Longevity Risk in Retirement: Planning to Not Run Out of Money in Ontario

There's an uncomfortable truth at the centre of retirement planning: the longer you live, the more money you need, and the harder it becomes to protect the purchasing power of what you have. Longevity risk — the financial risk of outliving your savings — is one of the most underappreciated threats facing Ontario retirees today. And as life expectancies continue to rise, it's becoming more relevant, not less.

Marc Pineault at Pineault Wealth Management in London, Ontario works with clients across southwestern Ontario who are confronting exactly this challenge. Planning for a retirement that might last 30 years or more requires a fundamentally different mindset than planning for a 15-year one.

How Long Should You Plan to Live?

Most people instinctively anchor their retirement planning to average life expectancy. But averages are misleading for individual planning purposes — by definition, half the population lives longer than the average.

Statistics Canada data suggests that a 65-year-old Canadian today can expect to live, on average, into their mid-to-late 80s. But a healthy 65-year-old couple has roughly a 50% chance that at least one of them will reach age 90, and a meaningful probability of reaching 95 or beyond.

Planning to age 85 when there's a realistic chance you'll reach 95 means building a plan with a 10-year structural shortfall. That's not a minor miscalculation — it's a plan that fails in its final decade, often when the person is most vulnerable and has the fewest options to course-correct.

The prudent approach is to plan for a longer-than-average lifespan, treat it as the base case rather than the optimistic scenario, and build in explicit safeguards.

The Core Tension: Spending Enough vs. Making It Last

Longevity risk creates a genuine tension in retirement planning. Spend too conservatively, and you may sacrifice quality of life in your healthiest years to protect against a scenario that never materializes. Spend too aggressively, and you may find yourself in your 80s with depleted assets and few options.

Neither extreme is acceptable, which is why the goal isn't to minimize spending or to maximize it — it's to build a plan that's sustainable across a wide range of possible outcomes, including a long life.

This requires understanding your "floor" — the baseline income you need regardless of how markets perform or how long you live — and your "upside" — the discretionary spending that enriches retirement but can be adjusted if necessary.

Income Sources That Last as Long as You Do

The most reliable hedge against longevity risk is income that cannot be outlived. Several sources provide this:

Canada Pension Plan (CPP): A lifetime indexed benefit. Delaying CPP to age 70 increases the benefit by 42% compared to taking it at 65, and provides a higher inflation-protected income floor for as long as you live. For most Ontarians, maximizing CPP through delay is one of the most powerful longevity risk strategies available.

Old Age Security (OAS): Also a lifetime indexed benefit, beginning at 65 (or delayed to 70 for a higher amount). Combined with CPP, OAS and CPP form a guaranteed income foundation that no market downturn can reduce.

Defined benefit (DB) pensions: If you're fortunate enough to have one, a DB pension provides guaranteed income for life. Its value in the context of longevity risk cannot be overstated — it's one of the few income sources that is structurally immune to sequence-of-returns risk and longevity risk simultaneously.

Life annuities: A life annuity converts a portion of your savings into a guaranteed monthly payment for life, regardless of how long you live. They come in various forms — some with survivor benefits, some with inflation indexing, some with guaranteed minimum payment periods. They are not suitable for everyone, but for retirees with significant longevity risk exposure and insufficient guaranteed income from other sources, they deserve serious consideration.

Managing the Portfolio to Support a Long Retirement

For the portion of retirement income that comes from personal savings (RRIF, TFSA, non-registered accounts), several principles help manage longevity risk:

Maintain appropriate equity exposure. A portfolio that shifts entirely to fixed income at retirement is a portfolio that may not grow fast enough to sustain withdrawals over 30 years. Some equity exposure throughout retirement — scaled to your risk tolerance and income needs — is often necessary to support a long retirement.

Plan for a declining spending trajectory — but be careful with the assumption. Research suggests that retirees often spend more in early retirement (when they're active and healthy) and less in middle retirement before potentially spending more again in late retirement due to healthcare costs. A flat or uniformly declining spending assumption may not reflect reality.

Use a "bucket" approach or similar structure to separate near-term income needs (held in stable, liquid assets) from long-term growth assets (held in equities), reducing the likelihood of having to sell equities at a loss to fund current expenses.

Review the plan regularly. A retirement income plan built at 65 based on certain assumptions may need adjustment at 70 or 75. Market conditions, health, spending patterns, and family circumstances all change. Annual or biennial plan reviews catch drift before it becomes a crisis.

The Role of a Financial Planner in Managing Longevity Risk

Longevity risk is not a problem with a single solution — it's a planning challenge that requires coordinating income sources, investment strategy, tax management, and estate planning across a multi-decade time horizon. It requires judgment calls about when to delay benefits, how much annuity coverage is appropriate, how to sequence withdrawals from registered accounts, and how to adjust when circumstances change.

Marc Pineault at Pineault Wealth Management serves clients in London, Ontario and across southwestern Ontario who are thinking seriously about building a retirement that lasts. If you want to move from hoping your money lasts to having a concrete plan for why it will, a conversation with a qualified financial planner is the right next step.

Book a consultation with Marc Pineault

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This article is for educational purposes only and does not constitute personalized financial advice. Please consult a qualified financial planner before making any financial decisions.