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Drawing Your RRSP Down Early on Purpose

Why taking more than you need before 71 can cost less over a lifetime, and the brackets and clawbacks that decide it.

By Nate Sorensen Reviewed for accuracyUpdated Nov 202614 min read
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You've stopped working, or you're about to, and there's a registered retirement savings plan, or RRSP, you haven't touched. Taking money out before you need it sounds backwards. For a lot of people it's the cheaper move. In the years when your tax return is nearly empty, you pay your lowest rate on a withdrawal, and nothing at all on the first slice. Leave the whole account until 71 and the money comes out anyway, on top of your public pensions, sometimes past the line where Old Age Security, or OAS, starts being taken back, and at a higher rate than you would pay now. What decides it is the room on your return this year, and how big the account will be when the withdrawals stop being your choice.

Key takeaways

  • Money you take out of an RRSP is income for that year, taxed at whatever rate your other income puts you in. In a year with little else coming in, that rate's low, and you'll pay no federal tax at all on the first $16,000 or so.
  • Once you've moved it into a registered retirement income fund, or RRIF, it pays you a set share every year from the next one on, whether you want the income or not. Your first share is 5.28%, and it rises every year after that.
  • Past the OAS threshold, $95,323 for 2026 income, each extra dollar you take costs you about 41 cents in Alberta's middle bracket. The same dollar in your lowest bracket costs you 22 cents.
  • Drawing your account down in the low years, and moving what you don't spend into a tax-free savings account, or TFSA, is how people keep their later years under the line. You pay some tax sooner, and the growth on that money leaves the shelter.

The years when your tax return is nearly empty

You're probably somewhere between leaving work and turning 71. Your wages have stopped. You can start the Canada Pension Plan, or CPP, anywhere from 60 to 70, OAS starts at 65 at the earliest, and nothing has to leave the RRSP until you turn it into a RRIF. So for a few years your income can be small, and a small income means the lowest bracket has room in it.

When money leaves your RRSP, it's your income for that year. You report it on line 12900 of that year's return, and you pay whatever rate your other income puts you in.1 If you have nothing else on the return, your basic personal amount covers the first $16,452 and you pay no federal tax on it.2 Take $20,000 and nothing else in the year, and in Alberta your tax works out to under $500, with only the basic credits behind it.23

Where your room is
A timeline from age 60 to 75 showing when each income source is on the tax returnFour rows. Wages run from 60 to 62 and stop. CPP and Old Age Security both start at 65 and run on. The RRIF minimum starts at 72 and runs on. The years from 62 to 72 are shaded to show the window where the reader chooses what comes out of the RRSP.the years your return is nearly emptyWagesCPPOASRRIFminimum60657075your age
Illustrative ages: your wages stop at 62, your CPP and OAS start at 65, and your first RRIF minimum lands at 72. Between the wages stopping and the minimum starting, what goes on your return is mostly your choice.
Source Illustrative timeline. CPP start ages and the RRIF minimum timing are sources 8, 9 and 18.

That room doesn't last. Once your OAS starts, 65 at the earliest, it's on your return. Whenever you start CPP, that's on it as well. And the year after you convert, the RRIF minimum joins it whether you asked for the money or not.

What does the same $10,000 cost at different incomes?

On top of $40,000 of other income, $10,000 more from your RRSP costs you $2,200 in Alberta, at 14% federal plus 8% provincial.3 On top of $70,000 it costs you $3,050, because you've moved into the next bracket up, 20.5% plus 10%.3 On top of $100,000 with OAS in payment it costs you $4,092.50. There you hand back 15 cents of OAS on each dollar over the threshold, then pay tax on the 85 cents left.4

The two don't add up to 45.5%, and the reason matters if you're doing your own arithmetic. The OAS repayment is itself a deduction on your return, so each extra dollar raises your taxable income by 85 cents, not a dollar.5 You pay about 26 cents of tax on the 85, you repay 15, and you keep about 59 cents. Under the line you'd have kept 69 and a half.

Tax on the same $10,000, three different years
Three bars comparing the tax on a ten thousand dollar RRSP withdrawal at three income levelsOn top of 40,000 dollars of other income the withdrawal costs 2,200 dollars, a rate of 22 percent. On top of 70,000 dollars it costs 3,050 dollars, 30.5 percent. On top of 100,000 dollars with Old Age Security in payment it costs 4,092 dollars and 50 cents, 40.9 percent, because 15 cents of Old Age Security comes back on each dollar and tax applies to the 85 cents left.$2,200on top of $40,00022 cents on the dollar$3,050on top of $70,00030.5 cents on the dollar$4,092.50on top of $100,000, with OASabout 41 cents on the dollar
Illustrative, Alberta, 2026 rates, before your age amount and any other credit. The third bar assumes your OAS is in payment and the $100,000 is already over the 2026 threshold of $95,323.
Source Federal and Alberta rates are source 3; the OAS threshold and the 15% repayment are sources 4 and 6; the deduction is source 5.

The line is tested on net income before adjustments. That's line 23400, and for 2026 income the threshold is $95,323.46 Every RRSP or RRIF dollar you take counts toward it. A dollar you take from your TFSA doesn't, and neither does anything your TFSA earns.7 How the clawback is collected, and when it comes off your payments, is in the OAS clawback guide.

If your retirement income will never get near $95,000, the clawback half of this doesn't touch you. Your question's only about brackets, and it's the same shape.

What happens if you leave it alone until 71?

Turning 71 sets your deadline. Before that year ends, you pick one of three things for the RRSP: you turn it into a RRIF, you put it into an annuity, or you cash it out.8 The usual choice is the RRIF. A minimum then comes out every calendar year after the opening year, set by your age that January 1 and what the account is worth that day.8920 Your first share is 5.28%, struck on your age that January 1, and it rises every year from there.10 More than the minimum is allowed in any year. Less isn't.9

So the question was never whether you pay tax on the money. It's how big the account is on the day the payments become compulsory. Say you've got $500,000 at 63 and it grows 4% a year. Leave it alone and you arrive at that January 1 with $684,285, so your first minimum is $36,131.10 Take $20,000 out each December instead, from 63 to 70, and your balance stays at $500,000, because you're drawing the growth and nothing more. Your first minimum is $26,400.

Two ways to arrive at 71 with the same account
A line chart of two RRSP balances from age 63 to 71The untouched account rises from 500,000 dollars at 63 to 684,285 dollars at 71, which forces a first minimum of 36,131 dollars. The account that pays out 20,000 dollars a year stays flat at 500,000 dollars, which forces a minimum of 26,400 dollars. The gap is nearly 10,000 dollars a year of required income.$400,000$500,000$600,000$700,000nothing out: $684,285 at 71first minimum: $36,131$20,000 a year out: $500,000 at 71first minimum: $26,4006365676971your age at January 1
Illustrative. $500,000 at 63, growing 4% a year. One line takes nothing out; the other takes $20,000 at the end of each year from 63 to 70. Your first minimum is 5.28% of what you're holding that January 1, rounded up to the dollar. Your own return will vary, and a stronger one widens the gap you see here.
Source The 5.28% factor is source 10. The balance and the 4% return are illustrative.

That $160,000 came out over eight years and was taxed as it came, most of it at 22 cents on the dollar or less. So the two lines compare forced income, not what you're worth. You paid some tax early to have nearly $10,000 a year less of income forced on you every year from 72 on, on a return already carrying CPP and OAS. How the three choices work, and why some people convert a piece of the account at 65, is in the RRSP to RRIF guide. Every percentage, age by age, sits in the RRIF minimum guide.

How much do you take out each year?

There's no official number for this. The amount people land on comes from three lines on their own return, and you can work yours out in an evening.

  1. Add up your other income for the year. Your workplace pension, your CPP if you've started it, your OAS if you've started it, interest, part-time work. That's where your return starts before the RRSP adds anything.
  2. Find the top of the bracket you're in. Federally, the lowest bracket ends at $58,523 in 2026, and each province draws its own edge. In Alberta it's $61,200.3 The gap between your other income and that edge is your room. Money you take up to that edge carries the lowest combined rate you'll ever pay on it.
  3. From 65, watch two more lines. The OAS threshold, $95,323 for 2026 income, and your age amount, a credit you get from 65 that gets smaller as your net income rises past $45,522 and is gone at $105,709, on 2025 figures.612 Neither one is a wall. Each is a place where your next dollar starts costing you more.
  4. Give the money somewhere to go. What you don't spend can go into your TFSA, where your room is $7,000 a year in 2026 plus anything you haven't used, and money you take out turns back into room the following January.13 Inside it nothing you earn is taxed again, and what you take out doesn't count toward your OAS or the Guaranteed Income Supplement, or GIS.7

If your RRSP is large and the room in step two is small, that's the honest signal that your cheap years are already behind you, and your decision is a smaller one than it looks.

When the money comes out, your bank holds back tax first. For residents outside Quebec, the rates are 10% on amounts up to $5,000, 20% on amounts exceeding $5,000 up to and including $15,000, and 30% on amounts over $15,000. If you're in Quebec you see half those rates federally, with provincial tax withheld on top.14 What your bank holds back is money on account, not your bill. The rates page itself says it may not be enough at your bracket, and you settle the difference when you file.14 Owe over $3,000 at filing for this year, $1,800 if you're in Quebec, and the same again in one of the two years before it, and you're put on quarterly instalments.15 You may also hear this done with borrowed money, where you take a loan, invest it outside the plan, and set the interest against the withdrawal. That deduction only holds where you borrowed to earn interest or dividends, never where the investment can only produce a capital gain, and never on money you borrowed to put into an RRSP.19 What withholding does to a RRIF, and why the minimum has none, is in the withholding guide.

The room between your net income and the OAS threshold is exactly what the clawback checker works out for you. Run your own numbers using this year's income and see how much fits under the line.

Four ways this can cost you more

Every rule so far is real. What you build on it is a bet, and the bet has four ways to go against you.

  • The tax now is certain. Every dollar you take is taxed this year, at this year's rate, for sure.1 The rate you're keeping it away from at 72 is a forecast. Brackets, thresholds, your health and your plans can all move before then.
  • A withdrawal can't be split. Money taken out of an RRSP as a lump sum never counts as eligible pension income, at any age. The same dollars left in the account and paid out as RRIF income after you turn 65 can be moved onto your partner's return, up to half of them.16 If your partner's in a lower bracket, drawing early can throw away a bigger saving than the bracket one.
  • At the low end it cuts your GIS. The Guaranteed Income Supplement is worked out from your income on the previous year's return, and a withdrawal from your RRSP is on that return while one from your TFSA isn't.177 If you'll be near the supplement line after 65, a withdrawal this year can cost you tax-free money next year. A plan aimed at the OAS threshold can be exactly wrong at the other end of the income range. The supplement can't start before you're 65, and it looks at the year before, so people in that position who draw the RRSP down do it well before 65 and hold what's left in a TFSA.1721
  • Leaving it isn't always taxed at the top. If you pass away with the account still there, the whole value is income on your final return, in one year. That doesn't happen when it goes to your spouse or common-law partner, or to a child or grandchild who depended on you.11 Those exceptions cover a lot of people, so if you've got a partner, the estate half of the argument mostly falls away. Estates are a subject of their own.

Your partner, your province, and the pension you already have

A few things move this arithmetic a long way for you, and most of it's on paper you already have.

  • A partner. Once you're 65, your RRIF payments count as eligible pension income, which means you can move up to half of them onto your spouse's or partner's return.16 So if your partner is in a lower bracket, you're in the group that often converts part of the RRSP to a RRIF at 65 and draws from that instead. The same rule gives you the pension income amount on the first $2,000 of your RRIF income.16
  • A workplace pension. If yours already fills the lowest bracket, there's no cheap room, and extra RRSP money stacks on top at 30.5% or more. People in that position usually wait, because going early gains them nothing.
  • Your province. The rates and bracket edges here are Alberta's. Yours differ, and if you're in Quebec your province collects its own income tax with its own withholding.314 The brackets by province guide has your edges.
  • When you start CPP. Every month you wait past 65 adds 0.7% to your cheque, which is 42% more by 70.18 People who wait usually live on their RRSP in the meantime, so the two decisions are really one. When to start CPP has the crossover ages.
  • Growth leaving the shelter. Money you take out and don't spend stops growing tax-free unless you put it in your TFSA. In an ordinary investment account you pay tax on the interest, dividends and gains as you go, and how investment income is taxed shows you what that costs.

Two numbers decide this for you, and you've got both already. Your line 23400 from last year's return shows you how far you sit from the threshold, and the balance on your RRSP statement tells you what 5.28% of it would be. Your notice of assessment shows your TFSA room. If you've got a pension, your statement says what it pays you and whether it rises with prices.

Take it out this year, or leave it?

Most people who stop working before 65 with a large RRSP and not much else coming in take something out every year, up to the top of their lowest bracket, and put what they don't spend in their TFSA. They start CPP later, because the RRSP money's paying their bills in the meantime.

People whose pension already reaches the top of that bracket mostly leave the RRSP until they have to convert. There's no cheap room to use, and every extra dollar costs them 30 cents or more whichever year it comes out in.

People with a partner and a big gap between their two incomes usually convert a piece at 65, so they can split the payments, and leave the rest of the RRSP growing. And people near the supplement line often do the opposite of everyone else. They empty the RRSP before 65, when there's no supplement to lose.

Where you fit depends on the three lines on your own return, and on nothing else.

?

Common questions

Is this the same thing as an RRSP meltdown?

That name usually means the version where you borrow. You invest the loan outside your plan, and the interest you can deduct offsets the tax on a withdrawal of the same size. The plain version needs no loan at all. It's the same withdrawal, and you time it for a year when your income is low.

Do I have to convert to a RRIF to take money out early?

No. You can take money out of your RRSP at any age. Your bank holds back tax and the amount is your income for that year. Once you're 65, a RRIF adds two things an RRSP withdrawal doesn't get you: the pension income amount on the first $2,000, and the option to split the payments with your partner. That's why some people convert part of the RRSP and leave the rest.

Does an RRSP withdrawal affect my OAS or GIS?

Yes. It's income on that year's return, and both are tested on your income. OAS uses your net income before adjustments for the year, and the supplement uses your income from the previous year. A TFSA withdrawal counts toward neither.

Does the tax my bank holds back settle the bill?

Not always. It's held at 10%, 20% or 30% depending on the size of your withdrawal, and the note on the rates page says that may not be enough at your bracket. You settle the difference when you file, and if you owe more than $3,000 this year and in one of the two years before, you're moved onto quarterly instalments.

What if the market drops after I've started?

A withdrawal from your RRSP is your choice, so you can take less or nothing in a bad year. A RRIF minimum isn't. It's set from your account's value on January 1, and a fall after that date doesn't reduce it. That's one reason people who draw early keep the choice open for as long as they can.

Sources

  1. CRAWithdrawing from your own RRSPs: report RRSP income on line 12900 for the year the RRSPs are withdrawn; tax deducted goes on line 43700. Accessed 2026-09-04.
  2. CRAPayroll Deductions Formulas, 122nd edition, effective January 1, 2026: the federal basic personal amount of $16,452. Accessed 2026-09-04.
  3. CRACurrent year tax rates and income brackets (2026): 14% to $58,523 and 20.5% to $117,045 federally; Alberta 8% to $61,200 and 10% to $154,259. Each rate applies only to its own bracket. Accessed 2026-09-04.
  4. Service CanadaRepayment of Old Age Security pension: the test is net income before adjustments, line 23400; the threshold is $93,454 for 2025; the repayment is 15% of the excess. Accessed 2026-09-04.
  5. CRALine 23500, Social benefits repayment: the repayment is an allowable deduction at line 23500 as well as the amount payable at line 42200. Accessed 2026-09-04.
  6. Service CanadaOld Age Security pension recovery tax: the threshold table, giving $95,323 as the minimum threshold for the 2026 income year. Cited for the table only. Accessed 2026-09-04.
  7. CRAWhat is a TFSA: TFSAs have no effect on Old Age Security, the Guaranteed Income Supplement or Employment Insurance. Accessed 2026-09-04.
  8. CRAReceiving income from an RRSP: the three options by the end of the year you turn 71, and the yearly minimum starting the year after a RRIF is set up. Accessed 2026-09-04.
  9. CRAReceiving income from a RRIF: the minimum is based on your age at the beginning of each year, and you can withdraw more but not less. Accessed 2026-09-04.
  10. CRAChart, prescribed factors: 0.0528 at age 71 in the all other RRIFs column; 1 divided by 90 minus the age at 70 or younger. Accessed 2026-09-04.
  11. CRAUnmatured RRSP on the death of the annuitant: the fair market value of the RRSP at the time of death is included in the deceased annuitant's income for the year of death, unless it passes to a surviving spouse or common-law partner or a financially dependent child or grandchild. Accessed 2026-09-04.
  12. CRAAge amount, line 30100, 2025: $9,028 where net income is $45,522 or less, reduced above that and nil at $105,709. Accessed 2026-09-04.
  13. CRACalculate your TFSA contribution room: the 2026 dollar limit is $7,000, and a withdrawal is added back to your room on January 1 of the following year. Accessed 2026-09-04.
  14. CRATax rates on withdrawals: 10% on amounts up to $5,000, 20% on amounts exceeding $5,000 up to and including $15,000, 30% on amounts over $15,000, with Quebec at half those rates federally plus provincial withholding; the tax withheld may not always be enough. Accessed 2026-09-04.
  15. CRARequired tax instalments for individuals: instalments apply where net tax owing is more than $3,000, or $1,800 in Quebec, for the year and in either of the two previous years. Accessed 2026-09-04.
  16. CRAPension income splitting: up to 50% of eligible pension income; RRIF payments qualify where the transferring spouse or partner is 65 or older, RRSP withdrawals are not on the list; the $2,000 pension income amount. Accessed 2026-09-04.
  17. Service CanadaGuaranteed Income Supplement, how much you could receive: the amount depends on your income from the previous year. Accessed 2026-09-04.
  18. Service CanadaWhen to start your CPP retirement pension: payments rise 0.7% for each month after 65, up to 42% at 70. Accessed 2026-09-04.
  19. CRALine 22100, Carrying charges and interest expenses: most interest paid on money borrowed to earn investment income such as interest and dividends is deductible; not where the investment can only produce capital gains, and not interest on money borrowed to contribute to an RRSP. Accessed 2026-09-04.
  20. CRAMinimum amount from a RRIF: the minimum is the fair market value of the property held in the RRIF at the start of the year multiplied by the prescribed factor. Accessed 2026-09-04.
  21. Service CanadaGuaranteed Income Supplement, do you qualify: you must be 65 or older and receiving the OAS pension. Accessed 2026-09-04.

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

See it in a story: "The Cheque That Grows If You Wait," where Joanne weighs three CPP start dates and what she'd live on while she waits. The next decision is which account your money comes out of first: which accounts to tap first in retirement. Or browse the whole retirement hub.

See it in a story

The Cheque That Grows If You Wait — Winding Down

Related guide

The OAS Clawback: The Threshold, the Maths, and How to Stay Under It