Mr. and Mrs. Lee are retired and need $70,000 net income annually. They receive $20,000 from OAS/CPP, and $30,000 from a DB pension. They have $500,000 in a RRIF, $150,000 in a TFSA, and $100,000 in non-registered investments. Assuming a 5% average annual return on all investments and a 20% average tax rate on taxable income, how much do they need to withdraw annually from their RRIF and non-registered accounts, respectively, to meet their income goal, prioritizing tax efficiency and longevity?

Question: Mr. and Mrs. Lee are retired and need $70,000 net income annually. They receive $20,000 from OAS/CPP, and $30,000 from a DB pension. They have $500,000 in a RRIF, $150,000 in a TFSA, and $100,000 in non-registered investments. Assuming a 5% average annual return on all investments and a 20% average tax rate on taxable income, how much do they need to withdraw annually from their RRIF and non-registered accounts, respectively, to meet their income goal, prioritizing tax efficiency and longevity?

Answer options:

• RRIF: $45,000, Non-registered: $0 ✅ RRIF: $25,000, Non-registered: $0
• RRIF: $20,000, Non-registered: $5,000
• RRIF: $10,000, Non-registered: $15,000

Correct answer: RRIF: $25,000, Non-registered: $0

Explanation: Net income needed is $70,000. Guaranteed income (OAS/CPP/DB) is $50,000. Remaining net income needed is $20,000. To achieve this, gross taxable income from RRIF/non-registered is required. If $25,000 is withdrawn from RRIF (taxable), $25,000 * (1-0.20) = $20,000 net income. This withdrawal strategy avoids triggering capital gains from non-registered assets and preserves the TFSA for later use or estate purposes, making it tax efficient. Prioritizing the RRIF first (after CPP / OAS / DB) is a common strategy to maximize the tax-free growth of TFSA.