Introduction
A physician who retires from clinical practice does not automatically dissolve their professional corporation. In many cases, the MPC has accumulated $1–4 million in retained earnings and continues to exist as an investment vehicle, gradually distributing wealth to the retired physician over the following decade or more.
The drawdown phase — the period after active practice ends and before the corporation is wound up — requires a different planning model than the accumulation phase. The goal is no longer to defer and accumulate; it is to distribute efficiently, at low effective tax rates, over a long time horizon.
The Retired Physician's Income Sources
A retired physician drawing from a professional corporation typically has multiple income sources operating simultaneously:
Corporate dividends: The MPC pays eligible or non-eligible dividends from accumulated retained earnings. The applicable rate depends on whether the income was taxed at the small business rate (non-eligible dividends) or the general rate (eligible dividends) inside the corporation.
Capital dividends: The CDA balance — accumulated from the non-taxable portion of capital gains and life insurance proceeds — can be distributed tax-free at any time.
RRSP/RRIF: The accumulated RRSP must be converted to a RRIF by December 31 of the year the physician turns 71. Minimum annual RRIF withdrawals are fully taxable income.
CPP: If the physician contributed to CPP through salary payments during their practice years, they receive monthly CPP retirement benefits, taxable as income.
OAS: Beginning at age 65 (or deferred to 70 for enhanced benefits), taxable income subject to the clawback threshold.
The planning challenge is managing all of these income sources in a sequence and at amounts that keep annual net income within the most tax-efficient range — below the OAS clawback threshold if possible, and well below the top marginal rate.
The Optimal Drawdown Sequence
For most retired physicians with a combination of RRIF, corporate retained earnings, and CPP/OAS:
Phase 1 (pre-RRIF, age 60–71): Draw primarily from the corporate retained earnings, using a mix of non-eligible dividends and capital dividends. The RRSP continues to compound untouched. CPP can begin as early as 60 (at a reduced rate) — the decision to start CPP early vs. defer to 70 is a longevity analysis.
Phase 2 (post-RRIF conversion, age 71+): Minimum RRIF withdrawals create a baseline of taxable income each year. Corporate dividends are layered on top, managed to keep total income below the OAS clawback threshold.
Phase 3 (drawdown completion): As the corporate investment portfolio is gradually depleted through annual dividends, the corporation is eventually wound up — with the final distribution structured to maximise CDA utilisation and minimise taxable dividend amounts.
The OAS Clawback: The Retirement Tax That Surprises Most Physicians
A retired physician drawing $150,000 in non-eligible dividends plus $40,000 in RRIF income has a net income of approximately $195,000 (after the dividend gross-up). This is significantly above the 2026 OAS clawback threshold of approximately $90,997. Their OAS benefit — approximately $8,700 per year — is fully clawed back.
Managing income below the OAS clawback threshold is not always possible for physicians with significant accumulated wealth. But strategies that reduce net income — capital dividends rather than taxable dividends, income splitting with a spouse through spousal RRIF or eligible dividend payments — can preserve meaningful OAS amounts.
The Spousal Income Split
For retired physicians whose spouse has low personal income, the gap between the physician's marginal rate and the spouse's marginal rate represents an ongoing tax saving opportunity. Legal mechanisms for post-retirement income splitting include spousal RRIF withdrawals (from a spousal RRSP built during the accumulation phase), pension income splitting (CPP and RRIF income), and eligible dividend payments to a spouse who holds shares of the MPC or holdco (subject to TOSI analysis in the year of payment).
When to Speak With a CPA
Drawdown planning should begin at least three to five years before the anticipated retirement date — when the physician can still make structural changes (adding spousal RRSP contributions, adjusting corporate investment allocation) that improve the post-retirement position. The optimal drawdown model takes the full portfolio — corporate, registered, and personal — into account simultaneously.