Once you reach retirement, the way you withdraw from your RRSP and TFSA accounts can save you thousands in taxes. The key strategy is to use your TFSA for withdrawals first since they're tax-free, then carefully time RRSP withdrawals to stay in a lower tax bracket. By coordinating these accounts thoughtfully, you can create a steady stream of retirement income while keeping your taxable income low and protecting government benefits like Old Age Security (OAS). Many Canadians focus entirely on how much they save, but they overlook how they'll withdraw it. The order and timing of withdrawals from different account types directly affects your tax bill, benefit eligibility, and total spendable income in retirement. Here's why it matters: TFSA withdrawals never count as taxable income RRSP withdrawals are fully taxable in the year you take them out Excessive RRSP withdrawals can push you into a higher tax bracket Large RRSP withdrawals can trigger OAS clawbacks, reducing benefits dollar-for-dollar above certain thresholds RRIF (Registered Retirement Income Fund) withdrawals are mandatory starting at age 65, which this CRA rule may apply to you if you convert your RRSP Using the wrong withdrawal strategy could cost you 10-40% more in combined federal and
Withdraw from your TFSA first because TFSA withdrawals are completely tax-free and don't count toward any income thresholds that affect taxes or government benefits. Save your RRSP/RRIF withdrawals for second, and only take what you need to keep your taxable income low.
Yes. Large RRSP or RRIF withdrawals count as taxable income and can trigger OAS clawback if your income exceeds the threshold (roughly $86,912 in 2026). This CRA rule may apply to you if you're age 65 or older and withdrawing significantly from registered accounts.
Ideally, keep your net income just below the next tax bracket or OAS clawback threshold. For 2026, staying below $86,912 helps protect OAS benefits. Use a tax calculator to model your specific province's brackets and find your optimal withdrawal amount.
You don't have to withdraw immediately at 65, but you must convert your RRSP to a RRIF by age 71. Once in a RRIF, mandatory withdrawal amounts increase each year based on your age. Planning this conversion early lets you optimize your withdrawal strategy.
Non-registered withdrawals are only partially taxable. You pay tax on capital gains (50% inclusion rate) and dividend income, but not on your original investment. This makes them more tax-efficient than full RRSP withdrawals for the same dollar amount.