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Which Account to Take Money From First in Retirement (Canada)

There's no fixed order in Canada, so the real decision is how much comes out of your RRSP or RRIF each year, and where the rest comes from.

By Nate Sorensen Reviewed for accuracyUpdated Oct 202613 min read
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You've got money in three places, and now you have to start taking it out. There's no fixed order in Canada. What you're really deciding is how much comes out of your RRSP or RRIF each year, because that's the only one of the three that counts as income. The rest of what you need can come from the TFSA, where a withdrawal counts as nothing at all. Most years the right answer is some of both.

Key takeaways

  • You're not picking one account. You're setting a yearly number for your RRSP or RRIF and topping it up from somewhere else.
  • Every dollar you take from an RRSP or a RRIF counts as income. The same dollar out of a TFSA counts as nothing.
  • The year you turn 71 is a real deadline, and it ends on December 31. After that, the minimum withdrawal is set for you.
  • Leaving your RRSP alone until 71 doesn't save you the tax. You pay the same tax in fewer, bigger years.
  • A TFSA is most useful in the years you need extra money without your income going up.

Which account should you take from first?

None of them on its own. In most years you'll take money from two accounts rather than one, and the split between them is the decision you're actually making.

Two Canadian rules matter more here than any rule of thumb. The first is a deadline. You have to deal with a registered retirement savings plan, or RRSP, in the year you turn 71, and after that you no longer set the size of each withdrawal.1 The second is that as your income rises you pass points where the next dollar costs you more than its tax rate, because you start losing credits and benefits at the same time.

If you've spent thirty years being told not to touch the RRSP, spending it now feels wrong. It's the same money whenever you take it. You're choosing which years you pay the tax in, and you've got far more say over that before 71 than after.

What happens when money comes out of each one

The three accounts behave completely differently the moment you take money out of them.

What each account does when you take money out
How an RRSP or RRIF, a TFSA and a regular investment account differ when you withdrawThree columns compared on three questions. Money out of an RRSP or RRIF is taxed in full, counts as income, and the room never comes back. Money out of a TFSA is not taxed at all, counts as no income, and the room returns on January 1 of the next year. Money out of a regular investment account is taxed on half the gain, only that taxed part counts as income, and there is no limit on paying money back in.RRSP or RRIFTFSARegular accountTaxed when it comes out?All of itNone of itHalf the gainCounts as income?Yes, all of itNoThe taxed partCan you put it back?NoNext January 1Any time
The same $1,000, from three different places, on your tax return.
Source CRA: tax rates on withdrawals; What is a TFSA; Withdrawing from a TFSA; Guide T4037, Capital Gains. Accessed 2026-09-04.

Your RRSP or RRIF. Every dollar you take is added to your income for the year. When you pull money out of an RRSP, the bank holds back tax at a rate that depends on how much you withdraw. It's 10% on amounts up to $5,000, 20% on amounts over $5,000 up to and including $15,000, and 30% on amounts over $15,000, with lower federal rates in Quebec.2 That's a deposit against the bill, not the bill itself. If your real rate is higher, you pay the difference the following April.

Your tax-free savings account, or TFSA. Nothing you take out is taxed, and nothing you take out counts as income. A withdrawal doesn't change the Guaranteed Income Supplement, Old Age Security, or any federal credit tested against your income.3 The room does come back, though only on the January 1 that follows, so a withdrawal in January leaves you waiting almost twelve months to replace it.4

Your regular investment account. You're taxed only on what it grew, and only half of a gain reaches your income.5 If you paid $8,000 for something and sold it for $12,000, $2,000 goes on your return, not $12,000. That usually makes it the cheapest place to raise a big lump sum quickly. Dividends are the exception. A Canadian eligible dividend lands on your return at 138% of what you were actually paid. If you're paid $1,000 of dividends, $1,380 goes onto the income every one of these lines is measured against, and the credit that follows doesn't give you any of it back.6 How dividends are taxed covers why.

How much should you take from the RRIF this year?

Enough to use up the low-tax room you've got, and not so much that you cross one of the lines that costs you extra. None of those lines shows up as a tax rate, which is why you can walk over one without noticing.

The points where extra income starts costing you more
Three income points at which credits and benefits start to fall awayA scale of net income for the year running from zero to about 110 thousand dollars. At the low end, anyone receiving the Guaranteed Income Supplement faces the opposite arithmetic, because taxable income reduces a tax-free benefit. At 45,522 dollars the federal age amount begins to shrink. At 93,454 dollars Old Age Security starts being repaid at 15 cents on every extra dollar. At 105,709 dollars the age amount is gone completely.on the Supplement, thearithmetic runs the other wayage amount starts to shrink$45,522age amount gone$105,709$93,454Old Age Security startscoming back at 15 centsyour net income for the year, rising to the right
How your net income for the year changes what you keep. Both dollar figures are federal, for the 2025 tax year. The clawback is tested on your net income with a few adjustments, and the Supplement on a different figure again.
Source CRA: Line 30100, Age amount. Service Canada: Repayment of Old Age Security pension. Accessed 2026-09-04.

Start with the minimum the RRIF owes you, because you can't go under it. Then add to it for every one of these that applies:

  1. You're under the age amount line. If you're 65 or older and your net income is $45,522 or less, you can claim the whole federal age amount, which is $9,028. Above that it shrinks, and by $105,709 you can't claim any of it.7
  2. You've got a cheap year in front of you. The years between the day you stop working and the day the pensions start are usually the lowest-income years you'll ever have. Filling one with RRIF income costs less than the same money will cost you at 75.
  3. Your RRIF is big enough to force your hand later. If the minimum at 71 would hand you more than you need, taking some now lowers the balance that minimum gets worked out on.

Then look at where you'd stop. There are two lines that cost more than their tax rate, and knowing where you sit against them changes your number.

  • The Supplement, if you're getting it. It's tax free, and it falls away as your other income rises, so RRIF money costs you far more at this income level than any tax rate suggests. TFSA money doesn't touch it.3 The ceiling moves every quarter, so the number you want is the one Service Canada is publishing today, not one you've read somewhere.
  • $93,454, where Old Age Security starts coming back. Past it you repay 15 cents of the pension for every extra dollar of net income, and you feel it later rather than now. The first year you cross the line it arrives as a bill on your return. After that it comes off your monthly cheque from the following July.8 Stacked on tax, a dollar over that line costs you about 41 cents if you're in Alberta's middle bracket, so you're keeping roughly 59.9 That $93,454 is the line for 2025 income and it moves every year, so check the one for the year you're deciding about. The clawback guide works it through.

Put your own figures into the Old Age Security clawback checker and it'll show how much room is left this year before that second line starts to bite.

The deadline at 71 that decides this for you

An RRSP doesn't run forever. In the year you turn 71, by December 31, it's got to move into a registered retirement income fund, or RRIF, buy an annuity, or come out as cash.1 Almost everyone picks the RRIF, and if you transfer it directly it won't cost you anything at the time.

From the year after the RRIF is set up, it has to pay you a minimum every year, so there's nothing forced in the year you convert. You can take more than the minimum, and you can't take less. The minimum is the balance on January 1 times a percentage set by your age, and at 71 that percentage is 5.28%.10 If you're holding $400,000, that's $21,120 landing on your tax return whether you wanted it or not.

Before 71 the percentage is smaller, and you work it out as 1 divided by 90 minus your age, so at 65 it's 4.00%.10 That's the argument for moving part of the RRSP over before you have to. You get a smaller required payment, on your own timing, in the years your income is lowest. You'll find the whole table, and what it forces, in RRIF minimum withdrawals, and you can work out your own with the RRIF minimum calculator.

A partner, a pension, and the lines you're near

If you have a spouse or partner. From the year you turn 65, you can put up to half of what counts as eligible pension income onto their return, and RRIF payments count as eligible once you're 65. Old Age Security and the Canada Pension Plan don't.11 Two people each paying tax on a moderate income pay less between them than one person paying on the whole amount, so the two of you can usually take more out of a RRIF than one of you could alone.

If you're turning 65. The federal pension income amount is $2,000, and you need eligible pension income before you can claim any of it. A RRIF payment counts. An ordinary RRSP withdrawal doesn't.12 If even a small part of the RRSP is sitting in a RRIF by 65, you can claim it.

If your income is modest. At this income level it works the other way round. The Supplement is worth more to you than a deduction ever was, and TFSA money is the only money you can take without touching it.

If you're still working part-time. You pay tax on what you earn first, so a RRIF withdrawal starts from a higher point than you're probably picturing.

Where you live. Your province sets its own brackets and its own age amount, and both of them move the answer. How the brackets work by province covers that part.

Some of this you can't settle without your own paperwork. The minimum depends on what the RRIF is worth on January 1, and what a withdrawal costs comes down to your province and everything else that lands on your return. Your RRIF statement carries the balance. Your notice of assessment from last year carries the figure the clawback is measured against, which is your net income before adjustments, on line 23400.

The same $50,000, funded two ways

Say you're 65 and you need $50,000 a year to live on. CPP and Old Age Security bring in $20,000 of it, so $30,000 a year has to come out of savings. You're holding $500,000 in an RRSP and $210,000 in a TFSA. They're round numbers and there's no growth in them, so they're illustrative rather than a forecast.

If you spend the TFSA. You take the $30,000 a year from it and leave the RRSP alone. Your income stays at $20,000 and your tax bill's tiny for seven years. Then the TFSA is empty. You convert the RRSP at the deadline in the year you turn 71, still worth the full $500,000, and because nothing is forced in the year you convert, your first minimum lands at 72. It's $27,000. Add the pensions and you're showing $47,000 of income every year from then on, with nothing tax free left to soften it.

If you spend the RRIF. You convert at 65 and take the $30,000 from there instead. Your income is $50,000 and you pay real tax on it for seven years. By 72 the RRIF is down to $290,000, so the same percentage gives you a minimum of $15,660, and the $210,000 TFSA hasn't been touched.

What the RRIF has to pay out at 72, after seven years of each
The forced RRIF minimum at 72 under two withdrawal ordersSpending the TFSA first arrives at 72 with the full 500 thousand dollar RRSP and a required minimum of 27,000 dollars, and an empty TFSA. Spending the RRIF first arrives with 290 thousand dollars and a required minimum of 15,660 dollars, and the 210 thousand dollar TFSA is still there.Spent the TFSA firstRRIF worth $500,000$27,000Spent the RRIF firstRRIF worth $290,000$15,660what the RRIF must pay you in the year you turn 72
Illustrative. Both start at 65 with $500,000 in an RRSP and $210,000 in a TFSA, and take $30,000 a year of spending money, one from the TFSA and one from the RRIF. Growth is left out to keep the arithmetic visible.
Source Illustrative arithmetic on the CRA prescribed factor of 5.40% at age 72. Accessed 2026-09-04.

Those first seven years genuinely are cheaper the first way, and that isn't a trick. You'd be buying them with a bigger forced withdrawal for the rest of your life and no tax-free money left for the year the roof goes. The second way costs more in the early years. You end up with the smaller minimum at 72, and a TFSA you haven't spent.

Before you put the request in

The withholding on an RRSP withdrawal is a deposit against your bill, not the bill, and nothing at all is held back on a RRIF minimum. You still owe the tax on that minimum, so you'll want to have kept it aside.

Size matters here more than it looks. If you take $60,000 in one year instead of $20,000 across three, the top of it lands in higher rates, and it can push you over the Old Age Security line for a year. That repayment reaches you in two different ways. The first year you go over, you settle it on your return. After that it comes off your monthly pension from the following July, so a big year can find you as a smaller cheque a year later.8

And a RRIF only runs one way. You can't pay money back into it, so if you take out more than you needed, the extra has to go somewhere else.

What most people end up doing

If you've got a large RRSP and a decent TFSA, most people in your position start drawing the RRSP in their sixties rather than waiting, because the alternative is a bigger forced withdrawal through the whole of their seventies and eighties. If your income is low enough to put you near the Supplement, most people do the opposite and spend the TFSA, because a tax-free supplement beats a deduction. Couples usually take more from a RRIF than either of them would alone, because they can split it.

If the RRSP is small, this may barely matter to you. When your retirement income is going to sit well under every one of these lines all the way through, you pay much the same tax whichever account you draw on.

?

Common questions

Should I take money out of my RRSP before 71 even if I don't need it?

Plenty of people do. The year you turn 71 is your deadline to convert, and from then on a minimum comes out every year, worked out from your balance. Draw some earlier and you're left with a smaller balance, and a smaller minimum. Whether it's worth it depends on your tax rate now against the rate you expect later.

Does taking money out of my TFSA affect my Old Age Security or the Supplement?

No. What you take out of a TFSA isn't income, and a withdrawal doesn't affect your eligibility for federal benefits and credits. So it's your one way to raise cash without your income going up.

How much tax is held back when I take money from a RRIF?

Nothing on your minimum payment. On anything above the minimum, the rates match an RRSP withdrawal, and they depend on how much you take. That's 10% on amounts up to $5,000, 20% on amounts over $5,000 up to and including $15,000, and 30% on amounts over $15,000, with lower federal rates in Quebec. You still owe the tax on the minimum, it just isn't collected when you take it.

Can I put the money back if I take out too much?

Not into a RRIF, and not into an RRSP once you're past the year you turned 71. Before that, only if you've still got contribution room. Your TFSA room does come back, but only on the January 1 that follows. That's why the size of a withdrawal matters more than it feels like it should.

Does it matter which province I live in?

Yes. Your province sets its own tax brackets and its own age amount, so the same withdrawal costs you a different amount depending on where you live. The federal lines, including the Old Age Security threshold, are the same wherever you live.

Sources

  1. CRAReceiving income from an RRSP. An RRSP must be converted by the end of the year you turn 71, and a RRIF minimum is payable starting the year after the RRIF is established. Accessed 2026-09-04.
  2. CRATax rates on withdrawals. The rates depend on your residency and the amount you withdraw: 10% on amounts up to $5,000, 20% on amounts over $5,000 up to and including $15,000, and 30% on amounts over $15,000, with 5%, 10% and 15% federal in Quebec. Accessed 2026-09-04.
  3. CRAWhat is a TFSA. TFSA income does not affect federal income-tested benefits and credits, and withdrawals do not affect eligibility for them. Accessed 2026-09-04.
  4. CRAWithdrawing from a TFSA. The amount withdrawn is added back as contribution room on January 1 of the following year. Accessed 2026-09-04.
  5. CRAGuide T4037, Capital Gains 2025. The inclusion rate for 2025 is 50%. Accessed 2026-09-04.
  6. CRALines 12000 and 12010, taxable amount of dividends. Eligible dividends are reported at 138% of the actual amount received; other than eligible at 115%. Accessed 2026-09-04.
  7. CRALine 30100, Age amount. Federal amount for the 2025 tax year: $9,028 where net income is $45,522 or less, and no claim at $105,709 or more. All three figures are the 2025 set and belong together. Accessed 2026-09-04.
  8. Service CanadaRepayment of Old Age Security pension. Income over $93,454 for 2025 triggers a repayment of 15% of the excess, tested on line 23400 and collected as a monthly recovery tax from the following July. Accessed 2026-09-04.
  9. EYAlberta personal tax rates, 2026. Marginal rate of 30.50% on ordinary income between $61,201 and $117,045, from which the stacked cost of a dollar over the Old Age Security threshold is calculated. Accessed 2026-09-04.
  10. CRAChart, prescribed factors. The factor is .0528 at 71 and .0540 at 72; at 70 or younger it is 1 divided by 90 minus your age. Accessed 2026-09-04.
  11. CRAPension income splitting. Up to 50% of eligible pension income may be allocated to a spouse or common-law partner; RRIF payments qualify from age 65, while Old Age Security and CPP do not. Accessed 2026-09-04.
  12. CRALine 31400, Pension income amount. The federal amount is up to $2,000, for which RRIF income qualifies. It is an amount claimed at the lowest federal rate, not $2,000 of tax saved. Accessed 2026-09-04.

Educational, not financial advice. Figures verified against primary sources on the date shown.

See it in a story: "The Question That Keeps Her Up," where Joanne retires and starts working out how savings turn into a monthly income. If you're still working out whether you've got enough at all, start with how to know if you can retire, or browse the whole retirement hub.