Drawdown refers to the process of withdrawing money from your retirement savings or investment accounts. It is a key stage in retirement planning, where the focus shifts from accumulating assets to using them for income.
How It Works
In Canada, drawdown often happens through accounts like RRIFs (Registered Retirement Income Funds) or by making withdrawals from TFSAs, RRSPs, or non-registered accounts. Strategies can include systematic withdrawals, lump-sum withdrawals, or annuity purchases.
Why It Matters
- Sustainability: Determines how long retirement savings will last.
- Tax planning: Withdrawals from different accounts have different tax impacts.
- Flexibility: Allows retirees to adjust withdrawals based on spending needs and market conditions.
Final Thoughts
A good drawdown strategy balances income needs, longevity risk, and tax efficiency. Careful planning helps ensure retirement savings last throughout retirement.