Decumulation: How to Draw Down Your Savings in Retirement

You spent thirty years putting money in. Now you have to take it out, and nobody sends you a schedule for that. Decumulation is the name for that second half, turning what you saved into a monthly amount you can live on. Two decisions do most of the work: how much you take out each year, and which account you take it from. At 71 you lose part of the first one, because your retirement savings plan has to turn into an account that pays you a minimum every year, whether you need the money or not.

Key takeaways

• How much you draw each year is your call. It turns on how long the money has to last, and on the tax you pay on every dollar you take out.
• The 4% rule stops working at 65 for money in a retirement income fund. That's the age the required withdrawal reaches 4%, and from 66 on it's always higher: 5.28% at 71, a flat 20% at 95.
• At 71 your retirement savings plan has to become an income fund. From then on it pays you a set share of its January 1 balance every year, and you can't take less than that share.
• A dollar from a tax-free account and a dollar from a taxed one aren't worth the same to you. Money out of the taxed one counts as income and shaves your Old Age Security. Money out of a tax-free savings account does neither.
• Of every 100 people who reach 65, about 68 are still here at 82 and 36 at 90. A plan that stops at 85 leaves that stretch uncovered.

How much can you take out a year without running out?

Nobody puts a ceiling on what you withdraw from your own savings, so the yearly amount is yours to set. You're really weighing three things: how long the money has to last, what else already lands in your account every month, and how much of each withdrawal you hand back in tax. Most people start with the gap. Once you subtract what the Canada Pension Plan, or CPP, and Old Age Security, or OAS, will pay you from what you want to spend, your savings only have to cover the rest.

It helps to know what that base pays you. In April 2026 the average CPP retirement pension for someone starting at 65 was $877.01 a month, and the maximum was $1,507.65.¹ You'll land nearer the average than the maximum unless you worked and contributed for close to a full career. If you haven't claimed yours yet, when you start it changes that amount permanently.

You'll hear people talk about drawing 4% a year, or saving twenty-five times what you spend. Those are round illustrative numbers rather than a Canadian rule, and they're good for sizing. If you want $40,000 a year out of savings, 4% points you at about $1,000,000. That tells you quickly whether you need a different spending number or a later finish date. It tells you nothing about a year when the market drops.

There's a catch for the part of your savings that sits in a registered retirement income fund, or RRIF, which is what your retirement savings plan turns into. Below 71 the required percentage climbs a little every year, and at 65 it reaches exactly 4%.⁶ At 66 it's 4.17%, at 70 it's 5%, and from 71 it comes off a set table and keeps rising. So once you're 65, you aren't choosing a withdrawal rate for that money. Your minimum is already at 4%, and it only goes up.

Living to 90 is not unusual

That leaves the length, and it's the part you can't look up. If you're 65 in Canada, you can expect about another twenty-one years.² Around half of people live longer than that.

Those aren't your odds. A hundred people who all reach 65 produce that spread, and your health, your work and your family history sit outside it. It shows you the stretch a plan has to cover. At 82 most of the group is still there, and at 90 more than a third of them are.

If what you've saved looks small next to twenty-five or thirty years, you're not doing the arithmetic wrong. Your savings were never meant to carry the whole cost by themselves. CPP and OAS don't run out, and they move with prices, so your own money only has to cover the part they don't.

The withdrawals you don't get to choose

You can leave your registered retirement savings plan, or RRSP, alone until the year you turn 71 runs out. After that you choose between three things: roll it into a RRIF, buy an annuity with it, or take the cash.³ Take the cash and you'll be taxed on the whole balance in one year, so hardly anyone does. Nothing is taxed on a direct transfer into a RRIF,³ which is why most people go that way.

Then your schedule starts. From the year after it's opened, the RRIF has to pay you a minimum every year.⁴ The minimum is whatever your balance was on January 1, times a percentage set by your age.⁵ At 71 that's 5.28%. At 80 it's 6.82%, at 90 it's 11.92%, and from 95 it's a flat 20%.⁶

You're free to take more than the minimum in any year. You can never take less.⁴

Two things about that January 1 balance are easy to miss. The balance is locked for the whole year, so if markets drop in March your minimum doesn't drop with them, and you sell more of your investments to raise the same dollars.

The other one works in your favour. In the year you open the RRIF, you owe no minimum at all,⁴ so you get to choose when you convert instead of signing whatever form arrives.

Your bank holds nothing back from the minimum.⁷ That doesn't make it tax-free. RRIF income is taxed the same way your salary was, so if you only take the minimum, you're the one sitting on the tax money until you file.

Take more than the minimum and your bank does hold some back. The rate depends on the size of the extra: 10% if it's $5,000 or less, 20% if it's more than $5,000, and 30% if it's more than $15,000. The federal rates are lower in Quebec.⁷

Here's how it lands. Say you turn 71 with $400,000 in your RRIF on January 1, and you want $40,000 out of it this year. The minimum is $21,120, and nothing comes off that. The other $18,880 is more than $15,000, so 30% of it is held back, which is $5,664.

You'd see $34,336 arrive over the year, and you settle the real bill when you file. Those are round illustrative numbers, not a quote for your account. Rather than work the percentage out by hand, run your own numbers, and the full table of required percentages runs from 71 upward.

What each account costs you on the way out

You're probably drawing from three places, and each one costs you something different. Out of a RRIF or an RRSP, the whole withdrawal is taxed, the same as pay. Out of an ordinary investment account, only the growth is taxed, and usually more gently than pay. Out of a tax-free savings account, or TFSA, none of it is taxed, and it never appears on your tax return.⁸

If you're near either end of the income range, whether a withdrawal counts as income matters more to you than the rate you pay on it. OAS starts coming back once your net income goes over $93,454, the threshold on 2025 income, and you pay back 15 cents on every dollar above it.⁹ Each RRIF withdrawal takes you closer to that line. A TFSA withdrawal doesn't, because it never counts as income.⁸ If you're close to the line, the clawback gets worked out in full in its own right.

The same thing runs the other way at the low end. If your income is modest enough that you get the Guaranteed Income Supplement, or GIS, your supplement falls as the rest of your income rises,¹⁰ and a RRIF withdrawal counts as the rest of your income. A TFSA withdrawal still doesn't.⁸

One catch if the TFSA is the account you flex. The room you use doesn't come back the moment you withdraw. You get it back on January 1 the next year, and not before.¹¹ So if you take $20,000 out in April and replace it in October, you've overcontributed, and it's taxed even though you never meant to.¹¹

A partner, a pension, and where you live

Five things matter more than any rule of thumb.

1. Your partner. From 65 you can put up to half of your eligible pension income on a spouse or common-law partner's return, and RRIF income counts.¹² Two moderate incomes usually cost less tax than one large one, and if you're near the OAS line it can keep you both under it.
2. A pension from work. If a pension already covers your fixed bills, your savings are only funding the flexible part, so you can take less in a bad year without changing how you live.
3. Where you live. The federal rate is the same everywhere and the provincial rate isn't, so the same withdrawal costs different amounts depending on where you file. If you file in Quebec, the federal withholding rates are lower.⁷
4. The pension income amount. Once you're 65, the first $2,000 of eligible pension income earns you a federal credit,¹³ and RRIF income qualifies. The provincial amount is different. Some people convert a small slice of an RRSP into a RRIF at 65 for that credit alone.
5. When you start CPP. The longer you wait, the bigger the payment, and it stays bigger. It also means you lean harder on your own savings while you're waiting.

There's one number nobody can hand you, and that's how long you'll need the money. The rest are written down somewhere. Your pension statement has your pension on it, your My Service Canada Account has your CPP estimate, and last year's bank statements have your spending.

The length stays a guess. People who look at that guess again every couple of years tend to catch a drift while a small change still fixes it. Working out whether you've got enough is the same arithmetic run forwards.

What most people with a RRIF actually do

Most people with a workplace pension and no mortgage left take the minimum and stop there, because the pension's already covering the bills and every extra dollar they pull out is taxed at their top rate.

Most people without a pension deliberately draw more than the minimum through their late sixties, because a moderate amount at a lower rate for ten years often costs less tax than a large one at 88.

Most people with a sizeable TFSA use it for the costs that don't fit a schedule. It stays invisible to OAS, so a new roof or a year in long-term care can come out of it without moving their tax bill.

People split on how much to take above the minimum. Some take only what they spend, so nothing extra is taxed that year. Others take more in a low-income year, because the same dollars cost them less tax then.

Your own two numbers decide it. One is what you spend in a year. The other is what already arrives without you lifting a finger. The difference between them is what your savings have to produce, and most people find both in twelve months of bank statements and a pension letter.

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Common questions

Do I have to convert my RRSP at 71, or can I leave it alone?+

You've got until the end of the year you turn 71. After that it can't stay an RRSP. It becomes a RRIF, or an annuity, or cash, and if you take the cash you pay tax on your whole balance in one year.

Can I take out less than the RRIF minimum in a bad market year?+

No. Your minimum comes from your balance on January 1, and it doesn't fall if your investments fall later in the year.

Is money I take out of my TFSA taxed?+

No, and it doesn't count as income either, so it won't affect your OAS, your GIS or your tax bracket. The room you used comes back on January 1 of the following year rather than straight away.

Do I owe tax on the RRIF minimum if nothing was withheld?+

Yes. Your bank holds nothing back from the minimum itself, but it's still ordinary income and you settle it when you file. Anything you take above the minimum has tax withheld at 10%, 20% or 30%, depending on how big the extra is.

Can I split RRIF income with my spouse?+

From 65, yes. You can put up to half of your eligible pension income on their return. That often lowers what the two of you pay together, and if you're near the OAS clawback threshold it can keep you both under it.

What happens if I convert to a RRIF before 71?+

You can do it whenever you like. There's no minimum at all in the year you open it, and below 71 your required percentage starts at 4% at 65 and rises a little each year to 5% at 70.

Further reading

• The Art of Spending Moneyby Morgan Housel

  Written for the problem you have once the saving is done: what the money is actually for, and why people who are good at saving find spending so uncomfortable.

Sources

1. Service CanadaCanada Pension Plan: how much you could receive. Average for new beneficiaries at 65, $877.01 a month (April 2026); maximum $1,507.65 (2026). Accessed 2026-09-04.
2. 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, and the survivors used to derive the figures in the chart. Three-year estimate 2022 to 2024. Accessed 2026-09-04.
3. CRAReceiving income from an RRSP: the options up to the end of the year you turn 71, and no tax withheld on a direct transfer to a RRIF. Accessed 2026-09-04.
4. CRAReceiving income from a RRIF: the minimum starts the year after the RRIF is set up, and you can withdraw more but not less than it. Accessed 2026-09-04.
5. CRAMinimum amount from a RRIF: the fair market value at the start of the year multiplied by the prescribed factor. Accessed 2026-09-04.
6. CRAChart, prescribed factors: the required percentage at each age from 71, and 1 divided by 90 minus the age below 71. All other RRIFs column. Accessed 2026-09-04.
7. CRARRSPs and RRIFs, section 7: no withholding on the minimum amount, and the lump-sum rates of 10%, 20% and 30% (5%, 10% and 15% in Quebec) on anything above it. Accessed 2026-09-04.
8. CRASave and invest tax-free: TFSA withdrawals are tax-free and do not affect Old Age Security, the Guaranteed Income Supplement or Employment Insurance. Accessed 2026-09-04.
9. Service CanadaOld Age Security pension recovery tax: net income before adjustments (line 23400) above $93,454 for 2025, repaid at 15% of the excess. The page for people living in Canada. Accessed 2026-09-04.
10. Service CanadaGuaranteed Income Supplement eligibility: the supplement is income-tested and falls as other income rises. Accessed 2026-09-04.
11. CRAWithdrawing from a TFSA: an amount you take out is added back as contribution room on January 1 of the next calendar year, and an over-contribution is taxable even in error. Accessed 2026-09-04.
12. CRAPension income splitting: up to 50% of eligible pension income may be allocated to a spouse or common-law partner, with RRIF income qualifying from 65. Accessed 2026-09-04.
13. CRALine 31400, pension income amount: up to $2,000 federally for 2025, with different provincial and territorial amounts. 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," a teacher a few years out from retiring works out that her question has changed from am I saving enough to will it last. For the money that pays you before your savings do, see when to start CPP, or browse the whole retirement hub.