Longevity risk — the risk of outliving your money — is one of the most underappreciated threats to a comfortable retirement. Decades ago, retirement lasted 10–15 years. Today, it often lasts 25–30 years, and sometimes longer. Your financial plan needs to reflect this reality.
The longevity reality
Statistics Canada data shows that a 65-year-old Canadian woman today has a 25% chance of living to age 96. A 65-year-old man has a 25% chance of living to 93. For couples, the odds that one partner reaches 90 are well above 50%. This means a 30-year retirement is not a worst-case scenario — it's increasingly the norm.
The implication: your retirement plan must either generate income that lasts indefinitely, or provide a clear, credible path to sustaining income for 30+ years through investment returns, guaranteed income sources, and careful drawdown management.
The 4% withdrawal rule — and its limits
The 4% rule suggests withdrawing 4% of your portfolio in year one of retirement, then adjusting for inflation each year. Research suggests this has historically sustained a 30-year retirement with high probability. But it has important limitations for Canadian retirees:
- It was developed using US market data and may not perfectly translate to Canadian portfolios
- It assumes a specific asset allocation (roughly 60% equities, 40% bonds)
- It doesn't account for major unexpected expenses — healthcare, home repairs, family needs
- In a low-return environment (like we may be entering), a lower withdrawal rate of 3–3.5% may be more prudent
- It doesn't account for guaranteed income from CPP and OAS, which can allow a higher portfolio withdrawal rate
Three pillars of longevity planning
Maximize guaranteed lifetime income
CPP, OAS, and any pension income continue for life regardless of market conditions. Delaying CPP to 70 adds 42% to your monthly benefit — providing a larger guaranteed income base for the rest of your life.
Maintain a growth-oriented portfolio well into retirement
The mistake many retirees make is becoming too conservative too quickly. At 65, you may have 25+ years of investing ahead. A portfolio that's entirely in bonds or cash will likely lose ground to inflation over time.
Build in flexibility and buffers
Maintain a 1–2 year cash buffer so you don't need to sell investments during a market downturn. Adjust your withdrawal rate in bad market years. Keep a contingency fund for unexpected major expenses.
Protecting against inflation
Inflation is the silent destroyer of retirement purchasing power. At 2.5% annual inflation, $100,000 in today's dollars is worth only $64,000 in 20 years. Your retirement income strategy must account for this — not just for the average inflation rate, but especially for healthcare inflation, which has historically risen faster than general CPI.
- CPP and OAS are indexed to inflation — these guaranteed sources protect your base income
- Equity investments historically outpace inflation over the long run — maintaining some equity exposure is essential
- Sun Life GIFs offer inflation protection features worth discussing with Carrie
- Plan annual retirement income reviews to adjust withdrawal amounts as costs rise
Planning for late-life care costs
Long-term care is one of the largest and most unpredictable retirement expenses. The average cost of a long-term care facility in Ontario is $3,000–$8,000+ per month, depending on the level of care. Home care can also run $2,000–$5,000+ monthly. These costs can quickly erode even a well-funded retirement plan.
- Review whether your province's publicly funded long-term care coverage will meet your needs
- Consider long-term care insurance or critical illness coverage as protection against these costs
- Carrie can model scenarios where one or both partners require extended care — and build a plan that accounts for this possibility
Carrie's key insight: Most of my clients underestimate how long they'll live and overestimate how quickly they'll spend down their savings in the early years. A well-structured plan takes both ends of the retirement horizon seriously — giving you confidence that you won't run out of money, no matter how long you live.
Carrie Wang
Carrie is the founder of Seven Lakes Financial Services Inc. and a Sun Life advisor serving clients across Ontario and Saskatchewan. She specializes in retirement, estate, and investment planning, with a warm, personalized approach. She is fluent in English, Mandarin, and Taiwanese.