In retirement, your spending needs are likely to change over time. Most retirees spend more in the early years while they are healthy and active, and gradually spend less as their lifestyle slows down. If your spending happens in phases, your withdrawal strategy should reflect that. Planning ahead can help you enjoy your money now, while staying financially secure later.
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Carolyn and Don’s Retirement Vision
Carolyn and Don were clear about their goals. They wanted to spend $16,000 per month for the first 15 years of retirement, then adjust spending based on what their remaining assets could support until age 90.
Here’s a snapshot of their financial starting point:
Carolyn
- $1.1 million in RRSPs
- $550,000 in a non-registered account
- $100,000 in a TFSA
Don
- $250,000 in RRSPs
- $290,000 in a non-registered account
- $100,000 in a TFSA
Joint Assets
- Home valued at $1 million
- Cabin valued at $600,000
- No debt
What Happens Without a Strategy
When we first mapped out Carolyn and Don’s plan using their preferred spending rate, their savings lasted only 12 years. After that, they would have to sell their cabin and later their home to continue funding retirement. Even then, the original plan only left them with $100,000 by age 90. Their estate was nearly depleted.
The issue wasn’t just how much they were spending, it was the order in which they were withdrawing money.
A Smarter, Phased Retirement Withdrawal Strategy
We helped them structure their plan into three distinct phases, each with its own withdrawal approach.
Phase One: Early Retirement (Years 1–12)
Instead of drawing on their TFSAs first, we targeted a taxable income of $77,000 per person per year. This meant drawing more from their RRSPs while those accounts were still relatively large. This allowed us to reduce future required RRIF withdrawals and make better use of lower tax brackets early on.
Phase Two: Mid Retirement (Years 13–15)
Once their cabin was sold, they had new funds in their non-registered accounts but fewer RRSP assets. During this period, we reduced their targeted taxable income to $35,000 each. Most of their income now came from the non-registered account, requiring less tax planning complexity.
Phase Three: Late Retirement (Age 78 onward)
When the home was sold, the proceeds were used to top up their TFSAs and fund ongoing living expenses through their non-registered account. They planned to rent during this period, and continued to contribute to their TFSAs each year while drawing down the remaining non-registered funds. This approach provided flexibility and minimized taxes in their final years.
The Outcome
By planning around the three spending phases and aligning each one with a different withdrawal strategy, we increased Carolyn and Don’s estate value from $100,000 to $414,000. More importantly, they were able to meet their lifestyle goal of $16,000 per month for 15 years, while maintaining long-term sustainability.
This strategy didn’t involve earning more or spending less. It came down to better planning withdrawals with their life stages and account types in a tax-efficient way.
Final Thoughts
A one-size-fits-all approach does not work in retirement. As your life changes, your retirement withdrawal strategy should too. Planning around your actual lifestyle phases can help you spend with confidence early on, reduce tax later, and preserve more for your estate or future needs.
If you want help building your own phased retirement withdrawal strategy, visit our website and book an appointment.
