What to Do With Money After Retirement in Canada: Withdrawal Order, Tax and the TFSA

Retirement turns saving into spending. Which account you draw from each year changes the tax you pay over your whole retirement and, at the edges, how much OAS and GIS you keep. This page covers how each income source is treated, a common order of withdrawals, drawing an RRSP down before 71, and retiring without a workplace pension. It is part of the retirement income hub.

How each income source is treated

Income earned in a TFSA and TFSA withdrawals don't reduce federal benefits such as OAS, GIS and EI, or credits such as the Canada child benefit, the Canada workers benefit and the Canada Groceries and Essentials Benefit (formerly the GST/HST credit). If your net world income is above the threshold ($93,454 of 2025 income), you repay 15% of the amount above it as recovery tax, taken from the OAS payments for the July 2026 to June 2027 period; the pension is fully recovered at about $152,062 (under 75) or $157,923 (75 and over).

A common order of withdrawals

There is no single right order; it depends on your tax rate now and later, the size of each account, and whether you may qualify for the GIS. A common pattern:

1. RRIF minimums each year once the RRSP has been converted; they can’t be skipped.
2. RRSP or RRIF withdrawals above the minimum in lower-income years, often between retiring and the start of CPP and OAS, to use up lower tax brackets.
3. Non-registered savings, where only half of a capital gain is taxable.
4. The TFSA as a flexible reserve for large or one-time expenses, since withdrawals don’t add to income.

People who expect to receive the GIS often do it differently: RRSP and RRIF withdrawals count as income for the GIS, which is based on the previous year’s income, so some draw down RRSPs in the years before the GIS starts (RRSP withdrawals before 65 and the GIS).

Federal tax brackets for 2026 (provincial tax is added on top):

The basic personal amount, the age amount and the pension income amount reduce the tax on the first part of income; reducing taxes in retirement has the details.

Drawing down an RRSP before 71

An RRSP must mature by December 31 of the year you turn 71: by then you convert it to a RRIF, buy an annuity, or withdraw it as taxable income (or combine these). From the year after you open a RRIF, you must withdraw at least the year's minimum: the January 1 balance times a factor for your age at the start of the year (or your spouse's age, if you choose), which is 1 ÷ (90 − age) up to 70 and CRA's prescribed factor from 71; you can always take more.

A large RRSP left untouched until then produces large minimums, which can push income into higher brackets and into the OAS recovery tax. Withdrawing some of it earlier, in lower-income years, spreads the tax out; this is sometimes called an RRSP meltdown.

Money withdrawn but not spent can go into a TFSA if you have room; A withdrawal is added back to your TFSA contribution room on January 1 of the following year, not right away, so putting it back sooner uses other unused room.

How CPP and OAS shrink the savings needed

Guaranteed income reduces what your savings must provide. At a 4% withdrawal rate, each $1,000 a year of CPP, OAS or pension income stands in for about $25,000 of savings.

These targets are before tax; withdrawals from an RRSP or RRIF are taxable and TFSA withdrawals are not.

Couples

• Pension income splitting. You can allocate up to 50% of your eligible pension income to your spouse or common-law partner with a joint election on Form T1032 filed with both returns, if you were both Canadian residents on December 31 and were not living apart because of a relationship breakdown for 90 days or more including December 31; RRIF (including LIF) and RRSP annuity payments count only if you are 65 or older at the end of the year (or received them because your spouse died), and OAS and CPP/QPP never count. CPP is shared through a separate program, CPP pension sharing.
• A younger spouse’s age. The RRIF minimum can be based on a younger spouse’s age, which lowers it.
• At death. Only a spouse or common-law partner can be a RRIF's successor annuitant: named in the RRIF contract or the will, they take over the RRIF and its payments; if not named, they can still become the successor if the legal representative consents and the carrier agrees. Only a spouse or common-law partner can be named successor holder (Quebec doesn't recognize the designation, except for TFSA annuity contracts); they become the new holder of the same TFSA, which stays tax-free, without using their own contribution room. Avoiding probate on registered accounts covers beneficiary designations.

Inflation

CPP rises with the cost of living each January and OAS each quarter, so the guaranteed part of your income keeps its value. Savings held entirely in cash or fixed-rate GICs can lose purchasing power over a long retirement; asset allocation by age covers how retirees usually mix stocks and bonds.

Related guides

• Retirement income hub, the retirement income floor and average retirement income
• Investments for retirees
• RRIF withdrawal rules, the RRIF calculator and when to convert an RRSP to a RRIF
• OAS clawback and how much you can earn on the GIS
• How much do I need to retire?