 65 and older. But it’s income-tested.
For 2025, the clawback starts once your net income hits $93,454. From there, the government deducts 15 cents from your OAS for every dollar you go over that amount. If your income reaches approximately $151,668, your OAS for that year is fully clawed back.
This is often where retirees feel blindsided. You plan for your RRIF withdrawals, but don’t always anticipate how much they’ll push up your taxable income—and how quickly that can erode your government benefits.
How to Avoid the Clawback: Tax-Smart Retirement Strategies
The trick is to smooth out your income and reduce the risk of spikes that can trigger higher taxes or lost benefits. Here are some of the most effective ways we help Nova Scotia retirees do just that:
1. Start Drawing Down RRSPs Earlier
If you're in your early-to-mid 60s and not yet drawing a full pension, it may make sense to start withdrawing from your RRSP early—especially if your income is relatively low. This lowers the balance you’ll later convert to a RRIF and spreads your income more evenly across your retirement years.
2. Pension Income Splitting
Once you turn 65, you can split up to 50% of your eligible pension income (including RRIF income) with your spouse or common-law partner. This is a great way to balance income between partners and possibly keep both of you under the OAS threshold.
3. Use Your TFSA Strategically
If you have both a RRIF and a TFSA, consider withdrawing only the required minimum from your RRIF and topping up your cash flow from your TFSA. Since TFSA withdrawals aren’t taxed and don’t count as income, they won’t affect your eligibility for OAS.
4. Defer Your OAS
If you don’t need OAS right away, you can delay it up to age 70. The longer you wait, the higher your monthly benefit. This can be a smart option if you're still earning income from work, investments, or your business and want to avoid a clawback in the early years of retirement.
5. Time Your Capital Gains
If you’re selling investments or property, the timing of that sale matters. One big capital gain in a single year can push you into clawback territory. Where possible, spread gains over multiple years or look for tax-efficient ways to rebalance your portfolio.
Every Situation Is Different—That’s Where We Come In
Navigating RRIF withdrawals, OAS timing, and overall tax planning isn’t just about crunching numbers—it’s about building a retirement strategy that matches your lifestyle, your values, and your long-term goals.
At Miles T Sweeney Limited, we work with retirees across Nova Scotia to create custom plans that reduce tax exposure and help protect every dollar you’ve worked hard to save.
You’ve earned the right to enjoy your retirement without worrying about tax surprises. If you want help building a smarter income plan for the years ahead, we’re here to support you every step of the way.
📞 902-468-5500
📧 info@msweeney.com
Call today to schedule your retirement income consultation.