The tax tip all retirees should know

Watch out for the dreaded Old Age Security clawback

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From the April 2016 issue of the magazine.

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(Lee Edwards/Getty Images)

One useful year-round tax tip for retirees that’s always worth repeating—and often ignored!—is to watch out for the dreaded Old Age Security clawback once you starting collecting government benefits. The more your income exceeds $72,809 in 2015, the smaller your OAS cheque will be (earn more than $118,055 and you won’t get a payment at all). This is important to keep in mind because if you want to avoid that clawback you may have to do some careful tax planning, such as removing money from an RRSP earlier than later. Many people make the mistake of keeping their savings in an RRSP until they have to convert to a RRIF starting at age 71. Once that happens, forced annual withdrawals from the RRIF could end up pushing you into a higher tax bracket.

The bottom line: You can save thousands of dollars in OAS payments—and possibly income tax—with a savvy RRSP withdrawal strategy.

More tax tips here.

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