Which account should I draw down first in retirement in Canada?

While everyone's tax situation is different, a common strategy is to draw down Non-Registered accounts first (to minimize taxable capital gains over time), followed by RRSPs (which are fully taxable), and finally TFSAs (which grow tax-free and are untouched by income testing like the OAS clawback).

How is the OAS clawback calculated in retirement planning?

The OAS clawback (Old Age Security pension recovery tax) is triggered when your net world income exceeds a specific threshold (e.g., $90,997 for 2024). Above this amount, you must repay 15% of the excess income. Our Retirement Planner automatically calculates this clawback year-by-year based on your projected taxable withdrawals.

The Ultimate Guide to Canadian Retirement Drawdown Planning [2026]

1. Introduction

Retirement planning in Canada is notoriously complex. Unlike jurisdictions with a single dominant pension scheme, Canadians rely on a patchwork of registered accounts (RRSP, TFSA), non-registered investments, and a two-tiered public pension system (CPP and OAS).

For years, we’ve provided isolated tools to estimate your CPP benefits. But knowing your CPP payout is only half the battle. To truly answer the question “Can I afford to retire?”, you need to simulate your entire asset drawdown.

That’s why we built the holistic Retirement Planner. This guide will show you exactly how to use it to project your cash flow, minimize tax drag, and ensure your money outlives you.

2. Understanding Your Asset Buckets

Before simulating your drawdown, it’s crucial to understand how different accounts are treated at withdrawal. Our planner asks for balances in four distinct buckets:

RRSP / RRIF: Withdrawals are fully taxable as regular income. By age 71, you must convert your RRSP to a RRIF and take minimum annual withdrawals, which can unintentionally push you into higher tax brackets.
LIRA (Locked-In Retirement Account): Similar to an RRSP, but holds funds transferred from a former employer’s pension plan. Withdrawals are highly regulated and fully taxable.
TFSA (Tax-Free Savings Account): The holy grail of retirement accounts. Withdrawals are completely tax-free and do not count toward income-tested benefits like the OAS clawback or GIS.
Non-Registered: Investments held in standard cash or margin accounts. Only 50% of capital gains (or 66.67% under new rules for large gains) are taxable.

Our calculator’s algorithm is designed to draw from these buckets in an optimized sequence to meet your target income while extending the lifespan of your portfolio.

3. The Government Floor: CPP & OAS

A major feature of the LoonieFi Retirement Planner is its automatic integration of the Canada Pension Plan (CPP) and Old Age Security (OAS).

You don’t need to manually calculate these benefits beforehand. Based on your current age, retirement age, and current income, the planner will automatically estimate your CPP payout (including the new Enhanced CPP provisions) and your OAS entitlement.

This creates a “guaranteed income floor.” For example, if your target retirement income is $60,000/year, and your combined CPP and OAS provide $20,000, the simulator knows it only needs to withdraw $40,000 from your personal portfolio to close the gap.

4. Step-by-Step Guide to Using the Calculator

Let’s walk through running your first simulation.

Step 1: The Basics

Navigate to the Retirement Planner and start by entering your demographic data.

Current Age & Retirement Age: These determine how many years you have left to save, and when you plan to start drawing down.
End Age (Life Expectancy): By default, we use 90, but you can adjust this based on your family history.

Step 2: Target Income

Enter your Target Income ($/yr). This is the amount of money you want in your pocket after taxes, in today’s dollars. The calculator automatically adjusts this figure for inflation (typically 2.1%) for every year of your retirement to preserve your purchasing power.

Step 3: Portfolio Balances

Input your current balances for your RRSP, TFSA, LIRA, and Non-Registered accounts. If you don’t have a specific account type, just leave it at $0.

Step 4: The Projections

Once your data is in, scroll to the Projections section. This is where the magic happens.

Real vs. Nominal Toggle: By default, charts are shown in “Real” (Today’s Dollars) so you can conceptualize the purchasing power. Toggling to “Nominal” shows the inflated, actual dollar amounts.
Portfolio Value Chart: A visual representation of your asset buckets depleting over time.
Income Sources Chart: A stacked bar chart showing exactly where your money comes from each year—how much from CPP, how much from OAS, and which specific account was tapped to meet your target.

5. Decoding the Results

In the metrics panel, you will see two primary indicators of your plan’s health:

Retirement Status

Fully Funded: The holy grail! This means your assets, combined with your government pensions, successfully sustained your target lifestyle until your “End Age” without running out.
Depleted at Age X: This indicates a shortfall. Your portfolio hits $0 before your target life expectancy. If you see this, consider lowering your target income, working a few years longer, or aggressively increasing your current savings rate.

Final Estate Value

This shows the remaining value of your portfolio at your “End Age.” This is what you will leave behind as an inheritance (before estate taxes).

6. Conclusion & Next Steps

Retirement planning isn’t a “set it and forget it” exercise. As your income changes, inflation fluctuates, and your portfolio grows, your projections will shift.

We recommend running your numbers through the LoonieFi Retirement Planner at least once a year. By simulating your asset drawdown today, you can make the precise course corrections needed to ensure a wealthy, stress-free tomorrow.