When and How to Withdraw From Your Retirement Savings

Withdrawing from savings in retirement

Hi Mary. I hope you and your husband are both doing well. I can relate to parts of your situation: my partner also receives CPP disability and long-term disability benefits. It’s common to overlook that CPP includes a disability component as well as a retirement pension. Based on your CPP estimate, you may receive a taxable CPP disability amount roughly in the same range as mine.

To answer your question about RRSP and RRIF withdrawal strategies, I modeled your finances under several scenarios so you can see the likely outcomes in dollars. The models assume an initial annual retirement spending goal of $75,000, inflation indexing at 2% per year, investment returns of 5% per year, and real estate growth of 3% per year. Each scenario shows different trade-offs between building household wealth and preserving an estate for heirs or charity.

Modelling withdrawal strategies for retirement

I prepared four models, each adding a different approach to when and how you withdraw from registered accounts. The models illustrate how timing of RRSP/RRIF withdrawals, use of TFSA room, and delaying government benefits affect long‑term wealth and estate value. Brief descriptions of the models follow:

1. Base plan: Delay RRSP-to-RRIF withdrawals until the mandatory conversion age and thereafter take only the minimum required RRIF payments. Use TFSA savings to cover any income shortfall between now and age 91.
2. Strategy 1: Mary begins taking $35,000 per year from a RRIF now (indexed to inflation) and your husband starts $10,000 per year indexed at age 65.
3. Strategy 2: Any surplus after your planned spending is reinvested into TFSAs (and then into non-registered accounts as TFSA room permits) to reduce future estate taxes.
4. Strategy 3: Use RRIF bridging (temporary increased withdrawals) to delay taking CPP and OAS until age 70, capturing higher government benefits later.

Model	Wealth advantage of base plan over strategic plan	Estate advantage of strategic plan over base plan
Strategy 1: RRIF early	$180,000	$150,000
Strategy 2: Add surplus to TFSA	$110,000	$330,000
Strategy 3: CPP & OAS @ age 70	$65,000	$420,000

The table summarizes the trade-offs. If your primary objective is to maximize household wealth, the base plan—delaying RRIF withdrawals—tends to perform best because it defers taxable withdrawals and allows money to compound in registered accounts. If your priority is to leave a larger estate, the strategic approaches that withdraw earlier or shift funds into TFSAs produce greater estate value, despite sometimes reducing overall household wealth.

Think about your goals: are you focused on wealth accumulation for retirement spending, or do you prioritize estate preservation for heirs or charity? If you have no dependents and plan to leave assets to charity, the base plan often offers the best balance of wealth growth and a large terminal value.

How different retirement income strategies play out

Below is a plain-language explanation of how each scenario affects cash flow, taxes, and long-term outcomes so you can match strategy to goals.

Base plan

The base plan delays most RRSP-to-RRIF withdrawals and only takes the legally required minimums once a RRIF is established. Because RRSP/RRIF withdrawals are fully taxable as income, delaying withdrawals reduces the amount withdrawn now and lets more capital compound tax‑deferred. That is why this approach often produces the largest household wealth over time.

However, because you leave more in registered accounts, the taxable value of the estate can be high. In the model, following only minimum RRIF withdrawals resulted in a sizeable RRIF balance at advanced ages, which can trigger higher tax liabilities on death. So the base plan boosts wealth but may not maximize the amount heirs ultimately receive after tax.

Strategy 1

Withdrawing earlier from RRIFs shifts some tax burden from the estate to your living years. That reduces the taxable balance remaining at death and can increase after‑tax estate value. Early RRIF withdrawals may also help manage exposure to benefit clawbacks in some situations, though your specific case does not indicate an OAS clawback risk.

If you plan to draw regularly from RRSPs, convert to a RRIF when you start systematic withdrawals—this gives more control over withholding and allows pension income splitting and possible pension tax credits once you reach age 65. Note that increased income from RRIF withdrawals plus CPP disability benefits could affect eligibility for caregiver or other credits claimed by your spouse.

Strategy 2

Reinvesting any surplus income into TFSAs builds a tax-free pool that can be withdrawn later without adding to taxable income. In the model, reinvesting excess cashflow into TFSAs and, as needed, non-registered accounts, created a larger after‑tax estate even though total household wealth was somewhat lower. TFSAs are especially powerful for estate planning because their withdrawals are not counted as taxable income.

Strategy 3

RRIF bridging means accepting larger withdrawals early to fund living expenses so you can delay CPP and OAS until age 70. Delaying those government benefits increases the lifetime level of CPP and OAS you’ll receive, which can be particularly advantageous if you expect to live many years. In the model, bridging came closest to the base plan’s wealth result while improving estate outcomes, because the higher later government income offsets earlier withdrawals.

Mary, there is no single correct RRIF strategy for everyone. The right choice depends on your expected spending, life expectancy, desire to leave an estate, and tax preferences. Start by clarifying your retirement spending needs and priorities, then use modeling or a planner to test strategies that align with those goals.

Read more about retirement planning:

• Why “unretirement” may be the fate of many Canadians
• How RRIF withdrawals work when you have multiple registered accounts
• CPP payment dates and key information about the Canada Pension Plan
• Considerations for dividend stocks and income generation in retirement