For a lot of Canadian retirees, the Previous Age Safety (OAS) pension is a welcome supply of revenue. However for these with average to excessive retirement revenue, the OAS clawback — formally often known as the OAS restoration tax — can cut back and even remove this profit. Happily, with the precise dividend methods, retirees can construct a dependable revenue stream whereas minimizing their publicity to the clawback.
Understanding the OAS clawback
As of 2025, the OAS clawback begins when your web revenue exceeds $93,454. For each greenback above this threshold, you lose $0.15 of OAS advantages. This can lead to 1000’s of {dollars} in misplaced revenue yearly.
Internet revenue, for tax functions, consists of curiosity revenue, Registered Retirement Earnings Fund (RRIF) withdrawals, and even capital positive aspects. Nonetheless, eligible Canadian dividends (and revenue or positive aspects obtained inside a Tax-Free Financial savings Account (TFSA)) — can present tax-efficient revenue and assist retirees keep away from hitting that clawback threshold.
Reap the benefits of dividend revenue
Dividends from Canadian companies profit from the dividend tax credit score, which considerably reduces the efficient tax fee in your Canadian dividend revenue in comparison with curiosity revenue or RRIF withdrawals. This makes Canadian dividend shares an important a part of any OAS-conscious retirement technique. Even higher, dividends, pursuits, and positive aspects earned inside a TFSA are fully tax-free — they don’t rely as revenue for OAS functions in any respect.
TELUS: A dividend inventory instance
TELUS (TSX:T) is a dividend inventory worthy for retirees to take a more in-depth take a look at. As one among Canada’s Massive Three telecom suppliers, TELUS presents steady money flows and a robust observe document of returning capital to shareholders.
- Dividend yield: Presently, TELUS presents a dividend yield of roughly 7.5% — effectively above the Canadian inventory market yield of about 2.7%.
- Payout frequency: TELUS pays dividends quarterly, giving retirees common, dependable revenue.
- Dividend development: TELUS tends to extend its dividend semi-annually. Final month, it simply introduced a brand new plan, focusing on annual dividend development of 3-8% from 2026 via 2028.
- Sector stability: Excessive debt ranges and capital-intensive investments are a standard theme within the telecom sector. As effectively, the sector is confronted with growing competitors and pricing stress. That mentioned, TELUS continues to generate substantial working money flows. Moreover, it targets a long-term payout ratio that’s 60-75% of its free money circulate.
For retirees trying to construct a reliable revenue stream with out pushing their web revenue into OAS clawback territory, TELUS is a stable concept.
Strategic tricks to decrease the clawback
Use a TFSA first: In case you have extra room in your TFSA, you possibly can take into account holding some big-dividend shares like TELUS in your TFSA to maintain that revenue out of your taxable web revenue. In any other case, maintain big-dividend Canadian shares in your non-registered account to benefit from the dividend tax credit score.
Delay RRSP withdrawals. Contemplate delaying RRIF conversions till age 72, and within the meantime, draw from non-registered accounts or the TFSA.
Cut up pension revenue. In case you have a partner, pension revenue splitting can decrease one’s revenue and cut back the prospect of hitting the clawback threshold.
Restrict interest-heavy investments. Assured Funding Certificates and bond curiosity are absolutely taxable and might rapidly drive up web revenue. Favour eligible dividends as an alternative if it is sensible in your scenario.
Watch capital positive aspects. Promoting shares with massive unrealized positive aspects in a non-registered account may push you into clawback territory. Purpose to reap capital positive aspects strategically in non-registered accounts or goal these positive aspects in your TFSA.
The Silly investor takeaway
The OAS clawback is an actual threat for a lot of Canadian retirees — however with a sensible dividend technique, it may be minimized and even averted completely. Dividend shares like TELUS, when held in tax-efficient accounts, can present regular revenue with out the tax drag. By planning rigorously and making tax-smart funding selections, you possibly can defend each your OAS advantages and your retirement life-style.
