# Which first to draw down TFSA or RRIF



## gemma119 (Apr 6, 2009)

We are a couple that are in our middle 70's. We take our RRIF payouts every year for each of us. The question here is to supplement our life style should we take the very minimum RRIF payout or more? We also both have TFSA which we paid the upper limit into until a couple of years ago. We have no pension plans other than OAS & CPP. We feel we live a very comfortable life and lack for nothing. We do want to keep our income taxes as low as possible. I was told that we should reduce our RRIF first. My thinking that since RRIF payments are income we have to include in our taxes that it puts us into a higher tax bracket where TFSA does not have to be included. Am I thinking right or am I missing something? Thanks!


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## Eclectic21 (Jun 25, 2021)

YMMV as to which is preferred.

Some are close to the OAS clawback threshold that would reduce future year's OAS so that they prefer to use the TFSA.

Some have had good gains and not as close to the thresh hold so that using the RRIF withdrawal delays when they hit the OAS clawback thresh hold. Others who make the same choice are worried about a surviving spouse having a much larger RRIF.

Some do a bit of both.


If you really don't need the money and have available TFSA contribution room, another option would be to take a bit larger RRIF withdrawal to make TFSA withdrawals. Depending on the tax rates in question, dealing with the larger taxable income might be as simple as donating to a charity you like. If there's non-registered assets with capital gains, donating some shares might be useful. This type of donation sets the capital gain to zero, increasing the effectiveness versus selling to donate the proceeds.









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Cheers


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## ian (Jun 18, 2016)

You might want to get some tax advice going forward. We will be doing this again when our RRIF/LIF kick in two years or so from now. Our experience is that getting professional tax advice and a tax plan moving forward pays for itself. 

You could also use a tax program and do some whatifs on your own. One that has the option to maximize spousal returns. It might give you some insight.

One thing to remember, tax brackets are incremental. Once your taxable income reaches another tax bracket only income above that level is taxed at that higher rate.

RRIF income is eligible for pension splitting as you are probably aware.


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## AltaRed (Jun 8, 2009)

Whether to tap more of the RRIF, or alternatively tap into the TFSA is very much a marginal tax rate question, and where one is at with respect to claw backs, e.g. the old age credit and/or OAS claw back, and finally relative differences in RRIF withdrawals to use pension income splitting. Without that information, no one here can provide effective input. Post #3 has nailed it. Either obtain tax advice or run scenarios yourself through appropriate tax calculators.


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## RICARDO (Nov 4, 2021)

@gemma
What you want to keep your eye on is the OAS clawback threshold. If possible try not to go over that.
I'm not an accountant or advisor so I have no knowledge of the implications for a married couple.
At any rate you mentioned that you stopped paying the max in to your TFSA's a few years back so that implies your have more than the yearly room to contribute.
You are taxed on your perceived income - various pensions, govt programs and other income, etc. You can look up your tax rate per your income and if you are below the max amount before it would change your tax bracket then pull the extra money from the RRIF to top up your TFSA's. If your are paying 33% tax on your present income then you can bump up your withdrawals to close to the max for your tax bracket. You will pay more tax monies but the percentage of tax you pay would stay the same. This permits you to tax shelter your money in the TFSA.
It also diminished your RRIF faster and thereby limits the potential of breaking through your tax bracket and getting your OAS clawed back.
Just my personal opinion

RICARDO


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