How to Use the Bridge Years Before CPP and OAS
For many Canadians who retire in their early sixties, the years before CPP and OAS begin feel straightforward. Employment income has stopped, so the natural instinct is to live on cash or non-registered savings, keep taxable income low, and leave the RRSP alone for later.
That approach is not necessarily wrong. In some cases, it is exactly the right move. But it can also miss the larger planning question. The years between retirement and the start of government benefits may be some of the lowest-tax years you will ever have again, and that can make them a valuable window for planned RRSP withdrawals.
The issue is not whether an RRSP withdrawal creates tax. Of course it does. The issue is whether paying some tax in your early sixties may reduce a larger and less flexible tax problem later, once CPP, OAS, pension income, non-registered income, and RRIF minimums begin stacking together.
Why the bridge years matter
Someone who retires at 62 often has a brief period where several future income sources have not started yet. CPP may be delayed. OAS may not begin until 65 or later. A pension may be smaller than it will be later, or not yet active. RRIF minimums have not arrived.
That combination can create unusual control over taxable income. Instead of having income dictated by employment, government benefits, and mandatory withdrawals, you may have a few years where you can decide how much taxable income to recognize and from which accounts.
That matters because low-income years have planning value. If they are left unused, they do not carry forward. You cannot save an unusually low-tax year at 62 and apply it later when a large RRIF minimum is landing on top of CPP, OAS, and investment income.
Consider a hypothetical retiree, Patricia, age 62. She has recently stopped working, expects about $30,000 of current taxable income, and holds roughly $900,000 in her RRSP. Her first instinct is to leave the RRSP untouched until at least 65 because she has enough cash and non-registered savings to fund spending in the meantime.
In Ontario, the lowest combined federal and provincial marginal tax bracket is 19.05% up to $53,891. With taxable income around $30,000, Patricia has roughly $24,000 of room before moving into the next bracket. That does not mean she should automatically withdraw the full amount. It does mean the year has capacity that may be worth using deliberately.
Seen that way, the bridge years are not just an income gap to get through. They may be a short period where recognizing some RRSP income on purpose is cheaper than leaving all of it for later.
Why cash first can be incomplete
The cash-first strategy is popular for understandable reasons. Spending cash does not create taxable income. Selling from a non-registered account may trigger tax only on the gain, not the full withdrawal amount. Leaving the RRSP alone avoids immediate tax and allows the account to continue growing tax-deferred.
Each of those points is true. The limitation is that they focus mainly on the current year.
Using Patricia again, imagine two paths. In the first, she spends only cash and non-registered assets from age 62 to 64. Her tax bill stays low, and the RRSP remains close to $900,000 before market movement. On the surface, that feels conservative.
In the second path, she withdraws $20,000 a year from the RRSP at ages 62, 63, and 64. Over three years, she moves $60,000 out of the registered account while her taxable income is still relatively modest. She pays tax sooner, which is uncomfortable, but two things happen:
- the future registered balance is lower, so later mandatory withdrawals may be smaller
- some income is taxed at roughly 19% instead of potentially 29.65% or more in later years
This is where many retirees get stuck. The tax withheld on an RRSP withdrawal is visible immediately, so it feels like a loss. The future tax pressure avoided by making that withdrawal is much harder to see.
It is also important to remember that RRSP withholding tax is not a separate penalty. It is a prepayment of the tax you owe for the year. The real planning question is whether the income belongs in a lower-tax year now or a more crowded year later.
Non-registered assets also deserve a more careful comparison than they usually get. They are flexible, but they are not tax-free. Interest, dividends, and capital gains can all add taxable income. Selling appreciated investments may trigger gains in a year when you would rather not realize them. In other words, spending non-registered money first does not automatically mean you are avoiding tax. You may simply be choosing a different kind of tax.
The more useful comparison is not RRSP versus cash in isolation. It is this year’s tax bill versus your lifetime tax pattern.
How income starts stacking later
The real problem usually does not appear in the first year of retirement. It shows up later, when income sources that once felt separate begin arriving on the same tax return.
CPP is taxable. OAS is taxable. Pension income is taxable. RRIF withdrawals are taxable. Income from non-registered accounts can add interest, dividends, and capital gains. None of these income sources adjusts itself because the others are already there.
That is why bridge-year planning has to look forward. If Patricia starts CPP and OAS at 65, she may add about $18,100 of CPP and about $8,900 of OAS annually, depending on her entitlement. That is roughly $27,000 of taxable income before any meaningful RRSP or RRIF withdrawals.
If her other taxable income remains around $30,000, she is already near $57,000. In 2026, the combined federal and provincial marginal rate in Ontario rises from 19% to 29.65% above $58,523, up to roughly $95,000. The same RRSP withdrawal that fit comfortably in her early sixties may become more expensive once benefits begin.
Then the RRIF stage arrives. Minimum withdrawals become increasingly restrictive over time. At 65, the RRIF minimum factor is 4%. At 71, it is 5.28%. At 75, it is 5.82%. At 80, it is 6.82%.
On a $900,000 RRIF, a 5.28% minimum at age 71 produces roughly $47,500 of taxable income. That is before CPP, before OAS, before pension income, and before any taxable income from non-registered assets.
Once those pieces are combined, the tax picture can change quickly. A return that looked modest at 62 can become much harder to manage in the early seventies, not because the RRSP changed, but because the surrounding income did.
OAS recovery can add another layer. In 2026, OAS recovery begins when net world income exceeds $95,323. Many retirees think of that as a future issue, and technically it is. But the planning that reduces exposure to it often has to happen earlier, while you still have more control over how much registered income to recognize.
This does not mean the goal is to avoid RRIF income at all costs. RRSPs and RRIFs remain valuable accounts. The point is that tax deferral has a second half. Eventually, the income comes out. The planning decision is whether more of that income is recognized in years you choose, or in years shaped by minimum withdrawal rules and a fuller income stack.
The four variables that drive the decision
There is no universal rule for bridge-year withdrawals. The right answer depends on four variables, and each one can materially change the recommendation.
1. Current taxable income
If you retire at 61 but still have consulting income, rental income, a pension, or significant investment income, the bridge years may not be low-income years at all. In that case, adding RRSP withdrawals may create tax now without much long-term benefit.
If taxable income drops sharply once work stops, the picture changes. A modest-income year may create room to withdraw from the RRSP at a lower rate than you expect to face later. Those are the years worth testing carefully.
2. Future income stack
This is the most important forward-looking variable. Add up the income likely to arrive later: CPP, OAS, defined benefit pension income, RRIF minimums, and taxable income from non-registered accounts.
If that future stack looks high, early RRSP withdrawals become more attractive. If it looks modest, preserving the RRSP may be perfectly reasonable.
Consider a hypothetical couple, Mark and Susan, with about $1.8 million combined in RRSPs. They plan to delay CPP to age 70, have enough cash to bridge the gap, and prefer not to touch the RRSP unless necessary. On the surface, that sounds prudent.
But when their later years are projected, future taxable income could easily reach $150,000 to $180,000 or more, depending on returns and spending needs. That outcome is not driven by one dramatic event. It comes from the combination of larger CPP, OAS, registered withdrawals, and other taxable income. In that situation, avoiding RRSP withdrawals in the early sixties may not be conservative at all. It may be preserving a larger future tax problem.
3. Other available assets
Cash is useful because it funds spending without creating taxable income. TFSAs are even more flexible because withdrawals are not taxable and do not affect OAS income calculations.
That does not mean the TFSA should always be spent first. For many retirees, the TFSA is the most valuable long-term tax shelter available. Draining it early just to avoid a modest RRSP withdrawal can sacrifice future tax-free growth while leaving the larger registered account untouched.
Non-registered assets sit somewhere in the middle. They are flexible, but they may produce taxable interest, dividends, or gains. In some years it makes sense to realize gains deliberately. In others, cash may be the better source. Often the best answer is a blend, where a moderate RRSP withdrawal works alongside cash or non-registered withdrawals so no single account does all the work.
4. Household context
A single retiree and a couple can face very different outcomes. Couples may have two tax returns, two sets of benefits, and some pension-splitting opportunities. But they also have survivor risk.
When one spouse dies, some income may continue, but it is now reported on one return instead of two. Some benefits may fall, but large registered balances can remain. A plan that looked manageable across two returns can become much less efficient for the surviving spouse.
This matters especially when one spouse holds most of the RRSP or RRIF assets. Preserving the larger account for too long can leave the survivor with a more concentrated taxable income problem later.
That is why a bridge-year strategy should be tested not only in the years before benefits begin, but also in the survivor scenario. For many couples, that is where the long-term cost of preserving too much registered money becomes easier to see.
Build the bridge as one plan
A strong bridge strategy is rarely as simple as using one account first, then another. More often, it is a coordinated approach built around the full retirement income plan.
You may use some cash for stability. You may draw some RRSP income to fill a lower tax bracket. You may realize capital gains selectively in a non-registered account. You may preserve the TFSA for later flexibility, or use it in years when taxable income is already high enough. And those choices should be coordinated with CPP and OAS timing.
CPP timing matters because the difference is permanent. Starting CPP at 60 means a 36% reduction compared with starting at 65. Delaying to 70 means a 42% increase compared with starting at 65. For someone in good health with other assets available, deferral can be attractive.
But the gap years have to be funded. And in many cases, delaying CPP or OAS is exactly what creates more low-income years where planned RRSP withdrawals may be useful.
Take a hypothetical retiree, David, age 64. He has a $600,000 RRSP, a $20,000 defined benefit pension, and modest current income. He is considering whether to start CPP at 65 or delay it. His instinct is to preserve the RRSP because the pension covers part of his spending and he has some cash available.
For David, the planning question is not just which account to spend first. It is what level of taxable income he wants to create between 64 and 70, and what level of forced income he wants to avoid at 75. A modest RRSP withdrawal before 65 may make sense if it fills a lower-income year and reduces future RRIF pressure. But if the pension and other income already use up that lower bracket, the answer may change. If there is a large non-registered gain to realize, that may change it again. If his spouse has little registered income, household planning may change it again.
The goal is not to keep this year’s tax bill as low as possible in isolation. The goal is to smooth taxable income across retirement and preserve flexibility for the years when choices narrow.
Final thoughts
The bridge years before CPP and OAS are not just a period to fund. For many retirees, they are a short planning window where taxable income can be shaped more deliberately than it can later.
Sometimes the right answer will be cash first. Sometimes it will be RRSP first. More often, it will be a coordinated blend of cash, RRSP withdrawals, non-registered assets, TFSA flexibility, and benefit timing.
If you are in your early sixties and taxable income has dropped, the key question is not whether an RRSP withdrawal creates tax today. It is whether this may be one of the better years available to recognize that income before CPP, OAS, pension income, and RRIF minimums begin doing more of the scheduling for you.
If you are approaching retirement and want to model how RRSP withdrawals, CPP and OAS timing, non-registered assets, and future RRIF minimums fit together in your specific situation, that is the kind of analysis we do with clients. A proper projection can show whether using the bridge years deliberately would reduce future tax pressure or whether leaving the RRSP alone still makes the most sense for your plan.