Easy retirement math and 6 factors that affect the answer.

If you’re like most people approaching retirement, you’ve probably asked yourself: 

How long will my retirement money last?

If you're asking that question, congratulations, you are already on the right track.

On the surface, it sounds like a clear-cut mathematical question with a simple numeric answer. Is it 15 years? Twenty or thirty years?

In all of my decades helping people plan their wealth for retirement, I realize that there is always a deeper question behind this one. 

It can be an anxious topic because the answer takes a swipe at your safety runway. You are really asking whether or not you will be okay for all of your retirement years, and if there will be a time when you are forced to depend on others, or the government. 

You have worked to become independent and secure. You have made sacrifices, possibly raising kids or paying off a home. Moving forward, you want to continue on this path of stability. 

And for that, you need a plan grounded in reality.

For me, it has become a genuine honour to be trusted hundreds of times to help answer big questions like this for each clients’ personal situation.

Clients find peace of mind when they stop guessing and start mapping out an answer, keeping in mind how these six factors influence your situation.

1. Start Now, With What You Have

Some people put off asking the question about how long their retirement savings will last. They wait because they believe they need to first achieve a target savings, like $1 million or $2 million, before they will get an answer that they want to hear.

Do not wait to cross a savings milestone to dig into this question. Get started with today’s reality, and keep reevaluating each year before and after you are retired. 

Once you calculate the savings you have right now, decide how many years you need this to last.

Here is the very basic math: If your investments are worth $500,000 and you want to stretch that over 25 years, the math is simple: You have $20,000 per year, which does not account for any growth. ($20,000 x 25 years = $500,000) 

Add in CPP, OAS, maybe rental income, or part-time work, and you have more. But you should start with what’s real, not what sounds good.

Working with facts creates clarity so you can make choices with your eyes open. 

2. Your Spending Habits Will Make or Break Your Plan

The number one factor that determines how long your savings will last isn’t inflation or investment return, it is how you spend.

I have seen people burn through money at a pace they can’t sustain. Some people manage to pay for necessities with a modest approach, but then something causes them to overspend. 

For example, they may suddenly splurge for a lifestyle upgrade, and take a trip or make a pricy purchase that feels like well-deserved excitement after years of restraint or hard work. 

I believe you should enjoy your retirement, but I also think you need to look at the numbers before you book the next luxury trip or renovate your entire house.

We can work through the numbers together and discover how you can reasonably accomplish the fun you desire without depleting your investments. A sober framework will tell you what is possible and what might need to wait.

3. What is the 4% Rule? What it Gets Right, and Where It Falls Short

You may have heard of the 4% rule. The idea is that if you withdraw 4% of your retirement savings in your first year of retirement and adjust that amount each year for inflation, your portfolio should last about 30 years.

This idea came from a 1998 study published by three finance professors at Trinity University in Texas. They took a large sample of U.S. market returns between 1926 and 1995, testing different withdrawal rates and portfolio mixes across rolling 30-year periods. They concluded that a balanced portfolio (typically 50% stocks and 50% bonds) can withstand a 4% withdrawal rate over a 30-year retirement.

It was a solid piece of research, and it still gets referenced in financial media today. But here’s what you need to keep in mind:

• The study was based entirely on U.S. historical data, not Canadian market returns.
  
• It assumes access to U.S. investment products, tax rules, and a different set of retirement income supports.
  
• It doesn’t account for CPP, OAS, or income-tested benefits in Canada.
  
• And it assumes your goal is to spend down your capital gradually, not necessarily preserve it.
  
  

4. Real Choices Matter More Than Theoretical Rates of Return

No amount of math will protect you from poor decision-making.

I’ve worked with people who are asset-rich but cash-poor because of emotional decisions and attachment to a former phase of life. This causes people to become nostalgic about keeping their large family home. 

In one case, a couple refused to downsize, even when it threatened their financial security. I was happy when they realized their aging home was going to cost them a fortune in renovations, and they considered moving. But they didn’t see it as a financial exercise, because they became fixated on replacing the old $2 million house with a new $2 million property. A smaller home at half the price would have been lavish enough for most people, and it would have been a smarter move for stability, while giving their portfolio a healthy edge. 

Other clients have rented expensive properties without considering what that rent might look like five or ten years down the line. It’s easy to justify these choices in the moment, especially if you recently left a high-paying career that has created a habit of fine taste. 

Retirement is about durability and decisions that will hold up for more than the short term. 

5. Plan for 30 Years Even If You Don’t Think You’ll Need It

Most people underestimate their longevity. They plan based on the age they hope to live to, not the one they might reach.

If you’re retiring at 60 or 65, you should be planning for a retirement that lasts 25 to 30 years. That doesn’t mean you can’t adjust as life unfolds, but if you plan too short and end up living longer, you will face a very different kind of stress.

I’ve seen clients talk themselves out of long-term planning with lines like, “I won’t live that long.” And I’ve seen the consequences of that thinking when they do.

Planning conservatively gives you options. You can always adjust your spending if things go better than expected. But it’s much harder to reverse course once the money starts running low.

6. You Don’t Have to Take Big Risks to Make This Work

You don’t need to hit home runs in the market. You don’t need to chase the latest trend or gamble with your savings.

A conservative portfolio can often allow very reasonable returns. 

You need to discuss with your advisor which investments are appropriate for your personal objectives. 

Conclusion: You Don’t Need a Perfect Number. You Need a Personal Plan.

Most of what you will read online about retirement is based on averages and assumptions. You need a plan that fits your life, not someone else’s.

It should reflect your priorities, spending, risk tolerance, and lifestyle you want to protect.

So if you’re asking how long your money will last, that tells me you’re thinking ahead. Now let’s turn that thought into a plan that is grounded, personal, and built to last. 

If you want help finding out how long your retirement savings will last, you can always reach out to me. I’m open to a discussion that helps bring you peace of mind.