How Long Will My Money Last? Retirement Portfolio Longevity

The question almost every pre-retiree asks is deceptively simple: will my money last? The honest answer is that it depends on four things working together. How much you withdraw each year, the returns your portfolio earns, how fast inflation raises your cost of living, and how long you live. Change any one of these and the arithmetic shifts.

The reassuring part is that the variable you control most directly, your withdrawal rate, is also the most powerful. You cannot command the markets or your lifespan, but you can decide how much to draw and how willing you are to adjust. This guide explains each driver, shows how they interact, and sets out how to stress-test a plan so you are not relying on a single hopeful projection.

It is written for retirees and those within a decade of retirement, in Ottawa and across Ontario, who want to move from worry to a plan they can actually follow.

The four drivers of portfolio longevity

Think of your savings as a reservoir. Four forces determine how long it lasts.

Driver	Effect on longevity	How much you control
Withdrawal rate	Higher draw drains faster	High
Investment returns	Higher returns refill the reservoir	Low to moderate
Inflation	Raises the income you must draw	Low
Longevity	Longer life means more years to fund	Low

Because you control the first lever most and the others least, prudent planning starts with a sustainable withdrawal rate and then builds in protection against the forces you cannot command.

Withdrawal rate: the lever you control

Your withdrawal rate is the percentage of your portfolio you draw in the first year, which you then typically increase with inflation. Draw too much and even good markets may not keep up; draw modestly and the same portfolio can last far longer.

A widely cited starting point is around 4% of the initial balance, adjusted annually for inflation, discussed in detail in our piece on the 4% rule in Canada. Treat it as a conversation starter, not a guarantee. The right rate for you depends on your asset mix, how much guaranteed income you have from CPP, OAS, and any pension, and how flexible your spending can be.

The key insight is flexibility. A retiree who can trim discretionary spending in a bad year can safely start at a higher rate than one whose budget is entirely fixed, because they can ease the pressure on the portfolio exactly when it is most vulnerable.

It also helps to separate your spending into essential and discretionary layers. Essentials, such as housing, food, and healthcare, are best matched to guaranteed income from CPP, OAS, and any pension, so they continue regardless of markets. Discretionary spending, such as travel and gifts, can be funded from the portfolio and flexed down in difficult years without affecting your security. A retiree whose guaranteed income covers the essentials has far more room to let the portfolio breathe through a downturn, which is itself a powerful form of protection against running short.

Returns matter, but timing matters more

It is natural to focus on average returns, but for a portfolio you are drawing from, the order of returns can matter more than the average. A poor run of markets in the first few years of retirement, while you are also withdrawing, can do lasting damage, because you are selling assets after they have fallen and have fewer left to recover.

This is sequence-of-returns risk, and it explains why two retirees with identical average returns can end up in very different places. We cover it fully in sequence of returns risk. The practical defences are a cash or short-bond reserve to avoid selling into a downturn, a diversified mix, and willingness to pause inflation increases after a bad year.

Remember too that investments are not guaranteed; their values change, and past performance may not be repeated. Any return assumption in a plan is an estimate, not a promise, which is exactly why stress-testing matters.

Inflation quietly shortens the runway

Even modest inflation compounds. If your cost of living rises steadily, the income you must withdraw rises with it, so a portfolio that looked ample at today’s spending can come under pressure a couple of decades in. Over a retirement that may last 30 years or more, purchasing power is a central concern, explored further in inflation and retirement.

The response is not to hoard cash, which loses to inflation, but to keep enough growth assets that your portfolio has a chance to outpace rising prices over the long run, while holding enough stability to ride out the short term.

Longevity: plan for a long life, not an average one

Planning to an average life expectancy is a quiet mistake, because by definition roughly half of people live longer. For a couple, the odds that at least one spouse reaches an advanced age are higher still. The prudent default is to plan to a later age, often the early to mid-90s, accepting that you may leave something behind rather than risk running short.

This is also where guaranteed lifetime income earns its place. Deciding when to start CPP, and whether to defer it for a larger inflation-adjusted amount, is partly a longevity-insurance decision: a larger lifetime benefit protects you precisely in the scenario where you live a long time.

How to stress-test your plan

Rather than ask whether a single projection says you are fine, ask how the plan holds up when things go less well. A good stress test examines a few deliberately uncomfortable scenarios.

• Poor early returns. What happens if the first few years are weak while you are withdrawing?
• Higher inflation. Does the plan survive a sustained period of faster price increases?
• A long life. Does the money last to 95 or beyond for the surviving spouse?
• A large late-life cost. Can the plan absorb a care expense without collapsing?

If the plan survives those, you can retire with genuine confidence. If it does not, you have found the adjustments to make now, while they are small, rather than later, when they are painful.

The adjustments themselves are rarely dramatic. They tend to be a slightly lower starting withdrawal rate, a larger cash reserve, a decision to defer CPP, or a willingness to pause inflation increases after a poor year. Each is modest on its own, but together they can turn a plan that fails in a difficult scenario into one that holds. The value of stress-testing is precisely that it surfaces these small, manageable changes before they become large, forced ones.

It is also worth repeating the exercise periodically rather than only once. Markets, inflation, and your own spending all evolve, and a plan that was robust at 65 may need revisiting at 75. Treating the stress test as a recurring check, not a one-time certification, is what keeps the answer to “will my money last” reliably yes.

Putting it together

Portfolio longevity is not about predicting the future precisely. It is about building a plan robust enough that a range of futures all end acceptably. That means a sustainable and flexible withdrawal rate, an asset mix suited to a multi-decade horizon, a reserve to protect against bad early markets, and a realistic view of inflation and lifespan. Coordinated retirement planning and investment management bring these pieces into one coherent strategy rather than a collection of guesses.

Next step

Knowing how long your money will last is less about a magic number and more about understanding which levers you hold and how hard each one can pull. A stress-tested plan replaces anxiety with a clear set of rules you can follow in good markets and bad. To see how long your savings could last under realistic conditions, book a private consultation with Kevin Hayes Financial Services.