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Minimizing Old Age Security (OAS) Claw Backs!

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Part of retirement planning is ensuring you get the income you need in a tax efficient manner and ensure you receive government benefits that you are entitled to. One of those government benefits is OAS and you might be wondering about claw backs. I have a lot of people ask me about this and most of them don’t understand how this works and if there is anything they can do to prevent claw backs.


For anyone born in 1957 or earlier, you will be entitled to OAS when you turn 65. So, let’s say you are now 65 and eligible for OAS, how could the claw backs affect you. First thing to keep in mind is that you can have $72,809 (2015 amount) taxable income before claw backs even start. Then for every dollar you make over this amount you only have a $0.15 claw back. It is not as bad as many people think! If you have over $117,908 taxable income you will not receive any OAS, which makes most people in this position unhappy, as they feel they are entitled to OAS.


So, what can you do?  If you want to maximize your OAS iit's all about thei type of income you receive. Simply stated you need to increase your net income and reduce your taxable income. There are a number of perfectly legal and allowable things you can do to achieve this. These include income splitting, corporate class mutual funds, reducing interest and dividend income, don’t have too much in an RRSP, and take full advantage of Tax Free Savings Accounts.


While there are more options available to you, you should seek the help of a qualified advisor, who can help you choose the best strategies for your situation. Since everyones finances are different there is no one size fits all solution.


So, if you are experiencing OAS claw backs or feel you are paying too much income tax, you should see anadvisor who can help you with retirement income and tax planning. It is never too late, but the sooner you get this done the better. The longer you wait the more complicated it becomes, BUT it is not impossible. 


Just like an accountants, lawyers, or doctors are essential professionals you need on your side, so to is a financial planner. I have rarely ever in all my years of practice seen someone who I could not make improvements to their financial situation, so at least seek a second opinion.


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