Should We Draw Down My Spouse’s RRIF Sooner?

How to draw down from a spouse’s RRIF

Hi Randall. This is exactly the sort of question best answered by a collaborative financial planner using simulation software. Your situation is complex and depends on many variables: investment returns, inflation, lifespans, tax rates, TFSA usage and future spending. A planner running simulations can show a range of possible outcomes and help you understand the trade-offs.

Because I don’t have you here to run simulations together, I’ll summarize the approach and the key findings from modeled scenarios so you can see which factors matter most and why a planner would test alternatives for you.

Scenarios a planner would test for RRIF withdrawals

For the scenarios summarized below I assumed the following baseline facts, which you provided or that tend to be common in similar cases:

• Both you and your wife are 67.
• Your wife’s combined indexed income from CPP, OAS, RRIF and pension is about $68,500 annually.
• Your own income, including OAS, is about $96,500.
• Each of you has $150,000 in TFSAs, and you continue to max TFSA contributions each year.
• After tax and TFSA contributions, your household spending is approximately $120,000 per year, indexed for inflation, projected for life to age 90 for you and 91 for your wife.

I tested inflation at 2% and investment returns at 3%, 5% and 7%. For lifespans, I modeled multiple combinations: both living to roughly 90/91, longer horizons such as 95/96 and 99/100, and an asymmetric case where your wife might die much earlier (for example 75) while you live to 90. For simplicity, these scenarios held spending constant through time so comparisons focus on the impact of withdrawals, income sources and compounding.

Each scenario began with only the required minimum RRIF withdrawal, then explored higher withdrawal paths: increasing the RRIF distribution to $45,000 and $70,000 per year, and an option that fully depletes the RRIF by your wife’s expected death. The goal was to see how drawing more now affects taxes, probate and the ultimate size of the estate.

Key takeaways from planner simulations

Overall, the simulations showed that the final tax and probate burden on the estate is sensitive to returns, withdrawals and lifespans, but not always in obvious ways. For a normal retirement where both of you live to roughly 90/91, final tax and probate as a percentage of the total estate were modest: roughly 4.8% with 3% returns, and around 10–11% at higher returns in the scenarios tested. The primary reason the percentage is not larger is that, by advanced ages, much of the portfolio often ends up in TFSAs if you continue contributing and managing withdrawals efficiently.

When both of you live much longer — for example into the late 90s — the RRIF typically shrinks relative to tax-free accounts, so the estate tax share can fall to the 3–4% range. In those long-lifespan scenarios, increasing withdrawals early often reduced the final estate but did not always reduce taxes in a meaningful way. In one modeled case, drawing enough to deplete the RRIF by age 90 improved the overall outcome slightly under a 7% return scenario; in another, higher returns combined with extended lifespans made early depletion disadvantageous.

A surprising result: the impact of losing CPP and OAS

One of the most striking results came from the asymmetric scenario where your wife dies relatively young (age 75) but you live to 90. If you both live to 90/91 and earn a 5% return, the modeled final estate was roughly $2,172,000. If your wife dies at 75 and you maintain the same $120,000 annual spending, the estate at your age 90 can shrink to about $695,000 — roughly $1.48 million less. That dramatic difference is not driven primarily by taxes, but by the permanent loss of her CPP and OAS income. Losing those lifetime income streams forces much larger withdrawals from savings to sustain the same spending, which reduces the money left to compound tax-free.

When does it make sense to deplete a RRIF?

Drawing additional money from the RRIF early can make sense if you genuinely expect a shortened life expectancy for your spouse and you want to lower the taxable estate. However, if you plan for an extended lifespan (which is prudent for retirement planning), keeping RRIF withdrawals at the minimum can be preferable because it preserves tax-advantaged growth and maximizes TFSA accumulation over time.

In practice, a blended approach often works: follow minimum withdrawals when health and longevity outlooks are normal, but consider increasing withdrawals if you face a terminal diagnosis, significant health decline, or if you are both in advanced ages and want to shift taxable assets sooner to lower estate tax exposure. A planner running personalized simulations can quantify the trade-offs specific to your balance sheet, assumptions and goals.

Further reading on retirement planning

• How to allocate a RRIF for secure income in retirement
• Is real estate the best investment for a Canadian retiree?
• What to do if you outlive your retirement savings
• How to make sure you have enough money to fund your RRIF withdrawals