The 4% Rule and Safe Withdrawal Rates (Canada)
What the 4% rule is, where it comes from, and how to use it as a starting point for how much you can safely spend each year.
You've got a pile of retirement savings and one question: how much of it can you spend each year without running out? The 4% rule is the usual answer. You take 4% of what you've saved in the first year, you give that dollar amount a raise for inflation every year after, and your money should last about 30 years. It's an American rule of thumb, built on American market history, and it's a fair first check on whether your savings are anywhere near enough. It stops being the full answer once your money is in a registered retirement income fund, or RRIF. From age 66 the law makes you withdraw more than 4% of what's in your account each year, whether you spend it or not.
Key takeaways
- You take 4% of your savings in year one, give that dollar figure a raise for inflation each year, and expect it to last about 30 years. On $500,000 that's $20,000 in your first year, as an illustration.
- The rule comes from American research on American markets. No Canadian government body publishes a safe withdrawal rate for you to use instead.
- Your RRIF has a legal minimum you must take out each year. It's 4% of your balance at 65 and it rises every year after, so from 66 you can't run the rule inside your RRIF even if you want to.
- What you take out and what you spend are two different decisions. The minimum only settles the first one.
What does the 4% rule actually say?
You add up your retirement savings on the day you retire. In your first year you spend 4% of that total. In your second year you spend the same dollar amount plus a raise for inflation, and you keep doing that each year, whatever your investments did. Starting from $500,000, you'd take $20,000 in year one. If prices rise 2% that year, which is Canada's inflation target,6 you take $20,400 in year two. Those numbers are only an illustration.
The rule also runs backwards, and that's the version you'll probably meet first. If your own savings need to give you, say, $30,000 a year, on top of what you'll get from the Canada Pension Plan, or CPP, from Old Age Security, or OAS, and from any workplace pension, you'd need 25 times that, or $750,000. That's the same arithmetic flipped around, so when you hear "25 times your spending" and "the 4% rule", you're hearing one idea twice.
It's an American idea. An American named William Bengen published it in 1994 after testing withdrawal rates against decades of US stock and bond returns, and a 1998 paper from Trinity University, usually called the Trinity study, ran a similar test and got a similar answer. Both asked which rate would've carried you through 30 years if you'd retired in the worst starting years on record. The answer was roughly 4%. So the rule tells you what would have survived in the American past. It says nothing about your own future, or about Canada.
Is there a Canadian version?
No. You'll find plenty of Canadian articles quoting 4%, but if you go looking for a Canadian government body that publishes a safe withdrawal rate, you won't find one. The federal guidance on planning for retirement asks you to compare what you spend now with what you expect to need after you stop working, and to plan from that gap.3 There's no percentage on the page.
That leaves you borrowing a number from a market that isn't yours. The rule was built on American stocks and bonds, not on the market you're invested in. So the 4% you're working with is a rough starting point from next door.
Why you can't follow it inside a RRIF
Once your money is in a RRIF, you're no longer picking your own withdrawal rate. The government sets a minimum for you, and you're free to go over it but never under.2 Your minimum is a percentage of whatever your account holds when the year starts, and the percentage depends on your age.7
Up to 70 you take 90, subtract your age, and divide one by what's left. At 65 the answer is exactly 4%. By 66 you're at 4.17% and by 70 you're at 5%. From 71 the government switches you to a set table, and your minimum keeps rising: 5.28% at 71, 6.82% at 80, 11.92% at 90 and 20% from 95 on.1
Put dollars on it and you can feel the gap. For every $100,000 sitting in your RRIF when the year starts, your minimum at 65 is $4,000. At 80 it's $6,820. At 90 it's $11,920, and nothing stops you taking more.
The two ideas measure different things. The 4% rule gives you a fixed dollar amount, set once against your starting balance and raised for inflation. Your RRIF minimum is a fresh percentage of whatever your account holds each January, and the percentage never goes down. The year you're 65 the two can look identical, at 4% of the same balance. After that they separate, and only the minimum is enforced. The RRIF minimum guide walks you through every age on the table and what each one makes you do.
How long does your money have to last?
The rule's 30 years isn't a random number. If you start at 65, it takes you to 95. A Canadian who reaches 65 can expect 20.85 more years on average, which is 19.43 for men and 22.15 for women.4 An average is the middle of a wide spread, though, and a withdrawal rate exists for the people on the far side of it, which may well include you.
Out of 100 people who are 65 today, 88 make it to 74, 80 make it to 78, 68 make it to 82, and 36 make it to 90.4 Fifteen of them reach 95, the last year the rule was built to cover. So over a third of the people retiring alongside you are still spending at 90, and 90 is the age where your RRIF minimum is nearly 12% of the balance. Those are counts of a population. Your health, your family history and plain luck decide which group you end up in, and nobody can tell you that in advance.
What a bad first few years does to a fixed rate
The rule was built to survive a bad start, and Canada has had a few. The Toronto stock index closed 2008 at 8,987.70, down 35% from where it ended 2007. From its month-end high in May 2008 to its month-end low in February 2009 it fell 44.8%, and it took until February 2011, 38 months after the end of 2007, to get back over that level.5 Early 2020 was sharper and shorter, a 22.8% drop from January to March, with the index back past its January level by December.5 Those figures are the price index, which leaves dividends out, so if your portfolio was collecting dividends it fell a bit less than the numbers say.
If you're still working through a fall like that, it hurts on paper and then it passes, because nothing gets sold. If you've just retired and you're taking the same inflation-raised amount out every year, each withdrawal in a down market sells more of your investments at low prices, and those investments aren't there for you when the market recovers. That's the risk the American tests were built around, and 4% was the rate that carried their retirees through the worst years. The rule was built on American history, so it can't tell you how a Canadian portfolio starting in 2008 would've come through.
Inside a RRIF, the same bad year costs you more in one specific way. Your minimum comes from what your RRIF held on the first day of the year.7 If the market falls in March, the dollar amount you must take out doesn't fall with it, so you're selling a bigger share of a smaller account. Why the first years matter works through what that does to you over a decade, with the arithmetic shown.
Try it with your own savings
The quickest use of the rule is the backwards version. You work out what you'd spend in a year, you take off what CPP, OAS and a workplace pension would cover, and what's left, times 25, is your number. If that number is near what you've saved, you're in the range the rule was built for. If it's a long way off, you've learned something useful early, while you can still do something about it. When can I retire? goes through each of those pieces, and your retirement income plan shows you how the government payments and your own savings fit together.
If your savings are still in a registered retirement savings plan, or RRSP, nothing forces a withdrawal, so for now the rule is yours to use or ignore. That changes when your RRSP becomes a RRIF. Converting your RRSP to a RRIF covers when that has to happen and what you can decide before it does.
Where people actually land
Most people use the 4% rule exactly once, as a quick check on whether they've saved enough, and then stop thinking about it. Twenty-five times the gap between what they'll spend and what their pensions pay tells them whether they're close, and that's the job the rule does well.
Most people with a RRIF let the minimum decide what comes out, because they don't have a choice, and make a separate decision about what to spend. Drawing down your savings goes through what each account costs you on the way out.
People who watched a market fall in the year they retired tend to hold one or two years of spending money in cash, so a bad stretch never forces a sale at the bottom. And if your essentials are already covered by a defined benefit pension, meaning a workplace pension with a fixed monthly payment for life, the rule matters less to you, because your savings only need to cover the extras.
How much you can actually take depends on things nobody can see from here: what your pensions cover, which tax bracket a withdrawal lands you in, and how many years you're planning for. Only your RRIF minimum is certain. The bank or company that holds your RRIF works it out from your age and the balance on January 1,7 and it shows on your RRIF statement.
Common questions
Does the 4% rule work in Canada?
The rule was built on American stock and bond history, not on the market you're invested in, and no Canadian government body publishes a safe withdrawal rate for you to use instead. It's still a fair first check on whether your savings are in range, as long as you treat it as a starting point for your own numbers.
Is 4% of my RRIF the same as the 4% rule?
No. The rule takes 4% of your starting balance once, then raises that dollar amount for inflation each year. Your RRIF minimum is a fresh percentage of whatever's in the account each January 1, and the percentage rises with your age. They only match at 65.
Can I take less than the RRIF minimum in a year when markets fall?
No. You can always take more than the minimum, but never less, and the amount is fixed by your balance on January 1. A fall after that doesn't reduce what you have to take out.
Do I have to spend what the RRIF minimum makes me take out?
No. It's taxed as income in the year it comes out, but after that it's yours to keep. If you've got TFSA room it can go there, and if you haven't it can sit in an ordinary savings or investment account.
Does the 4% rule include CPP and OAS?
No. The rule only covers the money you're drawing from your own savings. Your CPP, your OAS and any workplace pension you've got are paid on top, so you'd take those off your spending first and apply the rule to what's left.
Sources
- CRAChart of prescribed factors for RRIFs. For age 70 and under the factor is one divided by 90 minus the age, which is 0.04 at 65; the all other RRIFs column gives .0528 at 71, .0682 at 80, .1192 at 90 and .2000 at 95 or older. Accessed 2026-09-04.
- CRAReceiving income from a RRIF. The carrier calculates the minimum amount based on your age at the beginning of each year, and you can withdraw more but not less than the minimum. Accessed 2026-09-04.
- FCACPlanning and saving for retirement. The page compares current spending with expected retirement spending and publishes no withdrawal rate or percentage rule. Accessed 2026-09-04.
- Statistics CanadaTable 13-10-0114-01, life expectancy and other elements of the complete life table. Life expectancy at 65 of 20.85 further years, 19.43 for men and 22.15 for women. Survivors per 100 at 65 derived from the lx column: 88 at 74, 80 at 78, 68 at 82, 36 at 90, 15 at 95. Accessed 2026-09-04.
- Statistics CanadaTable 10-10-0125-01, Toronto Stock Exchange statistics. S&P/TSX Composite month-end close: 13,833.06 (December 2007), 14,714.73 (May 2008), 8,987.70 (December 2008), 8,123.02 (February 2009), 14,136.50 (February 2011), 17,318.49 (January 2020), 13,378.75 (March 2020), 17,433.36 (December 2020). Price index, dividends excluded. Accessed 2026-09-04.
- Bank of CanadaMonetary policy: the inflation-control target of 2%, the midpoint of a 1% to 3% range. Accessed 2026-09-04.
- CRAMinimum amount from a RRIF. The minimum is calculated by multiplying the fair market value of the property held in the RRIF at the start of the year by a prescribed factor. Accessed 2026-09-04.
Educational, not financial advice. Figures verified against primary sources on the date shown.
See it in a story: "Counting What's Already There," where Joanne adds up what a year of retirement really costs and works backward to the number she needs. For what the rules do once your money is in a RRIF, see RRIF minimum withdrawals, or browse the whole retirement hub.