Which accounts should I draw from first?

A coordinated approach often works best: consider pro-rated withdrawals or an RRSP meltdown before CPP/OAS to reduce lifetime taxes while preserving TFSA room.

What is an RRSP meltdown?

A strategy of accelerating RRSP/RRIF withdrawals in low-income years (often before CPP/OAS) to lower future tax rates, reduce OAS clawback risk, and minimize estate taxes.

Should retirement spending be flat every year?

Spending typically starts higher in the 60s (travel, hobbies) and tapers later. Front-loading can be sustainable if paired with a tax-efficient withdrawal plan and stress tests.

Retiring with $2 Million in Canada: How Much Can You Safely Spend?

Q: Is the 4% rule reliable in Canada?

It is a rough starting point. Tax treatment of RRSP, TFSA, and non-registered accounts, CPP/OAS timing, inflation, and market returns can make a fixed 4% approach suboptimal.

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. This can reduce lifetime taxes, mitigate OAS clawbacks, and lower estate taxes, while keeping TFSA space valuable for compounding.

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.

Key Takeaway

A $2M portfolio offers flexibility, but results depend on withdrawal order, taxes, and benefit timing—not a fixed percentage. The greater risk for many is delaying enjoyment. A coordinated, Canada-specific plan can deliver both security and freedom.

Disclaimer: Educational only; not financial or tax advice. Consult a qualified professional for personalized planning.

FAQs

Is the 4% rule reliable in Canada?

It is a starting point. Optimize for Canadian tax rules, CPP/OAS timing, and account mix to improve outcomes.

What is the RRSP meltdown strategy?

Withdrawing RRSP/RRIF funds earlier in low-income years—often before CPP/OAS—to reduce lifetime taxes and potential OAS clawbacks.

Should I draw TFSA first?

Not always. Preserving TFSA for tax-free growth while drawing some RRSP/non-registered can be more tax-efficient long term.

Retiring with $2 Million in Canada: How Much Can You Really Spend?