Canadians all over the map on retirement withdrawal rates
It's no secret that most Canadians are unsure how much they should be saving for retirement.
But a new study by investment firm Edward Jones suggests we may be equally clueless about how much we can safely spend once we get there.
When asked what percentage of their savings they think they can afford to withdraw every year, only one-third (32%) appeared to have any realistic spending expectations.
According to the poll, almost half (49%) of respondents thought they would need to withdraw 6% to 20% of their savings each year, a number most planners would describe as "a bit high."
Alarmingly, one-in-five (19%) respondents thought they would withdraw more than 20% of their savings, a grim reminder that most workers either have no real idea of what it costs to spend 20 years in retirement or simply don't plan on being around for that long.
Although there's still debate about just how to figure things out, most planners use a 4% withdrawal as a general rule of thumb. Planning on more than that entails a fair amount of risk, something most retirees have little stomach for.
Rather than take out a steady 4%, many investors might stand a better chance of not running out of money were they to adopt a strategy where the percentage of withdrawals was designed to rise and fall between 2.5% and 5% of the prior year-end portfolio, depending on the market's ups and downs.
In other words: After a good year, take out more, and following a bad year, less -- not that's the easiest thing to do for retirees relying on savings to help pay the bills. But it is something to consider.
If they'd called, would you have been in the 6% to 20% range? If you're retired, do you any real-life experience to report?
By Gordon Powers, MSN Money
Posted by: SP | Nov 3, 2021 9:15:13 PM
This article is making an almighty assumption that there will be many folks under 50 who will even be able to entertain the notion of "Retirement" much less having such a large nest egg that they could live off of the interest. Our society has allowed so many different forms of inflation to creep into the system that there will be no traditional retirement in 15 years for many, much less 'the masses'. What do we think is going to happen when the angry colleagues of the 99% protesters start being handed the bills for the corpulent babyboomer retiree's?
Look at house price inflation in the last 10 years compared to young peoples average wage inflation and then do your own 'back of the napkin' calculation to see how much disposable income the future taxpayers will be able to share with the Provincial health insurance programs etc. Tomorrow's babyboomer retiree's will personally be paying American prices for their hip replacements and heart operations etc, but "here in Canada".
Don't listen to me though, I'm just a young crank who thinks that Canada isn't an economic island. What would I know??
Posted by: Canuckguy | Nov 4, 2021 2:48:45 PM
"..need to withdraw 6% to 20% of their savings each year ..."
Good grief, what kind of nimrod would think a 20% withdrawal rate is a good idea, one who will die within 6 years? Because after a few years at that rate, the $ amount withdrawn will be pretty small. Such people don't have any math skills and to figure out stuff like that, high school math(well at least high school math I learned 40 years ago) is all you need. That and a dollop of common sense.
Posted by: Canuckguy | Nov 4, 2021 2:57:36 PM
Ok, you are right, " Canada isn't an economic island"
But please, the term "corpulent babyboomer retiree's..." is insulting to the majority of us who worked long and steady, have pensions and personal savings and so will, and in my case, are enjoying retirement and are not 'corpulent'.
So there, stick that in your hash pipe and smoke it.
Posted by: SP | Nov 4, 2021 3:42:01 PM
The reason that we have such a hard time feeling sorry for those born during the babyboom is highlighted in your response:
"the majority of us who worked long and steady"
This is in stark contrast to the employment options of those following the babyboomers. Our employers 'right sized / downsized / offshored / flattened the management hierarchy" and gutted/eliminated pensions and benefits left and right (Two tier wage structure for those working for the big 3 for example). This is in addition to the housing and education market inflation explosion which benefits the babyboomers and other asset holders.
Not all younger people use illegal or prescription drugs and as insulting as my 'corpulent babyboomer retiree's' statement may sound. It is technically and statistically correct.
Sorry, but the truth hurts and with over 75% of babyboomer overweight or obese the facts speak for themselves.
Posted by: dr boyle | Nov 5, 2021 12:14:25 PM
Most hack financial advisors want you to invest all your money with them and live off the interest. Why not take out principal AND interest? If you are about to turn 65 and have your nest egg ready to roll, your published agerage life expectancy is about 8 years. If you are genetically enhanced, you may make it to 90 and beyond. Why not use the principal of the Factor F, which is based on interest rate and number of years to reduce the principal amount to zero. Example: If you have $100,000 invested at 3%, the F Factor for 20 years is 15.2 and for 25 years is 18. Therefore, to reduce your principal to zero, $100,000/15.2 = $6579 per year for 20 years. For $1,000,000/15.2 = $65790 per year, etc. And most of this is tax free as principal. It's your money, you worked hard for it. Why leave it to someone who will blow it all, or even worse, to a financial advisor who is only interested in making a commission. Remember, Never take advice from someone who stands to gain from the advice they give you. Wishing you well in retirement.
Posted by: Younger Baby Boomer Canuck | Nov 8, 2021 10:07:58 AM
@Canuckguy - I too am a Baby Boomer... just obviously not in your world! I am your younger boomer sibling.
I finished high school when you and the other older boomers were already in the job market, notably with steady jobs, with pension plans, etc. I was unable to get a job at the time - not because of lack of education but because they were taken away already by those who were 5-10 years older than I. As a result, I stayed in school and worked full time to support myself.
Then came the 90"s. Perhaps you were downsized. I still did not have a great set-up although I had been in the labour force for almost 15 years at that point. Unfortunately, although I had worked my way through school and was making a decent living, I never did get that pension plan that you did. I was the first out the door when the layoffs came.
So here we are... you are probably in retirement and I should be following you within the next 10-15 years. Trouble is, I still dont have a job with a pension. My house is still not paid off. I have started having to support our parents, who are now in their last years of life.
I have been hard working too. I am in your generation - I am also a Boomer. I can assure you however, that the life that I have had to lead as your younger boomer-sibling, has made me the look like the runt of the litter and you look like a fat-cat to me. Some could call it Corpulant.
Stop bragging about how hard you worked and how much pension you have.... they were priviledges, and you are priviledged. Now spend some time giving back to the world that you benefitted from! Remeber, the day will come when your younger sibling will be the only family you have!
Posted by: Lee | Nov 10, 2021 10:12:58 AM
I think that this subject is very timely. The "Baby Boomer" era was a bubble in time. The percentage of population that lived in this bubble had the privilege of living in a limited time of staunch government support, reasonable levels of educational costs, strong export movement in the commodities market, where Canada excelled during this bubble in time, and so on, and so on. This was a wealth time in this bubble, and many of the so called baby boomers had time to take a close look at personal wealth management as a means of retiring at 55. Then the bubble burst. This now leads to the discussion between Baby Boomers and those who follow, and some who went before. I agree with @Canuck guy. Those who followed the Baby Boomers are now struggling in a time of market downtrends, currency fluxuation, very large tax increases, and extended times of unemployment. Sum it up-Baby Boomers spent our money to get to the top, the government spent money we did not have, and those who follow have to struggle to find a way to compensate. Deficits, lack of jobs, and government spending have become a way of life. Talk very softly Baby Boomer. You used our future to get to the top, and now we pay the bill.
Posted by: Tony | Dec 22, 2021 9:49:07 AM
These people that haven't worked for 20 years are the one's crying and blaming the baby boomer's
for all of the problems with pension's. First of all the stock market collapsed, I suppose thats our fault
when all you younger people feeding off of it the pensions cost of managing the pensions all contributed to the problem. After all you wouldn't even have a pension plan if it werent for us founding them. Most people don't even have a pension plan because the govt, allowed these nonunion companie's and free trade and immigration.So all I have to say to you people is quit crying
like babies go to work and pay till youre old and grey like we did. I should have invested in pablum
and diaper stocks. I would be rich, So eat your heart out you wont get any sympathy from me.