John Hughie
Despite growing financial pressures, Canadians plan to spend an average of $3,825 on summer vacations in 2025, according to a recent BMO survey. Remarkably, nearly 80% of Canadians are sticking with their travel plans, even with inflation and the rising cost of living.
While travel brings joy and mental wellness, older Canadians collecting Old Age Security (OAS) must keep a close eye on their finances. The Canada Revenue Agency (CRA) has raised specific red flags that could put retirement benefits at risk.
Top CRA Red Flags That Could Affect OAS Pensioners
1. Underestimating Total Retirement Income
The first critical issue is underreporting or overlooking investment income. While receiving income from sources like the Canada Pension Plan (CPP), private pensions, and capital gains is beneficial, it could push your total annual income beyond the OAS clawback threshold—which is set at $90,997 for 2025.
Many retirees track only their base pensions and neglect portfolio gains or dividends, especially when using extra funds for travel expenses. That vacation budget of $3,825 may seem small until added on top of other income streams, potentially triggering OAS repayments.
2. Unreported Income from Investment Tax Slips
Another significant warning sign is failing to report all tax slips, particularly for those with dividend-paying stocks held in non-registered accounts. If you’ve changed brokerages or transferred funds mid-year, you might miss some slips entirely.
The CRA’s advanced tracking system now automatically cross-checks slips with reported income. Even minor omissions can lead to reassessments, interest charges, or penalties. This is especially common with dividend investors who hold multiple stocks across platforms.
3. Excess Withdrawals from Registered Accounts
Many retirees are now withdrawing more aggressively from their Registered Retirement Savings Plans (RRSPs) due to inflation. But these withdrawals, when combined with pensions and other income, can accidentally bump you into a higher tax bracket or trigger OAS clawbacks.
Using RRSP funds to cover summer trips or large expenses may seem harmless, but it could lead to unexpected tax consequences. It’s vital to review and adjust your withdrawal strategy annually.
Hydro One: Reliable, but Handle with Care
One top choice for retirees is Hydro One (TSX:H), known for its steady 2.7% yield and regulated business model. In Q1 2025, Hydro One reported:
- Earnings: $300 million (or $0.50/share)
- Revenue: $2.1 billion
- Dividend: Raised to $0.33 per share quarterly
A $15,000 investment in Hydro One could generate around $404 annually in dividends. But while this passive income is helpful, it also adds to your total taxable income.
The key takeaway? Enjoy quality dividend stocks, but understand their tax implications to avoid disrupting your OAS benefits.
Hydro One Investment Snapshot
| Company | Recent Price | Shares Owned | Annual Dividend | Total Dividend Payout | Payment Frequency | Total Investment |
|---|---|---|---|---|---|---|
| H | $49.25 | 304 | $1.33 | $404.32 | Quarterly | $14,977.00 |
While 62% of Canadians plan to spend more or match last year’s vacation budget, this enthusiasm has consequences. About 32% are dipping into long-term savings, and 46% are cutting other expenses to fund their trips. For OAS pensioners, these financial habits could lead to CRA scrutiny, higher taxes, or lost benefits.
To stay secure, combine smart investing with strategic tax planning. Monitor your total income, organize your tax slips, and manage your withdrawals wisely. You can enjoy travel and financial freedom—just make sure you’re not unintentionally putting your retirement benefits at risk.
FAQs
What is the 2025 OAS clawback threshold?
The OAS clawback threshold for 2025 is $90,997. If your net income exceeds this amount, you may need to repay part or all of your OAS pension.
How can dividend income affect my OAS payments?
Dividend income adds to your taxable income, which can push you over the OAS clawback limit, reducing your monthly pension.
What’s the risk of missing a tax slip from my investments?
Missing a T-slip may trigger a CRA reassessment, including interest charges or penalties. The CRA’s automated system cross-verifies all reported income.
