The engine performs a year-by-year cash flow simulation from your current age until your projected life expectancy (or your spouse's, whichever is later). Each year, the engine looks at:

• Inflow: employment, CPP, OAS, mandatory RRIF minimums, optional RRSP melt withdrawals, investment income from non-registered accounts, and any one-time inflows.
• Gap analysis: compares net cash to your "Target Spend".
• Drawdown: pulls from accounts per your selected strategy if there's a deficit.
• Reinvestment: fills TFSA room, then RRSP room, then invests the rest in your designated non-registered surplus account.
• Growth: applies investment returns to remaining balances.

When a person dies in the simulation, assets roll over tax-free to a surviving spouse (keeping each account's cost base); with no survivor, the estate pays tax on a deemed disposition — the full remaining RRSP/RRIF is taxed as income, and unrealized capital gains are deemed realized.

RRSP last (defer taxes): draws non-registered accounts first (lowest tax per dollar), then TFSA (zero tax), leaving RRSPs untouched as long as possible. Deferral cuts both ways: the RRSP keeps compounding tax-sheltered, but forced RRIF withdrawals after 72 get larger and whatever remains is fully taxed at death.

RRSP first: draws from RRSPs before the other accounts, so the balance shrinks during your lower-income years instead of compounding into larger forced RRIF withdrawals after 72. That can lower the tax bill at 72 and at death — but it also empties the tax shelter early, leaving less growing inside it.

Neither order is generally better, and a smaller lifetime tax bill does not mean a larger estate — in our test plans the order that paid the least tax overall sometimes left the smaller estate. Which one wins depends on your own growth rates, spending and timing, so the Meltdown Optimizer tests both on your numbers rather than assuming one.

Both settings control only the order accounts are drawn from to fund spending — the Fund spending from RRSP first switch under Settings. Neither one is the RRSP meltdown: that is the separate RRSP Melt Amount set for each person, which withdraws a fixed sum every year from its start age until 71 whether or not the money is needed. A plan can run both at once — the meltdown withdraws its amount, and whatever spending is still unfunded is then drawn in the order chosen here.

For couples, the engine automatically calculates the optimal amount of eligible pension income (like RRIF withdrawals) to "split" with a lower-earning spouse.

• Optimization: tests splitting percentages up to 50% to minimize the household's combined tax bill.
• OAS impact: considers whether splitting helps a spouse avoid or reduce OAS clawback.
• Credits: preserves credits like the Age Amount where beneficial.

Assets grow based on the return rates set in the Rates of Return panel. The engine separates yield (dividends and interest, entered as the Non-Reg Dividend, Foreign and Cash Interest rates) from price growth (Non-Reg Growth (price only)).

• RRSP/TFSA: each account grows at its own whole-account return, reinvested and tax-sheltered — no yield/gains split needed.
• Non-Registered: yield is paid out as cash (and taxed) each year. The Equity slice appreciates at the full Non-Reg Growth rate. Dividend-paying stocks appreciate too — paying a dividend doesn't stop a share price rising, it just splits the return between cash and price — so the Canadian- and foreign-dividend slices grow at 85% of that rate less their own yield, leaving them a slightly lower total return than pure growth equity. Bonds and cash are income-only: their principal doesn't move. Growth doesn't raise the ACB, so unrealized gains build up until realized by sales, Fund Turnover, or death.

Multiple non-registered accounts

Each person can hold several non-registered accounts (e.g. a GIC ladder, a dividend portfolio, a growth ETF account):

• Withdrawals minimize realized gains: sells from the account with the highest cost-base ratio first — the least realized gain per dollar raised.
• Surplus goes to one account: leftover cash each year is invested into the account marked Surplus.
• At death: a surviving spouse inherits each account as-is, keeping its own ACB and mix.

Rebalancing vs. drift

The Rebalance Annually toggle controls each account's mix over time: on pulls it back to your chosen weights every year; off lets the equity share drift up, because the Equity slice compounds faster than the dividend slices and the bond/cash slices don't compound at all. The separate Fund Turnover input models the annual tax drag of funds that realize gains internally — it applies every year, whether or not rebalancing is on.