Weekend Reading: Your Retirement Withdrawals Edition
One of the biggest shifts in retirement is learning how to spend your own money without second guessing every decision. After years of building your portfolio, it can feel strange to start drawing it down. That is usually when people start watching the markets too closely and stressing about every dip.
The whole point of retirement is to get your time back. You should be travelling, golfing, or working on your pickleball spin serve, not refreshing the financial news multiple times a day.
A simple system can help take the pressure off. Start with the foundation: hold your risk-appropriate asset allocation ETF in about 85 to 90 percent of your RRSP or RRIF, keep a 10 to 15 percent cash wedge in a HISA ETF to cover near-term withdrawals, and turn off DRIPs so distributions naturally flow into your cash wedge without selling shares.
Withholding Taxes and Fees
If you are withdrawing from an RRSP, the bank will withhold tax at source. They withhold 10 percent on withdrawals up to five thousand dollars, 20 percent on withdrawals between five thousand and one and fifteen thousand dollars, and 30 percent on amounts above fifteen thousand.
What matters more is your average tax rate for the year, because that determines how much tax you will actually owe. That is why some retirees prefer smaller monthly withdrawals, others choose quarterly, and some make one or two larger withdrawals if their average tax rate will be closer to 20 or 30 percent anyway.
Also watch for withdrawal fees. Some institutions still charge for RRSP withdrawals, often called partial deregistration fees. If that is the case, switching to a RRIF can make more sense because RRIF withdrawals are usually free and there is no withholding tax on the minimum amount (or switch to a platform like Wealthsimple, which does not charge RRSP withdrawal fees).
Quarterly Rebalancing
Once the structure is in place, your month-to-month routine is simple. Sell the amount you need from the HISA ETF, move the cash to your chequing account, and carry on with your day. The important part is the quarterly check. This is the rule that lets you avoid watching the markets every day.
Choose four dates. March 15, June 15, September 15, and December 15 work well. On those dates only, ask one question: is your asset allocation ETF up year-over-year?
All that means is this: is the price today higher than it was twelve months ago? If the answer is yes, sell enough units to refill your cash wedge back to the 10 to 15 percent target. If the answer is no, do nothing and check again next quarter.
Why use year-over-year instead of year-to-date? Year-to-date changes reset every January 1 and can give a false sense of recovery. A portfolio might be slightly positive year-to-date in March even though it is still well below where it was a year earlier. Year-over-year is a better measure of whether the market has actually recovered and can support a small sale to top up your cash wedge.
Rebalancing in Practice
Now look at how this works in practice. If you retired at the end of 2024 with 90 percent VGRO and 10 percent CASH, you would have rebalanced in March 2025 because VGRO was essentially flat year-to-date but up about 12 percent compared to March 2024.
Even after the short-lived tariff pullback, VGRO was still up roughly 11 percent year-over-year in June 2025, which would trigger another refill.
Compare that with the much tougher 2022 bear market. If you retired on December 31, 2021, VGRO fell more than 17 percent between January and the October bottom. You would have actually rebalanced in March because it was slightly positive year-over-year, but after that the signals would all have been negative.
In June, VGRO was down about 12 percent year-over-year. In September, down about 13 percent. In December, down about 11 percent. In March 2023, still down roughly 7 percent. You would not have replenished your cash wedge until June 2023 when VGRO finally turned positive year-over-year again. Your cash wedge and the ETF’s distributions carried you for roughly fifteen months without being forced to sell into a downturn.
Remember, your 10-15% cash wedge is designed to give you 18-24 months' worth of safe spending without having to sell stocks during a down market.
This cash wedge + monthly withdrawal + quarterly rebalancing approach is not overly complicated. It's not predictive. It simply gives you a calm, structured framework so you can spend your time actually enjoying retirement instead of worrying about what the markets are doing on a daily or weekly basis.
This Week's Recap:
My last Weekend Reading looked at the concentration of the magnificent seven stocks and how to diversify away from tech and AI without market timing.
Before you fire your parents' advisor and start DIYing their portfolio in low cost ETFs, read this first.
Then I explored the myth of the too large RRSP that social media finfluencers have been pushing. Nonsense.
Finally, I looked at the annuity puzzle and why Canadians mostly avoid this misunderstood retirement income stream.
Promo of the Week:
I mentioned Wealthsimple's new Apple promotion with some hesitation because, to me, I'd rather have cold hard cash than a new iPhone or MacBook.
But many of you feel differently and were excited because you NEEDED a new phone or computer. Hey, you do you.
Here's the details on Wealthsimple's latest deposit / transfer promotion:
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| Move $300,000 | iPhone 17 Pro | or MacBook Pro 14” M5 |
| Move $500,000 | iPhone 17 Pro and MacBook Pro 14” M5 | |
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I get it. If you're in the market for a new iPhone 17 it's starting at $1,129. And, depending on the MacBook you're looking at paying at least $1,299.
- Open a Wealthsimple account (here, use my referral link and get an extra $25: http://wealthsimple.com/invite/FWWPDW), and;
- Once you’ve opened an account, or if you already have an existing account, you’ll want to register for the new Apple promo offer: https://www.wealthsimple.com/en-ca/apple
- Transfer or deposit $100,000+ into almost any account within 30 days
Remember, when transferring accounts from one institution to another I want you to keep in mind my Las Vegas analogy:
“What happens in your registered account stays in your registered account. You’re just moving across the street to a cheaper hotel with better amenities. You’re still in Vegas.”
This applies to all registered accounts (RRSP, RRIF, LIRA, LIF, TFSA, RESP, etc.).
Open an account at Wealthsimple, open the appropriate account type(s), initiate the transfer(s), and Wealthsimple’s back office contacts your existing bank’s back office to request the transfer. This is a federally regulated event and happens every day, and no break-up conversations need to be had at all.
Weekend Reading:
Many thanks to the Toronto Star's Lora Grady for including my comments in her step-by-step guide to building a $1M portfolio.
A must-read post by Nick Maggiulli on investing at all-time highs:
“Whether you are investing in U.S. stocks, international stocks, gold, or Bitcoin, the evidence suggests that all-time highs should not alter your regular investment plan.”
What is the goal of decumulation in retirement? Michael James says it's to maximize his safe spending level.
Here's how retirees can manage their quarterly instalment tax payments to the CRA.
A Wealth of Common Sense blogger Ben Carlson on why bull markets make you feel smarter than you really are, and bear markets make you feel dumber than you really are.
PWL Capital's Ben Felix covers “Investing 101”: why investing matters, what stocks and bonds are, what a sensible approach to investing looks like, and what tools you should consider using to implement these ideas:
Advice-only planner Shannon Lee Simmons explains the growing disconnect between teens and the concept of money.
For small business owners: when to take salary versus dividends.
The politics of Old Age Security reform are shifting, and a major driver is the continued generosity of OAS to retired couples with six-figure incomes (each).
Finally, filmmaker Norman Jewison had always planned to leave his $30-million estate to his three children. Then, in a will signed two months before his death, he bequeathed the bulk of his fortune to his second wife.
Have a great weekend, everyone!
Thank you for very clear and practical explanation!
I’m assuming that the quarterly dates are arbitrary? I’d lean to something like Jan, April, July, October because of distribution timing… ?
For sure, select dates that work for you and just set a calendar reminder. Mid-Jan, April, July, October can also work well if you’re logging-in anyway around the timing of distributions.
Do you have any suggestions for what good cash ETFs to use for the 10% cash wedge?
Hi Joe, I’m partial to CASH (Global X HISA ETF) because the ticker symbol is easy to remember. But CSAV, CBIL, or PSA work just as well.
Hey Robb
What do you think of ATL5070 a Rennasance Mutual Fund?
We send our installments monthly. Make sure that they are applying the installments to the correct year . Last June when we were doing our taxes we has a huge refund , I got the accountant to bring up our CRA accounts and seen that they were applying to previous years account . We left all money’s with CRA to avoid any penalties this year . We have automatic withdrawls set up . We will be checking the 20th of January to ensure going to proper account .
Hello Robb, thank you for your post. I love your simple and structured framework for withdrawals in retirement.
Can the same framework be used to withdraw from a non-registered account? Should tax efficiency be taken into account when using the two-ETF method for withdrawals from a non-registered account? Thanks
Hi BP, yes I would use the exact same framework for your non-registered investment withdrawals.
I’d start with the RRSP, filling up your low marginal tax brackets with RRSP dollars, and then move to the non-registered account withdrawals (selling the HISA ETF and withdrawing the cash to your chequing account, and then rebalancing quarterly).
Don’t fear rebalancing and triggering some capital gains. Remember that $1 withdrawn from your RRSP is $1 taxable dollar of income, while $1 of capital gains is only 50 cents of taxable income.
The caveat to this is setting up your 90% / 10% system in the first place inside of a taxable account could trigger some capital gains – so you want to tread carefully and make sure you can manage any additional tax by either contributing an equivalent amount to your RRSP, or by taking a 2-3 year approach to setting up your non-registered portfolio to spread the tax impact across different tax years.
Thank you Robb. I really appreciate your reply. I’m a big follower of your blog.
Love this simple system for using cash in a downturn. What about a scenario where you have y-y growth but are still well below previous highs? Are you not still selling at a loss?
Hi Rob, let’s think of this year as an example. VEQT is up 19% on the year. By any measure, it has been a banner year. Even if VEQT drops by 3-5% by year-end, your portfolio is still up double-digits.
By comparison, I might only be using 6-7% for the annual expected return in your plan. All signs are pointing towards rebalancing at your next quarterly interval, even if the market has dipped 3-5% off of its highs.
By sticking to this framework we avoid obsessing with the day-to-day fluctuations in the market. You’ll never time your rebalancing to be at the tippy-top of the market. A rules-based approach keeps things simple without tying yourself in knots about market timing.
Another way to look at it is what you’re trying to avoid with the cash wedge, which is selling stocks at a loss to meet your regular withdrawal needs.
We don’t want to tie our hands when it comes to refilling our cash wedge. Take every opportunity to replenish the cash bucket to 10-15%, because when a downturn happens, it often happens swiftly and out of nowhere. You don’t want to be caught with a 2-3% cash wedge right when the market downturn hits, just because you didn’t feel like rebalancing.
Thanks Robb, this framework is exactly what I was looking for! It sounds like you’re a fan of asset allocation funds in retirement vs separate stock/bond etf’s? I’m thinking of a scenario where you needed more than 2 yrs of cash?
Hi Rob, if you held 90% in VGRO and 10% in CASH you would essentially have a mix of 72% equity, 18% bonds, and 10% cash. No real need to separate the equities and the bonds when VGRO is automatically rebalancing daily.
Hi Robb
I am a current client and was going to ask you this question privately but perhaps it would be of benefit to others as well. Say VEQT is at $30 and drops 20% over a year and now at $24. The next year it goes up by 10% and now at $26.40. You suggest we rebalance here, would it not make more sense to peg the value at $30 and not rebalance until it it is at or above $30 again? What am I missing here?
Hi Jerry, thanks for asking this question here. I would say this depends on the size of your cash wedge (or remaining cash wedge). If you can afford to kick this decision to the next quarter, I can see merit in doing that. You could also do a partial refill (sell enough to replenish 2.5-5% of the wedge).
I like rules, but everyone’s situation is different and every market downturn is different. Rules can be broken.
Hi Robb,
Our withdrawals will consist mostly of harvesting the dividends from our non-registered account, and melting down our RSPs from 59(ish) to 70, while we defer CPP. Not sure about OAS – it will really depend on our cash flow situation, but we might defer OAS also.
Speaking of OAS, I can get behind the type of reform mentioned in the Globe article. While reducing the amount of OAS I might receive, I would be in favour of a revised clawback formula, as long as the savings do indeed go to other seniors who need it, either through enhanced GIS or some other approach. IF there’s room to redistribute previous OAS funds to other segments of society that are needy then that’s fine too.
I also think that any such changes shouldn’t apply to anyone already receiving OAS, or in the process of deferring OAS. Imagine burning through your RSP savings for a higher OAS only to learn that the payments you were expecting are much lower. Maybe the impact would still be low, but any changes should accommodate taxpayers who are already eligible for OAS.
James
Hi James, I think most sensible people can get behind OAS reform when the funds can be redistributed into a more generous GIS and maybe even into Canada Child Benefit at the lower income levels.
We don’t need precious tax revenue going to already wealthy seniors who, I can tell you, are not spending the money anyway.
When the Harper government pushed back the OAS retirement eligibility to 67 they phased it in over 10 years so as to not affect recent or soon-to-be retirees who were counting on OAS to be there in its current form. I would imagine any changes would have a similar grandfathering and phase-in over many years.
Hi Robb,
Once again, the timing of your advice hits the mark! I was just in the process of researching cash wedge management and your detailed explanation summarizes my research nicely. One question: Is there any merit to the notion of using the sum of the current year’s and next year’s RRIF minimum withdrawal percentages as the basis for the size of the cash wedge?
Thanks as always for your feedback.
Regards, Alan
Hi Alan, I haven’t heard of that particular rule but it sounds reasonable. I’d personally want to peg the cash wedge to at least two years of expected withdrawals (which might be higher than the RRIF minimum).
Two years’ of RRIF minimums might be too low in your mid-to-late 60s, and too high in your mid-to-late 70s, whereas 10% + dividends covers the higher meltdown in your 60s, and covers the higher expected minimums into your 70s and beyond once CPP and OAS have fully kicked-in.
Hi Robb,
Not a ‘rule’ just a notion on my part. I’m likely overthinking it to the point of hairsplitting (wouldn’t be a first,lol). Your explanation here makes perfect sense.
Thanks Again!
It must be noted that if you transfer a LIF or RRIF from an institution to Wealthsimple (or any other institution), you must first withdraw your minimum BUT once the transfer has been executed, you cannot withdraw from your LIF or RRIF until the following year. Just something to keep in mind.
Would you use the same dates to rebalance AWAY from the HISA and into VEQT in the event that VEQT dropped significantly? And if so, would you use a % trigger or just do it on the date? I’m thinking of a scenario in which VEQT starts at 85% of the portfolio and then drops to say 80% and the HISA would then be at 20%.
Why are all the links in your past emails expiring?