“Should I start drawing down my RRIF early?”

This month, Ying and I wanted to explore a question we’re often asked:

“Should I start drawing down my RRIF early?”

For many of us, our RRSP has been one of the most powerful tools in our financial lives. During our working years, every dollar contributed may have saved as much as 53 cents in tax, depending on our marginal rate. On top of that, those dollars compounded tax-deferred for decades.

(If you’d like a refresher on why RRSPs can be just as powerful as TFSAs, you can revisit our February 2025 article, Debunking 3 Common Misconceptions About RRSPs.)

But once we reach our 60s, the question often shifts. Our RRSPs have grown meaningfully. We’re thinking about retirement income, taxes, and what we’ll ultimately leave behind. So naturally, we wonder:

Should I start withdrawing earlier than required?

The Key Factors

Before we look at numbers, here are the big questions that drive this decision:

• What other income do I have in retirement? (pensions, non-registered investments, rental income, CPP, OAS)
• What tax bracket will I be in?
• Am I trying to maximize lifestyle spending, minimize lifetime tax, or maximize my estate?
• Will OAS clawback be triggered?
• Do I have available TFSA room?

There is no universal answer. It’s deeply personal and highly dependent on your circumstances.

A Case Study: Meet Lucy

Let’s walk through a simplified example.

Lucy is:

• 65 years old
• Single
• Has a $1,000,000 RRIF
• Earning $100,000 per year (excluding CPP/OAS)
• RRIF growth rate: 5.5%

We compare two strategies:

1. Take minimum RRIF withdrawals starting at age 71
2. Withdraw $100,000 per year starting at age 65

We assumed that early withdrawals are not spent, but instead:

• TFSA room is filled first
• Remaining funds are invested in a non-registered account
• All investments earn 5.5%

So this is not a “spend it” scenario. It is a pure tax and compounding comparison.

Results

If Lucy Lives to Age 95

Strategy	Cumulative Tax	Tax at Death	Total Tax	Lucy’s Legacy
Minimum RRIF	$1,475,952	$439,940	$1,915,892	$3,807,597
$100K from 65	$1,286,899	$135,105	$1,422,004	$3,182,626

Even though early withdrawals reduce tax at death significantly, the minimum withdrawal strategy results in about $625,000 more legacy.

If Lucy Lives to Age 89

Strategy	Cumulative Tax	Tax at Death	Total Tax	Lucy’s Legacy
Minimum RRIF	$1,142,023	$570,090	$1,712,113	$3,203,759
$100K from 65	$1,174,078	$89,336	$1,263,414	$2,547,406

Again, the minimum strategy produces the larger estate.

If Lucy Lives to Age 81

Strategy	Cumulative Tax	Tax at Death	Total Tax	Lucy’s Legacy
Minimum RRIF	$619,962	$675,961	$1,295,923	$2,290,844
$100K from 65	$973,692	$25,496	$999,188	$1,652,688

Shorter life expectancy narrows the gap, but the minimum withdrawal strategy still produces the larger legacy.

If Lucy Dies Shortly After Retirement

Strategy	Cumulative Tax	Tax at Death	Total Tax	Lucy’s Legacy
Minimum RRIF	$20,606	$517,793	$538,399	$1,074,394
$100K from 65	$63,552	$464,263	$527,815	$1,031,448

Even in this early-death scenario, the minimum strategy still results in a modestly higher estate.

What Does This Tell Us?

Across all modeled life expectancies:

• Minimum RRIF withdrawals consistently produced the largest legacy.
• Early withdrawals dramatically reduced “tax at death.”
• However, the power of continued tax-sheltered compounding inside the RRIF outweighed those savings.

In simple terms: The tax deferral and compounding inside the RRIF remained extremely powerful.

But – This Is Not One-Size-Fits-All

This example is based on specific assumptions. Change the assumptions, and the answer can change.

Important variables include:

• Retirement income level and tax bracket
• OAS clawback exposure
• Available TFSA room
• Type of non-registered returns (interest vs dividends vs capital gains)
• Spousal income splitting and rollover rules
• Longevity expectations
• Whether withdrawals are reinvested – or spent

For example:

• If funds are being spent rather than reinvested, the legacy comparison changes significantly.
• If OAS clawback is triggered, early withdrawals can create very high effective tax rates.
• If one spouse passes and assets can roll over tax-deferred, planning becomes more nuanced.

It’s also important to note that this conclusion does not always hold when there is less time to make withdrawals. For many clients in their late-80s with large RRIF balances, we often recommend more aggressive withdrawals, as there is less time for tax-sheltered compounding to work and a greater risk of a large, highly taxed balance at death.

So… Should You Draw Down Early?

Under Lucy’s assumptions, keeping funds inside the RRIF as long as possible maximized legacy.

But your situation may be very different.

For some clients, smoothing income earlier can reduce lifetime tax.
For others, managing OAS clawback is the priority.
For others still, lifestyle spending is more important than estate size.

There is no universal “best” answer – only the best answer for you.

If you would like us to model your own situation and explore the trade-offs, we would be happy to help. Please reach out to your Mah Investment Group advisor to see if a personalized financial plan makes sense for you.

Warmly,
Marissa & Ying