A Registered Retirement Savings Plan (RRSP) can become too successful for its own good. Decades of tax-deferred growth may create a wonderfully large balance, followed by wonderfully large taxable withdrawals arriving alongside the Canada Pension Plan (CPP), Old Age Security (OAS), and workplace pensions.
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Make it make sense
The problem isn’t the RRSP itself. Contributions can reduce taxable income, while investments compound without annual tax. The bill arrives when money leaves because withdrawals are generally included in taxable income. A larger future balance can therefore create larger withdrawals at precisely the wrong time.
Canadians must close or convert an RRSP by December 31 of the year they turn 71. Moving the assets into a registered retirement income fund (RRIF) avoids one enormous taxable withdrawal, but mandatory RRIF payments begin the following year. At age 72, the minimum equals 5.4% of the account’s opening balance.
Those payments can push net income above the OAS recovery-tax threshold, which is $95,323 for 2026 income. Every dollar above that amount can trigger a 15% OAS repayment until the benefit disappears entirely. The marginal cost of a withdrawal can suddenly include both income tax and shrinking government benefits.
What waiting can create
Consider someone retiring at 60 with $500,000 in a RRSP. If the balance earns an illustrative 6% annually and remains untouched until 71, it could approach $949,149. The first mandatory RRIF payment would then exceed $51,000 before CPP, OAS, or a pension joined the queue.
| STRATEGY | ILLUSTRATED RRSP AT 71 | FIRST RRIF MINIMUM AT 72 |
|---|---|---|
| No early withdrawals | $949,149 | $51,254 |
| Withdraw $20,000 at the start of each year from 60 to 64 | $779,627 | $42,100 |
This isn’t a recommendation to withdraw exactly $20,000, nor does it include taxes or returns earned after reinvesting the proceeds. It shows how planned withdrawals can reduce a later income collision. The goal isn’t eliminating tax. It’s paying some during years when the marginal rate may be lower.
Consider DOL
Before that happens, I’d identify any low-income window between leaving work and beginning CPP, OAS, or a workplace pension. During those years, I’d consider withdrawing part of the RRSP and moving the after-tax proceeds into available TFSA room. Growth and withdrawals inside a TFSA won’t increase taxable income or reduce OAS.
Dollarama (TSX: DOL) could help the transferred money pursue tax-free growth rather than immediate income. It operates more than 1,700 Canadian value stores, owns Australia’s The Reject Shop, and holds a majority interest in Latin American retailer Dollarcity.
Fiscal first-quarter sales rose 21.4%, while Canadian comparable-store sales increased 5.6% as both traffic and spending per visit improved. Australia and Latin America provide additional expansion routes, giving Dollarama stock considerably more runway than its Canadian store signs might suggest.
The quarterly dividend is only $0.12 per share, so Dollarama stock belongs among Canadian growth stocks rather than retirement-income giants. If $7,000 of confirmed TFSA room were available, it would purchase 36 full shares for $6,942.60 and produce $17.28 annually.
Dollarama stock compounded by approximately 19.6% annually over the last 10 years, after adjusting for its 2018 stock split. If the shares repeated that historical growth rate during the next year, the price could reach roughly $230.58. The 36-share position would then be worth about $8,300.88 before dividends.
| SCENARIO | SHARE PRICE | NUMBER OF SHARES | SHARE VALUE | DIVIDEND INCOME | TOTAL VALUE |
|---|---|---|---|---|---|
| Initial investment | $192.85 | 36 | $6,942.60 | — | $6,942.60 |
| After one year at 19.6% growth | $230.58 | 36 | $8,300.88 | $17.28 | $8,318.16 |
| One-year gain | — | — | $1,358.28 | $17.28 | $1,375.56 |
A plan, not a panic button
That outcome would represent a total gain of approximately 19.8%, assuming the dividend remains unchanged and isn’t reinvested. Of course, a historical CAGR is a rear-view mirror, not a speed-limit sign. Dollarama stock could grow more slowly, decline, or spend the year doing its best impression of an item permanently stuck on the shelf.
The larger lesson is to model taxable income before 65 rather than admiring the RRSP balance until 71. A controlled withdrawal today may feel irritating, but it can give tax-free investments more time to grow while preventing mandatory withdrawals from choosing the tax bracket later.
