Which retirement account should I withdraw from first?

For most retirees, the optimal approach is to fill low tax brackets with registered withdrawals (RRSP/RRIF or Traditional IRA/401k) first, use non-registered accounts next for their preferential capital gains rates, and save tax-free accounts (TFSA or Roth IRA) for last or for years when additional income would cross a benefit threshold.

Does withdrawal order really make a difference?

Yes — the difference can be $50,000 to $150,000 in lifetime after-tax income. The right sequence fills lower tax brackets deliberately, preserves government benefits like OAS and GIS, and lets tax-free accounts compound longer.

Should I ever withdraw from my TFSA or Roth first?

Yes, in specific situations. Use TFSA or Roth withdrawals in years where any additional taxable income would trigger OAS clawback, GIS reduction, IRMAA surcharges, or push you into a significantly higher tax bracket. The goal is to use tax-free income strategically, not to hoard it.

Retirement Withdrawal Order: Which Accounts to Draw From First

Retirement withdrawal sources chart showing account drawdown sequence over time

The order in which you withdraw from your retirement accounts can save — or cost — you tens of thousands of dollars in lifetime taxes. Yet most retirees default to whatever is easiest: pulling from the account with the most money, or the one their advisor set up first. Neither approach is optimal.

The right withdrawal sequence depends on your tax brackets, government benefit thresholds, account types, and how many years you need the money to last. A retiree with $800,000 split across RRSP, TFSA, and non-registered accounts (or 401(k), Roth IRA, and taxable in the US) can see a $50,000–$150,000 difference in lifetime after-tax income just by changing the withdrawal order.

The Four Common Strategies

1. Minimize Tax (Registered First)

Draw from tax-deferred accounts (RRSP/RRIF or Traditional IRA/401(k)) first, filling lower tax brackets each year. Leave tax-free accounts (TFSA or Roth IRA) untouched as long as possible.

Why it works: By emptying registered accounts while your income is low (before CPP/OAS or Social Security starts), you pay tax at the lowest possible rates. The TFSA or Roth continues compounding tax-free, growing larger for later years when you need it most.

Best for: Retirees with large registered balances and a window of low income before government benefits begin. This is the foundation of the RRSP meltdown strategy in Canada and the Roth conversion ladder in the US.

2. Maximize Estate (Tax-Free First)

Draw from TFSA or Roth IRA first, then non-registered, then registered last.

Why it works: Registered accounts receive a spousal rollover on death — no immediate tax. By preserving them, you maximize the surviving spouse’s tax-deferred balance. Tax-free accounts are spent down because they can’t benefit from a spousal rollover in the same way.

Best for: Couples where estate preservation is the priority, especially with a significant age gap or health difference. The surviving spouse inherits a larger registered balance to fund a longer retirement.

3. Equalize Income (Couple-Specific)

Balance withdrawals between both spouses each year to keep marginal rates roughly equal. If one partner has $600,000 in an RRSP and the other has $50,000, equalizing means drawing more from the larger account to avoid one spouse hitting a high bracket while the other sits in a low one.

Why it works: Canada’s progressive tax system means two people earning $40,000 each pay significantly less combined tax than one person earning $80,000 and another earning $0. Income equalization is the spending equivalent of pension income splitting.

Best for: Couples with unequal account balances or income sources.

4. Manual Order

Set your own sequence based on your specific situation. Maybe you want to drain a non-registered account first to harvest capital losses, or draw down a LIRA before converting to a LIF.

Best for: People with complex account structures, specific estate planning goals, or a financial advisor guiding the strategy.

Why Withdrawal Order Matters So Much

Tax Bracket Filling

Every dollar withdrawn from a registered account is taxed as ordinary income. The first ~$15,000 is sheltered by the basic personal amount (Canada) or standard deduction (US). The next chunk fills the lowest bracket. The goal is to fill each bracket deliberately — not overflow into a higher one because you pulled too much from one account in one year.

Government Benefit Preservation

In Canada, RRSP/RRIF withdrawals count as income for the OAS clawback (starting at ~$91,000 in 2025) and GIS eligibility testing. TFSA withdrawals don’t. A retiree who draws $30,000 from a RRIF and $20,000 from a TFSA has $30,000 of taxable income. The same retiree drawing $50,000 from a RRIF has $50,000 of taxable income — potentially triggering clawbacks or losing benefits.

In the US, Traditional IRA withdrawals push up “combined income,” which determines how much of your Social Security is taxable (up to 85%) and whether you trigger IRMAA Medicare surcharges.

Sequence of Returns Protection

Drawing from the right account during a market downturn matters. If your portfolio drops 30%, selling equities in a taxable account locks in losses. Drawing from a TFSA or Roth instead lets the taxable portfolio recover. Some retirees use a HELOC or pledged line of credit as a bridge during downturns.

The Withdrawal Order Decision Tree

A simplified framework for each year of retirement:

Take any mandatory withdrawals first — RRIF minimums (Canada, age 72+) or RMDs (US, age 73+). These are forced and unavoidable.
Fill low tax brackets with registered withdrawals — If your other income (CPP/OAS, Social Security, pension) leaves room in a low bracket, top it up with RRSP/IRA withdrawals.
Use non-registered accounts for the next layer — Capital gains are taxed at preferential rates (50% inclusion in Canada, 0%/15%/20% LTCG in the US), making these more tax-efficient than registered withdrawals above the low brackets.
Use tax-free accounts (TFSA/Roth) last — Or strategically in years where any additional income would cross a threshold (OAS clawback, IRMAA, GIS).

Common Mistakes

Drawing equally from all accounts every year. This feels balanced but wastes bracket space. You should be aggressive with registered withdrawals in low-income years and conservative in high-income years.

Ignoring the TFSA/Roth until the end. Tax-free accounts are best used strategically — not hoarded forever. If you’re 85 and have $400,000 in a TFSA you never touched, you missed years of using it to avoid clawbacks and bracket creep.

Not adjusting year by year. The optimal withdrawal source changes annually based on your income, market returns, and benefit thresholds. A static strategy set at age 65 will underperform a dynamic one that adapts each year.

Forgetting about the estate. The last dollar in a registered account is the most expensive — it’s taxed at your marginal rate on the terminal return. Spending it down earlier, even at a moderate rate, often saves more than leaving it to compound.

How Cinderfi Helps

Cinderfi implements all four withdrawal strategies in its projection engine and shows the year-by-year impact on taxes, account balances, and estate value. The Withdrawal Sources chart tab visualizes exactly which accounts are drawn and when. The Strategy Optimizer (Pro) sweeps across all strategy combinations — withdrawal order, meltdown settings, TFSA-in-retirement toggles, and PLOC configurations — to find the combination that minimizes lifetime tax, maximizes estate value, or maximizes funded years. One-click presets let you apply the optimizer’s recommendation instantly.

Model your withdrawal strategy — try Cinderfi free.

April 8, 2026 · 5 min read