If you’re relying on Old Age Security (OAS) in retirement, the last thing you want is for your payments to be unexpectedly reduced or suspended. Yet, thousands of seniors in Canada could face that exact issue in 2025 if they aren’t careful. The Canada Revenue Agency (CRA) closely monitors income levels and filing habits, and even seemingly minor financial decisions could trigger the dreaded OAS clawback.
Here are three major red flags that could lead the CRA to reduce or suspend your OAS payments in 2025—and how to avoid them.
1. Surpassing the OAS Clawback Threshold
The number one trigger for an OAS clawback is having too high a net income. For the 2025 benefit year, the clawback kicks in when your net income exceeds approximately $93,454. Once you go over this threshold, the CRA starts reducing your OAS at a rate of 15 cents for every dollar above it.
If your income reaches around $151,668, you could lose your OAS payments entirely for the year.
Common sources of income that count toward this threshold include:
- RRSP or RRIF withdrawals
- Employment or self-employment income
- Rental income
- Dividends and capital gains
- Company pensions or annuities
Even if your regular income seems modest, one-time events—like cashing out investments or downsizing your home—can unexpectedly push you over the limit.
2. Filing Your Taxes Late or Not at All
Many retirees don’t realize that OAS benefits are calculated annually using the previous year’s tax return. If you file late—or fail to file—CRA has no way to verify your income. As a result, your OAS payments may be delayed, reduced, or suspended altogether until the necessary tax information is submitted.
This red flag is especially critical for low- or moderate-income seniors who depend on the full OAS amount. If the CRA doesn’t have your most recent tax return, it may assume you’re above the income threshold and reduce your payments accordingly—even if you aren’t.
To avoid this, always file your tax return on time, even if you have little or no income.
3. Taking Large RRSP or RRIF Withdrawals
Many Canadians don’t realize that money withdrawn from registered accounts like RRSPs or RRIFs is fully taxable—and counts directly toward the OAS clawback threshold. After age 71, RRSPs must be converted to RRIFs, and minimum withdrawals become mandatory. These required withdrawals often push seniors into higher tax brackets, triggering a partial or full OAS clawback.
What makes this especially tricky is that these withdrawals aren’t optional. If your RRIF minimum withdrawal puts you above the clawback threshold, you’ll lose part or all of your OAS for that benefit year.
One strategy to avoid this is to begin smaller RRSP withdrawals earlier—perhaps in your 60s—before you reach the age when minimum RRIF withdrawals are enforced. Another option is to contribute more to a Tax-Free Savings Account (TFSA), since those withdrawals don’t count as taxable income.
How to Protect Your OAS Payments
If you want to avoid any surprise clawbacks or suspensions in 2025, here are a few key actions to consider:
- Keep your net income below the clawback threshold through careful tax planning
- Spread out large withdrawals over multiple years
- Prioritize TFSA contributions over RRSPs after retirement
- Use pension income splitting if you have a spouse
- Always file your taxes on time and ensure the information is accurate
Final Thoughts
The OAS clawback isn’t just for the wealthy. Many average-income retirees fall into this trap by overlooking taxable events or failing to plan ahead. The CRA doesn’t need much to flag your file for clawback or suspension—so staying proactive is essential.
By recognizing these three major red flags in advance and taking steps to avoid them, you can help ensure that your full OAS benefits continue uninterrupted throughout 2025 and beyond.