Summary: A $2M portfolio can fund a robust retirement, but results depend on account mix (RRSP, TFSA, non-registered), tax strategy, CPP/OAS timing, and the order of withdrawals—not on a flat “4% rule.”
The 4% Rule—Useful Benchmark, Not a Plan
The 4% rule suggests withdrawing 4% in year one and indexing to inflation. In Canada, taxes and benefits make this simplistic. Outcomes hinge on where assets sit (RRSP, TFSA, non-registered), how withdrawals are taxed, investment returns, inflation, and when CPP/OAS begin.
A $2 Million Portfolio in Practice
A representative mix might be $1.2M in RRSPs, $250k in TFSAs, and $550k in non-registered accounts, with CPP/OAS beginning at 65. On paper, withdrawing about $96k/year (indexed) can work; however, shifting more to TFSA/non-registered can materially increase after-tax wealth. Account location can rival portfolio size in importance.
Comparing Withdrawal Strategies
TFSA-First
Simple but often tax-inefficient; large RRSP balances remain for late-life, creating a heavy estate tax burden.
Pro-Rated
Drawing proportionally from RRSP, TFSA, and non-registered can smooth taxes and preserve more after-tax wealth.
RRSP Meltdown
Accelerate RRSP/RRIF withdrawals in low-income years before CPP/OAS to lower lifetime tax rates.
Spending That Matches Real Life
Most retirees spend more in their early 60s, then gradually taper. A staged pattern (e.g., $10k/month to 70, $9k to 80, $8k thereafter) can remain sustainable when paired with tax-aware withdrawals and ongoing monitoring.
Stress Testing for Confidence
Plan for lower returns, higher inflation, and longer lifespans. Keep a prudent buffer so adverse scenarios do not force cutbacks. Periodic reviews help adjust withdrawals, rebalancing, and CPP/OAS timing as conditions change.
Optimize Your $2M Strategy
Every retirement journey is unique. Use our detailed calculator to stress-test your specific numbers against inflation and tax scenarios.
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