There is no single correct answer — but the default for most retirees is to draw from your RRSP or RRIF first and preserve your TFSA as long as possible. The TFSA is your most flexible, tax-efficient asset in retirement. Depleting it early gives up the long-term advantage it provides. That said, the right sequencing depends on your income level, OAS clawback exposure, and estate goals.

Why the Order Matters

Every dollar you withdraw from an RRSP or RRIF is fully taxable as income. Every dollar you withdraw from a TFSA is tax-free. This difference determines how much of your savings you actually keep — and it interacts with other retirement income sources in ways that are easy to underestimate.

The goal is not just to minimise tax in any single year. It is to minimise total tax paid across your entire retirement, while preserving flexibility and protecting government benefits like OAS.

The Case for Drawing RRSP/RRIF First

Tax Bracket Management

RRSP and RRIF withdrawals are taxable income. If you have a window between retirement and when CPP and OAS begin — typically ages 60 to 65 — your income may be temporarily low. Drawing from your RRSP in those years allows you to fill lower tax brackets at a reduced rate, rather than being forced into higher brackets later when mandatory RRIF minimums, CPP, and OAS all arrive at once.

Reducing Future RRIF Minimums

The larger your RRIF balance, the larger your mandatory annual withdrawal. Strategic drawdown of your RRSP before RRIF conversion at age 71 reduces the size of those mandatory withdrawals and can keep you below the OAS clawback threshold throughout retirement.

TFSA Compounds Longer

Money left in a TFSA continues to grow tax-free. The longer it stays invested, the more powerful that compounding becomes. Drawing from registered accounts first lets your TFSA keep growing untouched.

When Drawing from Your TFSA First Makes Sense

Your Income Is Near the OAS Clawback Threshold

If adding RRIF income would push you above $90,997 (the 2025 clawback threshold), drawing from your TFSA instead keeps your net income lower and protects your full OAS benefit. TFSA withdrawals do not count as income for any government benefit calculation.

You Had an Unusually High Income Year

If you sold a property, received a large inheritance, or triggered capital gains in a given year, supplementing with TFSA withdrawals rather than RRIF withdrawals can prevent that year’s income from spiking further.

You Are in the Highest Tax Bracket

If your income is already in the top bracket, RRIF withdrawals are taxed at the highest marginal rate. TFSA withdrawals are always tax-free, regardless of your bracket.

The Spousal Dimension

If you and your spouse have very different income levels, withdrawal sequencing becomes more complex. The higher-income spouse may benefit from pension income splitting, TFSA withdrawals to suppress income, or CPP sharing — all of which affect the optimal draw-down order. Each account should be considered in the context of the household’s combined income, not just individual balances.

What About Non-Registered Accounts?

If you also have non-registered (taxable) savings, these typically sit between RRSP/RRIF and TFSA in the withdrawal sequence. Capital gains in non-registered accounts are only 50% taxable, making them more efficient than RRIF withdrawals but less efficient than TFSA withdrawals.

The Estate Planning Angle

TFSA assets pass to a named successor holder or beneficiary without tax. RRSP and RRIF balances are fully taxable on death (unless rolled to a spouse). If leaving assets to adult children or other non-spouse beneficiaries is a goal, preserving TFSA balances has clear estate advantages — another reason to draw registered accounts first.

Key Takeaways

  • RRSP/RRIF withdrawals are fully taxable; TFSA withdrawals are always tax-free
  • The default for most retirees is to draw RRSP/RRIF first and preserve the TFSA
  • Drawing RRSP in low-income years before CPP and OAS begin can reduce lifetime tax
  • TFSA withdrawals are the tool of choice when income approaches the OAS clawback threshold
  • Withdrawal sequencing should account for both spouses, estate goals, and non-registered assets

This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP® professional.

This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP® professional. Odyssey Wealth Inc. is regulated by CIRO through Designed Wealth Management.