What to hold near retirement, and which account to draw first

Last week ended on two problems: if your money has to last 30 years, it can't all sit in cash, and it has to come out of your accounts in some order. This post takes them one at a time, starting with what to hold and then which account to spend first.

Why most of it stays invested

A plan that runs to 94 means the money you won't touch until your 80s still has twenty years or more to grow. Moving all of it into GICs at 65 swaps a market drop you can see for a slow loss to inflation you can't, and over 30 years the slow loss usually costs more.

So I'd keep most of a retirement portfolio in the same kind of low-cost asset allocation ETF you held while saving, at a mix of stocks and bonds you can stick with when markets fall. How much of your money should be in stocks? walks through picking that mix, and the logic doesn't change much the day you stop working.

What does change once you retire is that you're selling instead of buying, and that's when the sequence-of-returns risk from Part 1 starts to matter. If the market drops 30% in your first year of retirement and you sell to pay the bills, you sell near the bottom. Those shares aren't there for the recovery.

How much to keep in cash

The right amount depends a little bit on what you're comfortable with. Some people are okay keeping a few months of spending in cash, while others would rather have a year or two. The more cash you hold, the more of a drag it is on your overall returns, but the easier it is psychologically to keep spending money during a market downturn.

Say your plan needs $30,000 per year from your own savings, which is about the gap between a $50,000 target and average CPP plus full OAS from Part 2. Three months of that is $7,500. A year or two is $30,000 to $60,000.

In practice this can be two funds: one asset allocation ETF for the long-term money, and a high-interest savings ETF or a money market fund for the cash. Your withdrawals come out of the cash fund, never straight out of the ETF. You turn off automatic dividend reinvestment (often called DRIP) on the ETF, so its distributions land in cash and help refill it. After a good year in markets, you sell a little of the ETF to top the cash back up. After a bad one, you leave the ETF alone and spend the cash.

Whatever amount you land on, the cash has the same job: a bad market never forces you to sell, which makes it much easier to stay invested with the rest. The failure I'd most want to avoid is the retiree who gets scared in the first big drop, sells everything, and ends up in GICs for good.

I did a smaller version of this with my own FHSA, because we're planning to buy a home in about five years. I moved part of it into XSB, a short-term bond fund, so a crash the year before we buy doesn't get to decide the purchase for us. Retirement is the same idea, only with the next year or two of groceries instead of a down payment.

Which account to draw first

For someone who stops working in their early 60s and waits on CPP and OAS the way Part 4 described, a common default looks like this:

• Through your 60s, live mostly on RRSP withdrawals and any non-registered savings, while your other income is low.
• Start CPP and OAS later, so they're bigger for life.
• Leave the TFSA for last, or for big one-off costs along the way.

The RRSP goes first because it has to come out eventually. By the end of the year you turn 71 it becomes a RRIF, and the minimum you have to withdraw starts at 5.28% of its January 1 value and climbs every year after, up to 20% at 95. Leave a big RRSP untouched until then and those forced withdrawals stack on top of CPP and OAS in the same years. A $500,000 RRIF at 71 pushes out $26,400 of taxable income that year whether you need it or not.

Drawing some of it in your 60s, when it may be your only income, spreads the same tax over more years and keeps more of it in the lower brackets. It also keeps the later RRIF minimums smaller, which means less exposure to the OAS clawback in your 70s and 80s.

The TFSA goes last because it's the most useful account to have later on. As Part 3 showed, a TFSA withdrawal doesn't count as income, so it won't push you up a bracket or into the clawback, even in the years when RRIF minimums, CPP and OAS are all paying out. That's worth more at 80 than at 62. For someone who expects to qualify for GIS, it matters even more, because RRIF income shrinks the top-up and TFSA withdrawals don't.

I wouldn't take this so far that you empty the RRSP as fast as you can in your 60s. Paying tax years before you have to has a cost of its own, and if your RRSP holds mostly bonds, the interest that was sheltered inside it gets taxed every year once it moves to a non-registered account. Your goals change the order too, since someone who wants to leave the most to their kids might draw differently from someone who wants the most to spend while they're alive. If I was in your shoes, I'd run the numbers both ways before pulling a big chunk out of an RRSP early.

What's next

The plan can be in good order and the people who saved hardest still often won't spend it. Next week closes the series with permission to spend. That one is coming soon.

This is general financial education, not individual advice. RRIF minimum factors are set by the federal government and can change; the figures here are the factors CRA publishes, unchanged for 2026. The $30,000 example uses the average CPP and full OAS figures from Part 2. The cash and account-order charts are illustrations, not real market data or a projection. For advice specific to your situation, talk to a qualified professional.