How WealthPath Models Retirement Drawdown
Once you reach your target retirement age, WealthPath switches from accumulating savings to drawing them down. This guide explains how the decumulation projection works — how withdrawals are calculated, which accounts are tapped first, and how income, taxes, and longevity risk fit into the picture.
At a Glance
Each year of retirement, WealthPath follows this sequence:
- Add up your retirement expenses for the year (inflated from their base amounts). These are treated as an after-tax target — the money you need to have in hand after income tax.
- Add up your retirement income for the year (pensions, CPP/OAS, rental income, etc.) and the income tax it incurs.
- Calculate the withdrawal needed from your portfolio to cover what your after-tax income doesn't. For the fixed-dollar strategy this is grossed up so the amount left after withdrawal tax still meets your spending need.
- Enforce any RRIF mandatory minimum if you're 72 or older.
- Draw from your accounts in your chosen drawdown order (default, RRSP meltdown, or clawback-aware).
- Apply investment returns to whatever remains.
- Compute the tax cost for the year — income tax on your full taxable income (CPP, OAS, pensions, and taxable withdrawals), the OAS clawback, and tax drag on non-registered returns.
This repeats every year until your configured life expectancy.
Withdrawal Strategies
WealthPath supports four strategies for determining how much you withdraw each year. You can choose your strategy on the Projection page.
Fixed-Dollar (default)
Withdraw exactly what you need to fund your spending after tax. WealthPath takes your retirement expenses as an after-tax target, subtracts the after-tax value of your retirement income, and grosses up the portfolio withdrawal so that what's left after income tax (and any OAS clawback) covers the rest. The dollar amount rises each year as expenses are adjusted for inflation.
Best for: people who want to match spending exactly and minimize unnecessary drawdown.
Note on the gross-up. Only the fixed-dollar strategy is grossed up, because it's the one driven by a spending need. The three percentage-based strategies below are gross-withdrawal rules — a "4% of portfolio" rule already says how much to pull, so WealthPath withdraws that amount and reports what's left after tax as your net spendable income rather than inflating the withdrawal.
Fixed-Percentage
Withdraw a fixed percentage of your current portfolio balance each year (for example, 4%). The dollar amount changes as your portfolio grows or shrinks. This approach naturally adapts to market performance — you spend less when your portfolio is down and more when it's up.
Best for: people who want a simple, self-adjusting rule.
% of Initial Portfolio (the "4% Rule")
Withdraw a chosen percentage of your portfolio in the first year of retirement, then adjust that dollar amount for inflation each year. Unlike fixed-percentage, the amount is not recalculated against your current portfolio — it stays constant in real (inflation-adjusted) terms.
For example, if you retire with a $1,000,000 portfolio and set the rate to 4%, you withdraw $40,000 in year one, $41,000 in year two (at 2.5% inflation), $42,025 in year three, and so on — regardless of whether your portfolio has gone up or down.
The default rate is 4%, based on the widely cited "4% rule" from retirement research. You can adjust the rate to be more conservative (3%) or aggressive (5%) depending on your risk tolerance and time horizon.
Best for: people who want predictable, inflation-adjusted income with a well-studied historical basis.
Dynamic (Guardrails)
A hybrid approach. Each year, WealthPath calculates a base withdrawal (a percentage of your portfolio), then clamps it within a floor and ceiling relative to last year's inflation-adjusted withdrawal. This prevents spending from swinging too far in either direction year to year.
Best for: people who want the adaptability of percentage-based withdrawals with the stability of fixed-dollar spending.
Retirement Income Sources
Before touching your portfolio, WealthPath accounts for income you'll receive in retirement. Each income source has a start age, an optional end age, and an annual amount.
| Source | Inflation-Indexed? | Notes |
|---|---|---|
| CPP (Canada Pension Plan) | Yes | Enter your age-65 estimate; the benefit is adjusted for the start age you choose (60–70). |
| OAS (Old Age Security) | Yes | Enter the age-65 amount; deferral (65–70) and residency proration apply, and it's subject to the recovery tax (clawback). |
| Employer / DB Pension | No (by default) | Flat annual amount unless you manually adjust. |
| Part-Time / Phased Work | No | Time-bounded — set a start and end age. |
| Rental / Passive Income | No | Ongoing stream, optionally time-bounded. |
CPP and OAS are modeled as distinct programs with their own start-age rules, residency proration (OAS), and the OAS clawback. See the CPP & OAS guide for the full details.
Retirement income reduces the amount that needs to come from your portfolio. If your income fully covers your expenses in a given year, no portfolio withdrawal is needed (though RRIF minimums may still require one — see below).
You can add and manage income sources on the Income page.
Account Drawdown Order
Not all accounts are taxed the same way when you withdraw, so the order in which you tap them affects your lifetime tax. WealthPath offers three drawdown orders, chosen with the Account Order control on the Projection page. This is separate from the withdrawal amount strategy above — you can combine any amount strategy with any drawdown order.
In all three orders, the RRIF mandatory minimum is always taken from your RRSP/RRIF first (see below).
Default (taxable first)
The default order draws non-registered accounts first, then RRSP/RRIF, then TFSA last. This is the order described in detail below and suits most plans: taxable growth is already taxed annually, so spending it first lets your registered and tax-free accounts keep compounding.
RRSP Meltdown
Draws RRSP/RRIF earlier — ahead of non-registered accounts. Taking taxable registered money sooner (often in lower-income years before CPP/OAS begin) can smooth your lifetime tax and shrink the forced RRIF minimums of later years, which might otherwise push you into a higher bracket or trigger the OAS clawback.
Best for: people with large RRSPs who want to avoid a late-retirement tax spike from mandatory RRIF withdrawals.
Clawback-Aware
Limits the taxable RRSP/RRIF draw so your net income stays at or under the OAS clawback threshold where possible, funding the rest of your need from your TFSA. It only draws RRSP past the threshold as a last resort, when no tax-free room remains. The order is: non-registered, then RRSP up to the threshold, then TFSA.
Best for: people whose income sits near the OAS recovery-tax threshold and who have TFSA balances to draw on.
The rest of this section describes the default order in detail.
1. Taxable (Non-Registered) Accounts — First
Growth in these accounts is already taxed every year (the "tax drag" on interest, dividends, and capital gains). Since withdrawals themselves don't trigger additional tax, it makes sense to use these funds first.
This tier also includes property and other account types.
2. RRSP — Second
Withdrawals from tax-deferred accounts are taxed as ordinary income. WealthPath draws from these next, after taxable accounts are exhausted. This lets your remaining RRSP balance continue growing tax-deferred for as long as possible.
Exception — RRIF minimums: Starting at age 72, the government requires you to withdraw a minimum percentage from your RRSP/RRIF each year (see the next section). WealthPath satisfies this minimum from your RRSP accounts first, then fills any remaining need from taxable accounts before drawing more from the RRSP.
3. TFSA — Last
Withdrawals from tax-free accounts are completely untaxed. WealthPath preserves these accounts as long as possible, drawing from them only after taxable and RRSP accounts are depleted (or insufficient).
Within a Tier
If you have multiple accounts of the same type (for example, two taxable accounts), WealthPath withdraws proportionally based on their current balances. A taxable account with twice the balance of another will provide twice the withdrawal.
Why This Order Matters
Consider two retirees with the same total savings but different withdrawal strategies:
- Retiree A withdraws proportionally from all accounts. RRSP withdrawals early in retirement push them into a higher tax bracket while their TFSA shrinks unnecessarily.
- Retiree B follows the taxable-first order. Their RRSP and TFSA compound tax-free for longer, and RRSP withdrawals are spread over later years when income (and tax rates) may be lower.
Over a 25-year retirement, the sequenced approach can preserve tens of thousands of dollars in additional savings.
RRIF Mandatory Minimums
Canadian law requires you to convert your RRSP to a RRIF by the end of the year you turn 71. Once converted, you must withdraw a minimum percentage of the account balance each year. WealthPath models this automatically.
| Age Range | Minimum Rate |
|---|---|
| 65–70 | Formula: 1 / (90 − age) |
| 71 | 5.28% |
| 75 | 5.82% |
| 80 | 6.82% |
| 85 | 8.51% |
| 90 | 11.92% |
| 95+ | 20.00% |
If the RRIF minimum exceeds your calculated withdrawal need, WealthPath increases your total withdrawal to satisfy the minimum. The full amount comes from your RRSP accounts.
The RRIF increase is treated as a one-time top-up — it does not permanently raise your withdrawal base for subsequent years. Strategies like % of Initial Portfolio and Dynamic continue to track their strategy-computed amount, so a single year of high RRIF minimums won't ratchet up spending for every year that follows.
The RRIF minimum and actual RRSP withdrawal amount are both shown in the year-by-year projection table, so you can see exactly how much is mandatory versus discretionary.
Retirement Expenses
WealthPath can model your retirement expenses in two ways:
Simple (Single Number)
Enter a total annual retirement expense figure. WealthPath inflates this amount each year by your configured inflation rate.
Detailed (Multiple Expense Items)
Add individual expense items on the Expenses page, each with its own amount, start age, and end age. For example:
- Housing: $24,000/year, ages 65–80 (mortgage paid off at 80)
- Healthcare: $8,000/year, ages 65+, growing at 4% per year
- Travel: $12,000/year, ages 65–75
This lets you model expenses that start and stop at different ages, or that grow at rates different from general inflation.
One-Time Events
You can add one-time financial events at specific ages — both positive (inheritance, downsizing proceeds) and negative (major medical expense, home renovation). These are applied to your portfolio balance in the specified year, distributed proportionally across all accounts.
One-time events are separate from the withdrawal sequencing — they don't follow the taxable-first order because they represent external cash flows, not planned drawdowns.
Fund Depletion and Safety Margin
If your withdrawals outpace your portfolio's growth, WealthPath identifies the exact age at which your funds are projected to run out. This is shown as the fund depletion age in your projection results.
The safety margin is the gap between your fund depletion age and your life expectancy. A positive safety margin means your money is projected to run out before you do — a signal to adjust your plan.
If your portfolio never depletes (withdrawals plus returns sustain it through your full life expectancy), no depletion age is shown and the safety margin is not applicable.
Taxes During Retirement
Your spending need is an after-tax target, and WealthPath funds the tax from your portfolio. Each year it computes:
Income Tax on Your Full Taxable Income
CPP, OAS, pensions, any part-time income, and the taxable (RRSP/RRIF) portion of your withdrawals are stacked together and run through the federal and provincial tax brackets. The tax on your guaranteed income is no longer ignored — it reduces the after-tax value of that income, which is why the portfolio has to cover a little more.
The RRSP/RRIF withdrawal is taxed as the top slice above your other income. For the fixed-dollar strategy, the withdrawal is grossed up so that, after this tax, the net amount still meets your spending target. The projection table breaks this out into three columns:
- Gross W/D — the total amount withdrawn from your portfolio.
- W/D Tax — the income tax (and any OAS clawback) that the withdrawal triggers.
- Net Spendable — what's left to spend (Gross W/D − W/D Tax).
This includes the fund depletion year — if your entire portfolio is consumed in a single year, the full RRSP liquidation amount is still run through the tax brackets so the projection reflects the real tax cost of that event. Because WealthPath uses account sequencing, the taxable withdrawal amount reflects exactly what was drawn from registered accounts — not a proportional estimate.
OAS Recovery Tax (Clawback)
When your net income exceeds the indexed threshold, part of your OAS is recovered. The clawback-aware drawdown order can limit your taxable withdrawals to keep income under this threshold. See the CPP & OAS guide.
Tax Drag on Non-Registered Returns
Even during retirement, non-registered accounts continue to generate taxable returns on their remaining balance (interest, dividends, capital gains). This annual tax drag is included alongside the above in the Tax Cost column, which shows your total tax for the year across all of these sources.
See How WealthPath Handles Taxes for the full tax model documentation.
Where Decumulation Shows Up in the App
| Page | What You See |
|---|---|
| Projection | Withdrawal strategy and Account Order controls; year-by-year table from retirement to life expectancy: gross withdrawal, withdrawal tax, net spendable, income, tax cost, portfolio balance. |
| Dashboard | Fund depletion age, safety margin, and retirement readiness score (all reflect the sequenced withdrawal model). |
| Income | Add and manage retirement income sources (CPP, OAS, pensions, rental); CPP/OAS start-age what-if. |
| Expenses | Add detailed retirement expense items with start/end ages. |
| Scenarios | Compare different retirement ages, return rates, or contribution levels — each scenario runs the full decumulation model using your configured withdrawal strategy. |
| Monte Carlo | Simulate thousands of random return sequences using your configured withdrawal strategy to see how often your portfolio survives through retirement. |