Which accounts to draw from first in retirement
Most retirees have money in several places: an RRSP or RRIF, a TFSA, a non-registered account, and sometimes a holding company. The order you draw them in does not change how much you have today, but it changes how much tax you pay over your lifetime, how much OAS you keep, and how much your heirs receive.
How each account is taxed
| Account | Tax when you withdraw | At death |
|---|---|---|
| RRSP / RRIF | Every dollar is income. Minimum withdrawals start the year after you open a RRIF (by 72 at the latest). | Whole balance taxed as income on the final return, unless it passes to a spouse |
| TFSA | None, and it doesn't count for the OAS clawback or the GIS. Withdrawals can be put back from the next January. | No tax on the value at death; a spouse can take it over as successor holder |
| Non-registered | Only the gain is taxed, and only half of it. Interest and dividends are taxed each year anyway. | Treated as sold: half the gain taxed, unless it passes to a spouse |
| Holding company | Capital dividends tax-free; eligible and non-eligible dividends taxed at dividend rates | Shares treated as sold; possible double tax without planning |
The usual rule of thumb, and its problem
The classic advice is to spend the non-registered account first, then the RRSP, and keep the TFSA for last. It defers tax, but it often leaves a large RRIF that you are then forced to draw in your 70s and 80s on top of CPP and OAS. That can push you into higher brackets and the OAS clawback, and whatever is left is taxed in one year at death, frequently at the top rate.
A better approach: fill the low brackets every year
- Take enough from the RRSP or RRIF each year to fill your lower tax brackets, even if you don't need all of it. Where the line falls depends on your other income; the top of the first federal bracket ($58,523 in 2026) and the OAS clawback threshold ($95,323) are common targets.
- Cover the rest of your spending from the non-registered account, where only half of any gain is taxed.
- Keep the TFSA as the last account and as a buffer for big one-off costs, so they don't add to your income. Move any money you don't spend into the TFSA each January (the 2026 limit is $7,000, plus unused room).
This smooths your taxable income over retirement instead of keeping it low early and high later. Whether it wins for you depends on your balances, returns, pensions and province, so it is worth testing with your own numbers.
When a different order makes sense
- Retiring before CPP and OAS start. Drawing mostly from the RRSP in those years uses low brackets and lets you delay CPP and OAS for larger pensions. See When to start CPP and OAS.
- Low income and the GIS. RRIF withdrawals reduce the Guaranteed Income Supplement; TFSA withdrawals do not. People who qualify for GIS often draw the TFSA before the RRSP.
- Couples. From 65 you can split RRIF income on your returns, so draw from the account that keeps both incomes even. See Retirement income splitting for couples.
- Leaving an estate. TFSA money and a principal residence pass with no income tax; a RRIF left to someone other than a spouse is fully taxed. See Tax at death and probate fees.
- A holding company. Capital dividends first; then blend eligible dividends with your personal accounts so they fill the same low brackets. See How to pay yourself from a holding company.
Try it with your numbers. Both free planners run your plan under every withdrawal order and rank them by what is left after tax for your heirs. The Auto order picks the best one for you, and the melt-down options can fill each year to a bracket line.
Open the Personal / Couple PlannerHolding Company PlannerGeneral information for planning and education, not financial, tax or legal advice.