Which Account Should I Withdraw From First in Retirement?
The instinct is to spend taxable money first and let the sheltered accounts grow. That is often the wrong order in Canada, because a large RRIF forces rising withdrawals later, at ages when other income is also arriving and the recovery tax has begun.
- The answer:: There is no fixed order. The question is which years have the lowest marginal rate, and those are usually between retiring and starting benefits.
- The trap:: Leaving the RRSP untouched until 71. The balance is then largest exactly when the minimum schedule, CPP, OAS and the recovery tax all arrive together.
- The recommendation:: Use the gap years to draw registered income deliberately at a low rate, and keep TFSA room for later when income is being managed.
Where the AI summary above gets this wrong
"Spend your non-registered money first and leave your RRSP to grow tax-free as long as possible."
That's surface-true. Here's what it misses:
- The shelter is not free later — Everything in an RRSP is taxable on the way out. Growing it larger grows the eventual tax, and the minimum schedule removes your control over the timing.
- The cheapest years come early — Between retiring and starting CPP and OAS, marginal rates are often at their lowest for the whole retirement. Those years are wasted if nothing registered is withdrawn.
- TFSA order matters too — TFSA withdrawals do not count for the recovery tax or GIS, which makes them most valuable later rather than first.
01 Why the default order misleads
The instinct to preserve tax shelter is sound in accumulation and misleading in decumulation. Everything inside an RRSP or RRIF is taxable when withdrawn, so a larger balance is a larger future tax bill, not a larger gift.
The shelter also comes with a schedule. Once converted, the prescribed minimum forces withdrawals that rise with age, so postponing the problem eventually removes your ability to manage it.
Source: RRSPs and other registered plans for retirement (T4040)
02 Where the cheap years are
For most people the lowest marginal rates of an entire retirement fall between the day they stop working and the day CPP and OAS begin. Income is low, benefits have not started, and the recovery tax is not in play.
Drawing registered income deliberately during those years — even where it is not needed for spending — moves money out at a rate that will never be available again. The alternative is taking it later alongside everything else.
Shows: the OAS recovery tax at your net income, given the threshold and recovery rate you enter. Ignores: the second threshold at which OAS is fully recovered, provincial tax, and the one-year lag before recovery applies.
Source: RRSPs and other registered plans for retirement (T4040)
03 Where the TFSA belongs
A TFSA withdrawal does not enter net income, so it does not affect the recovery tax, GIS or the age amount. That makes it most valuable in the years when income is being actively managed, which is late rather than early.
Spending the TFSA first inverts that. The account that could have absorbed a large one-off expense without touching any threshold is gone by the time the thresholds start to matter.
The order also has to survive a death, when the survivor's brackets halve and the same withdrawals cost more. A plan that drains the non-registered account first and leaves a large RRIF behind hands the survivor the worst version of every threshold, which is an argument for drawing registered money earlier than instinct suggests.
Almost everyone arrives at retirement intending to leave the RRSP alone as long as possible, and for a large minority that instinct costs them a six-figure sum in lifetime tax. The years between retiring and starting benefits are the cheapest you will ever have, and spending them without touching registered money is the most common expensive mistake in Canadian decumulation.
FAQ
Should I spend non-registered money first?
Not automatically. Everything in an RRSP is taxable on withdrawal, so leaving it to grow grows the eventual tax bill, and the RRIF minimum eventually removes your control over when it comes out.
When are my lowest tax years likely to be?
Usually between the day you stop working and the day CPP and OAS begin. Income is low, benefits have not started, and the recovery tax is not yet in play, which makes those years the cheapest to withdraw registered income.
Should I save the TFSA for last?
Generally yes. TFSA withdrawals do not enter net income, so they do not affect the recovery tax, GIS or the age amount, which makes them most useful in the years when income is being managed against thresholds.
Sources
Regulator references
- RRSPs and other registered plans for retirement (T4040) · Canada Revenue Agency · 2025The prescribed RRIF minimum withdrawal factors and the rules for registered plans.Last verified: 2026-09-07
- Tax-Free Savings Account contributions · Canada Revenue Agency · 2025TFSA contribution room, carry-forward, and the rule on re-contributing withdrawals.Last verified: 2026-09-07
Calculator unit tests · the assertions this page's worked example is checked against, and their last result
Changelog
- 2026-09-07 — initial publish (new format)
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Jordan Reeves
Founder of Talk Through Wealth. A software engineer for over a decade before turning to retirement planning, Jordan built the projection engine after watching family members get fragmented, country-by-country advice that never reconciled. He writes about retirement the way the engine computes it: month-by-month, lifetime-long, and skeptical of any rule of thumb that hasn't been run through the math.