Retirement Withdrawal Order: Which Account to Draw First
The order you withdraw from your RRSP/RRIF, TFSA, and non-registered accounts can save you tens of thousands in taxes over retirement. Here's the optimal strategy for Canadians.
$20–80K
Typical Tax Savings
Over a 20-year retirement
Age 71
RRSP must convert by
To a RRIF by Dec 31
$90,997
OAS Clawback Threshold
2024 net income threshold
$7,000
TFSA Annual Limit
2024 contribution limit
Why Withdrawal Order Matters
Each account type has different tax consequences when you withdraw money. The goal is to minimize your total lifetime tax bill by:
Drawing from taxable sources in your lowest-income years (usually early retirement, before CPP/OAS starts)
Keeping TFSA money growing tax-free as long as possible (draw it last)
Preventing your RRSP/RRIF from growing so large it pushes you into high brackets or triggers OAS clawback
Smoothing your income across all retirement years so you never spike into high tax brackets unnecessarily
Understanding Your Three Account Types
RRSP / RRIF
Every dollar withdrawn is fully taxable as regular income. No capital gains treatment — all taxed at your marginal rate. Must convert RRSP to RRIF by December 31 of the year you turn 71. Minimum annual withdrawals from RRIF begin at 5.28% at age 72.
Tax on withdrawal: Fully taxable income
Non-Registered
Only the gain above your adjusted cost base (ACB) is taxable, and only 50% of capital gains are included in income. Dividends have preferential treatment (dividend tax credit). Interest income is fully taxable — consider holding interest-bearing assets in registered accounts.
Tax on withdrawal: Only capital gains (50% inclusion)
TFSA
Withdrawals are completely tax-free — no tax regardless of how much the account has grown. Withdrawals do NOT count as income (won't affect OAS clawback, GIS eligibility, or income-tested benefits). Withdrawn amount is re-added to contribution room the following January 1.
Tax on withdrawal: Zero
The General Withdrawal Order Rule
Non-Registered Accounts
Draw from non-registered first because gains here only face capital gains tax (50% inclusion). If you have a mix of accounts, use non-registered money to live on while letting your RRSP/RRIF and TFSA continue compounding tax-sheltered.
Key note: Exception: If you have large unrealized capital gains, be mindful of your marginal rate. Spread large gains across multiple tax years.
RRSP / RRIF
Draw from RRSP/RRIF second — but the key is to start drawing BEFORE you're forced to (by age 72 minimum RRIF withdrawals) and before CPP/OAS starts. The years from retirement to age 65 (when OAS starts) are often your lowest-income years — perfect for melting down your RRSP at low tax rates.
Key note: The RRSP meltdown strategy: withdraw $20,000–50,000/year from RRSP in early retirement at the 20.5% federal+provincial rate, then deposit to TFSA. This prevents a forced massive RRIF withdrawal at age 72+ in a high bracket.
TFSA
Save TFSA for last. Since withdrawals are completely tax-free and don't affect income-tested benefits (like GIS or OAS clawback), TFSA money is most valuable in high-income years or in old age when income spikes. Use it to top up income without affecting your tax bracket.
Key note: Exception: If you're eligible for GIS (Guaranteed Income Supplement for low-income seniors), TFSA income doesn't reduce your GIS, making it especially valuable.
Real Example: Two Retirees, Same Balance, Different Tax Bills
Both retirees have $600,000 in savings at age 60. Different withdrawal strategies, dramatically different outcomes.
| Factor | Retiree A: No Strategy | Retiree B: Optimal Order |
|---|---|---|
| Age 60–65 income source | Waits, draws minimum RRIF | Melts down RRSP ($30K/year) |
| RRSP/RRIF at age 72 | $900,000+ (forced withdrawals huge) | $400,000 (manageable) |
| OAS clawback triggered? | Likely — income spikes at 72+ | No — income smoothed |
| TFSA at age 80 | $0 (drawn early) | $450,000+ (grew untouched) |
| Estimated lifetime tax paid | ~$180,000–220,000 | ~$110,000–140,000 |
| Tax savings from strategy | — | $40,000–80,000+ |
*Illustrative only. Actual savings depend on income, province, investment returns, and life expectancy.
When to Adjust the Standard Order
You have a defined benefit (DB) pension starting at 65
If your pension will push your income to $80,000+ at 65, melt down your RRSP harder in your 50s and early 60s before the pension kicks in. The pension replaces RRIF income, so you want RRIF to be smaller by then.
Your spouse has much lower income
Pension income splitting allows you to attribute up to 50% of RRIF/eligible pension income to a lower-income spouse. This can cut your combined tax bill significantly. Optimize your RRIF withdrawal size to take full advantage of income splitting.
You're eligible for GIS (Guaranteed Income Supplement)
GIS goes to low-income seniors (income below ~$21,000/year in 2024). If you have modest savings and expect low income in your 70s-80s, maximize TFSA and minimize RRIF — TFSA withdrawals don't reduce GIS, but RRIF does.
You plan to retire abroad
A move can change the tax cost of withdrawals. Compare Canadian withholding, destination-country tax and available relief for each account before changing the order. Do not treat a treaty withholding rate as your total tax rate.
Quick Reference: Account Comparison
| Account | Tax on Withdrawal | Counts as Income? | Best Use |
|---|---|---|---|
| RRSP / RRIF | 100% as regular income | Yes — affects all income tests | Draw down in low-income years before CPP/OAS/pension |
| Non-Registered | Only capital gain (50% inclusion) | Partially — capital gains count | Draw 1st — lowest-taxed for growth assets |
| TFSA | Zero | No — does not affect income | Save for last or use to prevent bracket spikes |
Related Calculators and Guides
RRSP Meltdown Strategy
The detailed guide to drawing down before 71
Retirement Income Calculator
Model your withdrawal plan
TFSA vs RRSP
Which to prioritize during accumulation
OAS Clawback Calculator
Avoid the OAS recovery tax
RRSP Calculator
Project your RRSP/RRIF balance
TFSA Calculator
Project TFSA growth to age 80+
Related Calculators
Related Articles
- RRSP Withdrawal Tax Guide
How withholding tax and RRIF minimums work
- TFSA Withdrawal Rules
Re-contribution room and optimal timing
- OAS Clawback Guide
How income from RRIF triggers the OAS recovery tax
- Pension Income Splitting
Reduce your combined tax bill with spousal strategies
- RRSP Meltdown Strategy
Systematic low-tax RRSP drawdown before RRIF age
- Can I Retire at 55?
Withdrawal order critical for 10-year CPP/OAS gap
- Can I Retire at 60?
RRSP bridge strategy for age 60 retirees
- Can I Retire at 65?
Withdrawal order when CPP + OAS begin
- Retire on $500K
Optimal withdrawal for smaller portfolios
- Retire on $1 Million
Clawback planning crucial at $1M RRIF
- Retiring in Alberta
Lowest provincial tax on RRSP withdrawals
- Retiring in Ontario
Surtax thresholds affect withdrawal sizing
Next Steps
- 1Run your personalized retirement plan
See exactly when your money runs out under each strategy
- 2Is age 65 the right time?
Model CPP + OAS + RRIF at different retirement ages