Skip to main content

Your web browser is out-of-date. For the best experience, please update to a modern browser like Chrome, Edge, Safari or Mozilla Firefox.

Insights & advice

How long will my retirement savings last?

Key takeaways

  • Your lifestyle decisions will affect how long your retirement savings last

  • The 4% rule of thumb is useful as a starting point to determine how long your retirement savings will last

  • By doing a little math you can estimate your own retirement income needs

  • There are several other factors that can impact how long your money will last

  • There are strategies you can use to help your retirement savings last longer

  • While you’re withdrawing a part of your retirement savings, it’s important to keep a healthy portion invested

Share on

You’ve spent your working life saving for retirement. Now it’s time to spend some of that money. But how much? After all, you don’t want to outlive your retirement savings. 

It’s safe to say we spend a lot more time figuring out how we’re going to save for retirement, than how we’re going to withdraw those savings. Here are some tips that may help.

What your retirement looks like

Before you begin to estimate how long your retirement saving will last, you need to spend some time thinking about what you’ll do in retirement. 

Do you plan to travel a lot or be a homebody and spend time with your grandchildren? Do you plan to downsize your home? Or are you planning to work part time in retirement? All these lifestyle decisions will impact how long your retirement savings will last.

Your retirement lifestyle and budget

Once you’ve decided on your retirement lifestyle, you’ll likely want to create a retirement spending plan that reflects your lifestyle choices. 

This table shows a sample budget for an average retirement lifestyle1. For a simpler or more elaborate retirement lifestyle, your budget figures would be less or more.  

Basic expenses
Shelter (primary home)2 $13,975
Vehicles3 $7,047
Groceries $6,184
Health and dental $5,694
Home and garden4 $1,932
Clothing and personal care $2,951
Phone and communication $1,903
Personal insurance and financial services $1,561
Local transportation $756
SUBTOTAL $42,003
Additional expenses
Recreation, entertainment, reading5 $1,824
Restaurants, alcohol, tobacco $3,237
Second home $1,706
Travel $7,803
Pets $0
Charitable and personal gifts $3,429
Miscellaneous $1,506
SUBTOTAL $19,505
TOTAL (excluding tax) $61,508
Income tax $11,018
TOTAL (including tax) $72,526

The above example is for illustrative purposes only. Situations will vary according to specific circumstances.

Footnote 1
1 Average spending by senior couples. Source: Statistics Canada, Survey of Household Spending in 2019
Footnote 2
2 Includes property taxes, utilities, maintenance, property insurance, rent, mortgage payments
Footnote 3
3 Includes gas, maintenance, insurance, lease and financing costs. Statscan figures include purchase costs of owned vehicles.
Footnote 4
4 Includes cleaning supplies, furnishings, appliances, garden supplies and services.
Footnote 5
5 Includes computer equipment and supplies, recreation vehicles, games of chance, educational costs.

The 4% rule

In the 1990s, financial planner William Bengen used historical data to determine that, as a rule of thumb, for most people, withdrawing 4% of their retirement nest-egg each year would allow them to enjoy a steady income for 25 to 30 years. 

However, there are some things to remember about the 4% rule:

  • You’ll still have to pay income taxes from this annual amount
  • You may need to adjust for the annual inflation rate (how much goods and services increase in price each year)
  • It doesn’t consider investment returns on your remaining retirement savings 

For many people, the 4% rule will be more like a guideline. Some years they may withdraw more, some years less, depending on their plans and lifestyle. 

Estimating your own retirement income needs

It’s difficult to calculate exactly how long your money will last in retirement. However, you can estimate using these steps: 

  1. Add up all your retirement savings including registered retirement savings plans (RRSPs), tax-free savings accounts (TFSAs) and non-registered accounts. Your retirement savings may also include the sale of a business. Divide your savings by the number of years you expect to live in retirement to get an estimated annual income amount from your savings. Remember, this estimate won’t include any potential future investment returns.
  2. Add up all your sources of monthly retirement income from company pension plans, government benefits such as Canada Pension Plan (CPP) or Quebec Pension Plan (QPP), Old Age Security and Guaranteed Income Supplement (GIS). Multiply this amount by 12 to get an annual amount. 
  3. Add the 2 annual amounts together from steps 1 and 2 to get your approximate annual retirement income amount. 
  4. Next, add up all your annual expenses in retirement. Include mortgage, car or rent payments, health care expenses, food, insurance, utilities, gifts, travel, etc. And be sure to treat yourself occasionally. 
  5. Compare your annual retirement income with your annual expenses. If your annual income is higher than your annual expenses, you’re in good shape. If not, you may need to reduce your expenses or consider working longer and saving more. 

Remember, this estimate doesn’t consider someone living off dividends or a similar constant income stream. 

The importance of investing in retirement

What happens if you live longer than you expected? Or inflation makes things you buy more expensive than you’d planned? 

It’s important to have a strategy that lets you withdraw some of your savings while keeping a healthy portion invested.

This chart provides some examples and shows the importance of keeping your retirement savings invested.

Total retirement income
Investment returns
Total annual expenses/
Number of years money will last
$500,000 6% $35,000 33

The above example is for illustrative purposes only. Situations will vary according to specific circumstances.

Factors that can affect how long your retirement savings will last

  • The length of your retirement – While the average Canadian retires at age 63.5 according to Stats Canada, some people choose to work longer. If you continue to work until you’re 70, that’s 6.5 fewer years of retirement you need to save for, or more money you can spend annually during retirement. 

    That said, if you want to retire at age 60 or even 55, you may need to plan for 35 years of retirement or more. That may mean you need to save more for retirement or spend more frugally.

  • Market volatilityMarket ups and downs can affect the return on your investments and your total retirement savings. Working with an advisor is a great way to ensure your investments match your comfort with investment risk.

  • Inflation – If your rate of return on your investments lags behind the rate of inflation for a long period of time, as your cost of living increases, your current lifestyle will become more difficult to afford and you may have to adjust it.

  • Your health – As we age, it’s common for health care expenses to increase. Whether you’ve lost your employer healthcare benefits or are looking to get health and dental insurance, it’s important to look at your health and healthcare costs and how you’ll pay for them if they increase. Looking in the future, when you may not be able to look after yourself any longer, you’ll also want to consider long-term care and how you’ll pay for that.

Making your retirement savings last longer

There are several strategies you can use to make your retirement savings last longer:

  • Delay your retirement – If you think you have a shortfall in your retirement savings, you may decide to work longer, or work part-time, or have a side hustle in retirement that earns you income.
  • Stick to a budget – Having a budget in retirement helps you make your spending more predictable including planning for healthcare expenses, vacations, etc.
  • Tax-efficient retirement withdrawal strategies – There are ways you can manage the amount of income tax you pay in retirement.

What’s next?

Now that you know more about how long your money may last in retirement, you may want to contact your advisor to:

  • Create a retirement spending plan to calculate your expenses

  • Determine how much retirement income you can expect from the government

  • Calculate your total retirement savings

  • Learn about options for drawing an income from your retirement savings that may help you not outlive your money

Share on

The information provided is based on current laws, regulations and other rules applicable to Canadian residents. It is accurate to the best of our knowledge as of the date of publication. Rules and their interpretation may change, affecting the accuracy of the information. The information provided is general in nature and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.