Minimizing taxes in retirement is all about timing and strategy. Withdrawing from your registered accounts in a tax-efficient way can help your savings last longer and maximize your retirement income. Here are some practical strategies to consider:

1. Maintain Consistent Taxable Income

Try to keep your annual taxable income steady and within the lowest possible tax bracket. Spreading out withdrawals from your RRSP or RRIF over several years, rather than making large lump-sum withdrawals, helps you avoid being pushed into a higher tax bracket and paying more tax.

2. Sequence Withdrawals Strategically

A popular approach is to withdraw first from non-registered (taxable) accounts, then from registered (tax-deferred) accounts like RRSPs or RRIFs, and finally from TFSAs. This strategy allows your tax-deferred and tax-free accounts to continue growing, maximizing compound growth over time.

3. Consider Early RRSP/RRIF Withdrawals

If you have a large RRSP balance, consider making withdrawals earlier in retirement, before you’re required to convert your RRSP to a RRIF at age 71. This can help you spread out your taxable income and avoid large mandatory withdrawals later that could bump you into a higher tax bracket. If you don’t need the income immediately, you can contribute the withdrawn funds to your TFSA for future tax-free growth.

4. Delay Government Benefits

If your finances allow, delaying government benefits like CPP/QPP and OAS until age 70 can increase your monthly payments and help you avoid the OAS clawback, which applies if your income exceeds a certain threshold. Drawing down your RRSPs or RRIFs before starting these benefits can help keep your taxable income below the OAS recovery threshold.

5. Use Pension Income Splitting

If you have a spouse in a lower tax bracket, splitting eligible pension income (including RRIF withdrawals after age 65) can reduce your household’s overall tax bill and may help you avoid the OAS clawback.

6. Proportional Withdrawals

Instead of depleting one account at a time, consider withdrawing proportionally from all your account types based on their share of your total savings. This approach can help stabilize your tax bill and potentially reduce your lifetime taxes.

7. Use TFSAs for Flexibility

TFSA withdrawals are tax-free and don’t affect government benefits. Consider using your TFSA for unexpected expenses or to manage your taxable income in years when your income might otherwise be higher.

8. Work with a Financial Advisor

Personalized planning is essential and individual circumstances can vary. That is why it is important to work with an advisor and your tax professional, to help you model different withdrawal scenarios and coordinate your income sources for optimal tax efficiency. 

By carefully timing and coordinating your withdrawals from various retirement accounts, you can significantly reduce your overall tax burden and help your savings last longer. Consider these strategies as you plan your retirement income, and consult with a professional to tailor a plan that fits your unique situation.