Which account to draw from first in retirement, and why the order matters

Three kinds of accounts, three kinds of tax

An RRSP or RRIF withdrawal is fully taxable income in the year you take it. It also counts toward the net income used for the OAS recovery tax and for income-tested benefits such as the Guaranteed Income Supplement.

A TFSA withdrawal is not income at all. It doesn't appear on your return, it doesn't affect OAS or GIS, and the amount you take out is added back to your contribution room the following calendar year.

A non-registered account sits in between. Pulling out your original investment is not taxed, but interest, dividends and realized capital gains are, and investment income keeps arriving each year whether you spend it or not. Our guide to non-registered investing in retirement covers that in more detail.

Underneath all three sit CPP, OAS and any workplace pension. These arrive whether you need them or not and are taxable, so they form a base layer of income. The withdrawal order is really a question of how to fill the gap between that base and what you plan to spend, year after year, without paying more tax than necessary along the way.

The common withdrawal orders

There is no single official sequence. Planners and retirees tend to compare a handful of patterns, and the calculator models four of them using the same spending target each year.

• Conventional: spend non-registered money first, then RRSP/RRIF, and keep the TFSA for last.
• RRSP first: draw the RRSP or RRIF to cover spending, leaving the TFSA and non-registered money to grow.
• TFSA first: spend the TFSA, then non-registered savings, and leave the RRSP/RRIF until last.
• Bracket fill: each year, withdraw enough RRSP/RRIF money to bring taxable income up to a chosen level (here, the top of the 2026 lowest federal bracket, $58,523), then use other accounts for anything beyond that and move any surplus into the TFSA.

A worked example: Margaret in Alberta

Suppose Margaret is 64, single, lives in Alberta and plans to retire at 65. She has $600,000 in her RRSP, $120,000 in her TFSA and $150,000 in a non-registered account, and she isn't adding to any of them. Her CPP estimate at 65 is $1,250 a month, she takes OAS at 65, and she wants $56,000 a year after tax in today's dollars.

The illustration assumes 6% returns before retirement and 5% during retirement, with 2% inflation. These are planning inputs, not forecasts. All four orders carry her to 95 without running short, so the comparison is about tax and what remains.

Why the lowest tax isn't always the largest estate

Drawing the RRSP first produced the smallest lifetime tax bill in Margaret's case, about $40,500 less than the conventional order. Yet it left roughly $48,100 less after tax at 95. Spending the RRSP early means her TFSA and non-registered money keep growing, but the non-registered portion loses part of its return to tax each year, and the RRSP stops compounding without tax.

The conventional order did the reverse. In the first year, Margaret draws $33,038 from her non-registered account and pays only $1,188 in tax. But by 70 she is drawing $43,256 a year from the RRSP and paying $11,406 in tax, and that higher-tax pattern continues for the rest of the plan.

Bracket fill landed near the middle on both measures. Each year she draws $34,373 from the RRSP, which, together with $15,000 of CPP and $9,150 of OAS, brings her taxable income to the $58,523 target, and her annual tax holds at $8,750 in the illustration. The table above shows how close it comes to the lowest-tax result while keeping most of the estate.

Pressure points that can change the answer

Margaret's income never came close to the 2026 OAS recovery threshold of $95,323, so none of her orders triggered the 15% recovery tax. A retiree with a larger RRSP, a workplace pension or rental income could see a very different ranking, because large forced RRIF withdrawals later in life can push income past that line. The OAS clawback guide explains how the recovery tax works.

RRIF minimums matter too. An RRSP must be converted by December 31 of the year you turn 71, and from then on a minimum percentage must come out each year, starting at 5.28% at 71 and rising with age. Orders that leave the RRSP untouched for years can produce larger minimums later. See RRIF minimum withdrawals explained for the full schedule.

Couples have extra levers. Eligible RRIF income can be split with a spouse from 65, and each partner has their own tax brackets and OAS threshold. The order that suits a single person may not suit a couple with uneven savings. Our pension income splitting guide shows how that can change the numbers.

Life rarely follows a straight line, either. A plan built around steady spending can look different after a home repair, a gift to family or a few years of strong or weak markets, so many retirees revisit the order every year or two rather than fixing it once.

The TFSA's special role

Because TFSA withdrawals are invisible to the tax system, many retirees treat the TFSA as a reserve: something to tap in a year with a large one-off expense, so that the extra spending doesn't push taxable income into a higher bracket or into the OAS recovery range.

Spending the TFSA first gives up that flexibility early. In Margaret's case it also produced the second-highest lifetime tax, because her RRSP grew untouched and later withdrawals were larger. Our TFSA in retirement guide looks at the TFSA's place in a drawdown plan.

Testing your own order

The withdrawal order tool runs these four patterns on your own balances, province and spending, and shows lifetime tax, OAS recovery tax and the after-tax estate side by side. The retirement tax estimator can show what a single year's income might cost.

Keep the model's simplifications in mind. Tax estimates use 2026 federal and provincial brackets and basic personal amounts but leave out credits such as the age amount and pension income amount. Estimates for Quebec exclude Quebec provincial income tax, and QPP replaces CPP there. The estate figure assumes any remaining RRSP or RRIF is taxed in the final year with no spousal rollover.

Before acting, it's worth confirming the tax rules that apply to your situation with the CRA, and reviewing how withdrawals interact with any benefits you receive. For a broader view of how one-time and recurring income fit together, see retirement tax planning in Canada.