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Planning for retirement: how long will you live?

Planning for retirement: how long will you live?

July 12, 2018

How long will you live?

That is the million-dollar question when it comes to planning for retirement. Not understanding how long your money has to last can create a lot of uncertainty.

There are plenty of statistics to show people are living longer.

Zürich-based UBS group AG continues to monitor and study 5,000 of the banks’ wealthy clients. Its observation is longevity is beginning to change investor behavior.

Canada’s life expectancy ranks among the top in the world. Statistics Canada reported the number of people aged 85 and older grew 19.4 per cent from 2011 to 2016. During that same time people aged 100 and older grew by 41.3 per cent.

For planning purposes, it is advisable to assume a long life. The longer the life, the more likely you will run out of money.

Many consider an appropriate retirement age to be 65. That means if you live to age 100 you will have 35 years after your employment income stops.

That is a lot of years to be financially self-sufficient and to support your desired lifestyle. Unless you work for the government you likely don’t have pension income.

One critical financial planning question for retirees is how much of your investment portfolio should be allocated to stocks and how much should be allocated to bonds?

Stocks are risky because they are volatile however over the long-term the expected return is higher than bonds. Although bond returns are lower they are less volatile.

If regrettably your life is short your investment decisions are not that significant. You will likely not run out of money during a short retirement.

Your risk of living a long life is running out of money and therefore the higher return of stocks should be considered.

There are many unknowns to long-term retirement planning.

The most significant unknown is how long will you live.



Peter Watson is an agent of, and securities products are provided by, Aligned Capital Partners Inc. (ACPI).  ACPI is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF).  The opinions expressed are those of the author and not necessarily those of ACPI. Peter Watson provides wealth management services through Peter Watson Investments