Which Accounts Should You Withdraw From First in Retirement?

Donna — If you and your husband are at the tail end of the Baby Boomer generation, you’re likely in your early 60s and thinking about how to manage the next couple of decades. That’s a sensible place to start: you probably want to enjoy an active, secure retirement without worrying that you’ve outlived your savings.

As a financial planner, I’m often asked, “What is the most tax-efficient sequence to withdraw from my accounts?” My first response is to question whether making tax efficiency the central focus is the right priority. In practice, the “best” long-term withdrawal order is rarely universal. Results depend heavily on assumptions about investment returns, the mix of income types (interest, dividends, capital gains), turnover, and future tax rules. Small changes in those assumptions can create very different conclusions, which explains why articles and calculators sometimes contradict one another.

I have tested many withdrawal approaches — RRSP/RRIF-first, non-registered-first, blends, depleting RRIFs by a certain age, using dividends from a holding company, integrating TFSA withdrawals and more. In most modeled scenarios over a 25–30 year retirement horizon, the differences to the estate are often minor. There are exceptions, but they are just that: occasional cases driven by specific circumstances.

Think spending, not decumulation

Rather than fixating on “decumulation” — which centers the conversation on the accounts and taxes — start with spending. What do you want to do with your time and money in the years ahead? Would you prefer to look back and say, “I was extremely tax-efficient,” or “I lived well, travelled, helped family, and enjoyed my life”? Too many retirees limit themselves unnecessarily in the name of tax efficiency and then miss out on experiences they value.

Begin by setting short-term goals. You can’t reliably predict 20 years ahead, so focus on this year and the next few years. What would make this a great year for you? How much will that cost? If you aren’t sure what you’re currently spending, prepare an expense sheet. Itemize recurring costs and discretionary plans: travel, renovations, vehicle replacements, health-related expenses, gifts, charitable giving, and unexpected items. Knowing your spending brings clarity to what withdrawal plan you need.

A qualified financial planner with good projection software can be invaluable here. That software can model your income sources and expenses over time so you can see whether your current assets and income will support the lifestyle you want, or whether adjustments are needed. This exercise helps shift the focus from abstract withdrawal rules to a concrete, sustainable spending plan.

Now do the math

After you create a realistic spending plan, test different withdrawal strategies against it. The order and timing of withdrawals should be driven by the amounts and timing of your spending, not the other way around. When you detail spending needs — including large, one-time expenses — you can see how withdrawals from RRIFs, RRSPs, non-registered accounts, and TFSAs interact with your taxable income each year.

At the start of each year, estimate predictable taxable income: CPP, OAS, RRIF minimums, pensions, dividends and any earned income. Identify any income gap between those sources and your planned spending. Then choose withdrawals that fill that gap in the most tax-efficient way for that specific year. Repeat this process annually: what’s optimal in one year may not be ideal the next, and that flexibility is important.

When you model these scenarios — ideally with a planner and software — you’ll often find that the withdrawal order matters less than you might expect. The key benefit of using good planning tools is the confidence they provide. Revisiting projections annually helps you stay on track, adjust for life changes, and spend with assurance rather than anxiety about running out of money or overpaying tax.

Developing a meaningful spending plan is often the hardest and most valuable part of retirement planning. Once you have it, the withdrawal strategy becomes a series of calculations that can be updated yearly. That iterative process allows you to enjoy your retirement while remaining tax-aware and financially secure.

Read more Ask a Planner columns:

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• Which types of pension income can be split with your spouse?
• A parents’ guide to home down payment gifts and loans
• Is now the time for retirees to sell stocks and buy GICs?