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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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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.

You’ve spent your working life saving for retirement. Now it’s time to spend some of that money. But how much? You’ll want to make sure you have enough to get everything you want out of retirement.

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.

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

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 your retirement to last 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 (OAS) and Guaranteed Income Supplement (GIS). Multiply this amount by 12 to get an annual amount.
  3. Add the two annual amounts together from step 1 and 2 to get your approximate annual retirement income amount.
  4. Next, add up all your annual expenses in retirement. Include carmortgage or rent payments, health care expenses, food, various types of 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.

The length of your retirement

While the average Canadian retires at age 63.5 according to Stats CanadaOpens a new website in a new window, 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 volatility

Market 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.


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, hopefully you can look forward to your retirement without worrying about outliving your money. 

If you’re a member of a Canada Life employer-sponsored savings plan, we have licensed professionals who can assist you. Contact Canada Life to learn more.

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.

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. 

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