FP Answers: How do I avoid Old Age Security clawbacks due to high dividends?

financialpost.com:

By Julie Cazzin with Allan Norman

Q: My wife and I are 83 and 80, respectively, and I am losing my Old Age Security (OAS) due to dividends and my registered retirement income fund (RRIF) withdrawals. I wish when I was younger that someone had told me dividends could be a problem as a retiree. I am thinking of cashing out my RRIF this year and cashing in my stocks for index funds so I can collect my OAS pension. Does this make sense? Our tax-free savings accounts (TFSAs) are maximized, I have $600,000 in RRIFs as well as a pension of $45,000 per year, and my wife has $490,000 in a RIFF. We have non-registered investments of about $3.5 million with a dividend yield of about 3.2 per cent, and a small rental in my wife’s name with an income of $9,000 per year.

FP Answers: You are in a good spot, Tim, and it is smart to think about how to minimize your taxable income to reduce OAS clawbacks, which apply if your net income exceeds $90,997 in 2024. And you will have to repay 15 per cent of the excess over this amount to a maximum of the total amount of OAS received. Just be careful that you don’t do something that will cost you more money in the long run.

Don’t beat yourself up about dividend investing. If, when you were young, you were advised that future dividends may result in OAS clawbacks, you may not have the money you have today. Dividend investing is a comparatively easy stock selection strategy, making it popular with DIY investors. That, plus the fact that value stocks — often dividend payers — have historically outperformed growth stocks.

Today, your stocks are producing a steady flow of taxable dividends that you are reporting on your tax return. However, you must report the grossed-up (38 per cent) dividends, not