Ep 170 - What Should You Withdraw First: RRSP, CPP, or TFSA?

In this episode of Your Retirement Planning Simplified, you will gain insight into the optimal withdrawal order for Canadian retirement accounts — RRSP first, CPP/OAS later, TFSA last. This sequencing can save you tens of thousands in taxes. Joe explains how strategic timing creates more flexible, tax-efficient income and a more secure retirement plan.

Key Takeaways

RRSP withdrawals before CPP/OAS can significantly reduce lifetime taxes by filling lower tax brackets in your early 60s and shrinking future RRIF minimums.

Delaying CPP to age 70 boosts guaranteed, inflation-protected income, often outperforming what a retiree could earn in a conservative portfolio.

TFSA preservation adds long-term flexibility, allowing tax-free withdrawals later in retirement when taxable income is at its highest.

Coordinating withdrawals across RRSPs, CPP, OAS, and TFSAs protects OAS from clawbacks and smooths your taxable income over time.

A dynamic, annually updated withdrawal framework outperforms ad-hoc decisions, creating more spendable after-tax income for life.

Insights Worth Sharing

“This isn’t about spending less — it’s about spending smarter.”

“Draw from your RRSP on your terms, not when the system forces you to.”

“Delaying CPP is like buying yourself more guaranteed income for life.”

“Your TFSA is your flexibility fund — save it for when taxable income is highest.”

“A coordinated withdrawal plan turns taxes and benefits into tools instead of obstacles.”

Resources

Original Youtube Episode: RRSP vs CPP vs TFSA: What Should You Withdraw First

Your Retirement Planning Simplified Blog

Matthews + Associates: Retirement Planning Process

The Optimal Withdrawal Order for Canadians.
RRSP First, CPP Later, TFSA Last

Most Canadians assume the right move in retirement is to start CPP at 65, leave their RRSP alone as long as possible, and use the TFSA early because it feels tax-free and convenient. But when you look at the math — and more importantly, how income interacts with our tax brackets and benefit programs — the optimal approach is often the opposite.

For many retirees, the smartest withdrawal sequence is RRSP first, CPP later, TFSA last. And getting this order right can dramatically reduce taxes while increasing your guaranteed income over the long term.

The opportunity starts in your early retirement years — often in your 60s, after you stop working but before CPP and OAS begin. With little taxable income coming in, you have a valuable window where you can intentionally withdraw from your RRSP at lower marginal tax rates. This helps shrink the size of your RRIF before minimum withdrawals become mandatory at 71. A smaller RRIF means fewer forced withdrawals later, which helps protect your OAS from clawbacks and keeps your taxable income much smoother.

That alone can save some retirees tens of thousands of dollars over their lifetime.

Next is CPP. Delaying your CPP benefit past 65 increases your payment by 8.4% per year until age 70. Those increases are guaranteed, inflation-protected, and completely risk-free — something your investment portfolio simply can’t match. By drawing RRSP income during these years instead of collecting CPP, you buy yourself a larger lifetime pension that reduces pressure on your investments down the road.

Then there’s the TFSA, one of the most powerful tools in the Canadian retirement system. Because TFSA withdrawals are completely tax-free and don’t impact OAS or GIS eligibility, your TFSA becomes incredibly valuable later in retirement, when your other income sources — CPP, OAS, RRIF withdrawals, investment income — are at their highest. Preserving your TFSA for those later years gives you unmatched flexibility for healthcare expenses, family support, travel, or big purchases without triggering higher taxes.

When these three strategies work together, you get a coordinated withdrawal plan that adapts as you age. The goal isn’t to spend less; it’s to create the most sustainable, tax-efficient, and confidence-building income plan possible. This is the framework we revisit with clients every year because taxes change, benefits change, and life changes.

A structured, Canadian-specific withdrawal sequence almost always outperforms ad-hoc decisions like “just take CPP at 65” or “leave my RRSP alone as long as possible.” With the right plan, you can lower your lifetime tax bill, avoid unnecessary clawbacks, and increase the amount of spendable income available to you throughout retirement.