RRSP Season Is Coming: Should You Still Contribute in Your 60s?

A Question With Two Reasonable Answers

Gordon Fitzgerald is sixty-three and lives in London, Ontario. He spent his career in logistics, he is still working part-time by choice, and like a lot of people his age he has a healthy RRSP that he has been faithfully feeding for decades. Every winter, as RRSP season approaches and the contribution-deadline reminders start showing up, he does the same thing out of pure habit: he makes a contribution and takes the deduction.

This year, though, a conversation with a recently retired friend planted a doubt. The friend had stopped contributing entirely and had instead started pulling money out of his RRSP early, on purpose. "Why would you keep filling it up," the friend asked, "when you're just going to get hammered on tax taking it back out later?" Gordon did not have a good answer, and it bothered him. So before this RRSP season, he decided to actually think it through.

The Case for Still Contributing

There is a genuinely good argument for continuing to contribute to an RRSP in your sixties, and it starts with the deduction. When you put money into an RRSP, you reduce your taxable income for that year. If you are still earning a decent income, that deduction can be worth a meaningful amount, because it shaves off dollars that would otherwise be taxed at your current rate.

The logic that has always made the RRSP work is the idea of arbitrage between tax rates. You contribute in a year when your income, and therefore your tax rate, is relatively high, and you withdraw later in a year when your income, and your rate, is lower. If Gordon expects his retirement income to sit in a lower bracket than the one he is in while still working, contributing now and withdrawing later could leave him ahead.

There is also the simple matter of contribution room and the deadline. You can keep contributing to your own RRSP until the end of the year you turn seventy-one, after which the account must be converted. So at sixty-three, the door is still very much open.

For Gordon, who is still doing part-time work he genuinely enjoys, the deduction is not trivial. Every dollar he contributes comes off the top of his current income, and because he is still earning, those top dollars are taxed at a rate that is meaningfully higher than what he expects to face once he stops working entirely. On the surface, that is a textbook case for contributing: defer income from a higher-rate year to a lower-rate one. If retirement Gordon really will sit in a gentler bracket than working Gordon, the RRSP is doing exactly what it was designed to do.

The Case for the Meltdown

Now the other side, which is what Gordon's friend was getting at. An RRSP meltdown means deliberately drawing money out of your RRSP earlier than you strictly have to, often in your sixties, rather than letting the balance grow until withdrawals become mandatory.

Why would anyone volunteer to pay tax sooner? Because of what happens later. Once an RRSP becomes a RRIF, the government requires a minimum withdrawal every year, and that minimum percentage climbs as you age. If you let a large RRSP balance keep growing untouched, those forced withdrawals later in life can be big enough to push you into a higher tax bracket, and high income in retirement can also trigger clawbacks on benefits like Old Age Security.

The meltdown strategy tries to get ahead of that. By drawing the RRSP down gradually during lower-income years in your sixties, you can fill up cheap tax brackets that would otherwise go to waste, and you shrink the balance that would later force those large, expensive mandatory withdrawals. In the right circumstances, paying a little tax now can mean paying considerably less overall.

The intuition behind it is the same arbitrage logic that justifies contributing, just run in reverse. If you have several years in your sixties where your income is unusually low — say you have stopped full-time work but have not yet started CPP or OAS — those years are a kind of tax bargain. Income pulled out of the RRSP in a low-income year may be taxed very gently, sometimes barely at all once credits are accounted for. Leave that same money in the account and it may eventually come out in a year stacked with CPP, OAS, and a large forced RRIF withdrawal, where it is taxed at a much steeper rate. The meltdown is simply about moving withdrawals into the cheap years and away from the expensive ones.

That said, the meltdown is not free money, and it is easy to do badly. If you draw down the RRSP without actually landing in cheaper brackets — for instance, if your income is already high in your sixties — you have just paid tax sooner for no benefit. The strategy only works when there genuinely are cheaper years to fill. This is the crux of why it is so personal: the very same move that saves one person thousands can cost another nothing or worse.

"My friend made it sound obvious," Gordon says. "But the more I looked, the more I realized it wasn't obvious at all. Both moves can be right. It just depends on whose situation you're in."

What TrackMoola Showed Him

Gordon did not want to settle this with a gut feeling. He started with the TrackMoola RRSP contribution room calculator to confirm exactly how much room he still had, and then he used the planner to compare two futures across the years ahead: one where he kept contributing through his sixties, and one where he stopped and began a gradual meltdown instead.

Seeing the two paths side by side was what cut through the noise. In the keep-contributing path, his RRSP grew larger and so did the mandatory withdrawals later, which stacked up his income in his seventies. In the meltdown path, his income was lower and steadier in his sixties, the cheap brackets got used rather than wasted, and the later mandatory withdrawals were tamer. TrackMoola let him see which path produced a smoother lifetime tax picture for his particular numbers, rather than relying on either his old habit or his friend's advice.

The specific dollar figures here are Gordon's own, so we are keeping them general. The headline is not a single number. It is that the question genuinely has two defensible answers, and the only way Gordon could tell which fit him was to see both futures laid out.

His Decision, and Why Yours Might Differ

For Gordon, seeing the comparison tilted him toward easing off new contributions and beginning a modest, gradual meltdown in his sixties, because his particular mix of a sizable RRSP and a relatively low expected retirement income meant the forced-withdrawal problem loomed larger for him than the value of further deductions. That was his answer for his numbers.

It is worth being blunt about this: that does not make the meltdown the right answer for you. Someone still earning a high income, with a smaller RRSP and plenty of years before mandatory withdrawals, might land firmly on the keep-contributing side. The deduction is more valuable when your current rate is high, and the meltdown is more valuable when a large balance threatens to force expensive withdrawals later. Change those inputs and the answer flips.

"The lesson for me," Gordon says, "wasn't 'meltdowns are good.' It was that I should never have been on autopilot. The right move depends entirely on the details, and mine happened to point one way."

A Few Honest Caveats

• You can contribute to an RRSP only until the end of the year you turn seventy-one, so the contribute-versus-meltdown question has a built-in deadline.
• The deduction is worth more when your current tax rate is high, which is why the answer depends heavily on whether you are still earning.
• A meltdown only helps if it actually fills cheaper brackets and reduces costlier future withdrawals; done carelessly it can simply pull tax forward for no gain.
• Benefits like Old Age Security interact with retirement income, so the decision is about your whole picture, not the RRSP alone.

Try It Yourself

If you are in your sixties and reflexively contributing to your RRSP every season, it is worth pausing to ask whether that is still the right move for you, or whether a gradual meltdown deserves a look. Start with the TrackMoola RRSP contribution room calculator to see exactly how much room you have, lean on the RRSP guide to understand the rules, and use the planner to compare both futures with your own numbers. The right answer is the one your situation points to.