Retired: $40,000/Year Income - Helen's Story


Sources of Income:

  1. Government pensions: $20,000/year
  2. Investment portfolio withdrawals: $20,000/year

Investment portfolio: $200,000 invested in bank term deposits.

The Problem

Shortly after her retirement, Helen had to make several large capital withdrawals from her portfolio, which reduced the balance to $200,000. At only 70, she’s concerned that her portfolio is shrinking too fast.

  • Interest earned on the term deposits is less than inflation.
  • Helen doesn’t want to own stocks that fluctuate in price.
  • Simple math shows she only has 10 years before the portfolio will be depleted.
  • Increasing her income to keep up with inflation will actually deplete the portfolio in less than 10 years.

She could live well beyond average life expectancy; without an increase in interest rates, she should be worried about running out of money.



Strategy could work if…


Keep the investment portfolio and stagger term deposit maturity dates over five years.

Her life expectancy is short; less than 10 years.

Less income over time

May run out of money.

Buy annuities over five years by slowly selling off the investment portfolio.


She can buy adequate annuity income with the $200,000.

Her life expectancy is long.

Initial annuity income could amount to less than her current income.


Helen’s Considerations

  • Her age, medical condition and estimated life expectancy.
  • How much $200,000 will buy her in the form of annuity income.
  • Difference between her investment withdrawal rate ($20,000) and potential annuity income payments.
  • How willing is she to accept lower income today—an indexed annuity payout in exchange for the security of life-long income?

Still undecided? Helen might consider using only 50% of the term deposits to buy annuities.

To see tips and recommendations for Helen after her annual portfolio assessment, go to Retired: $40,000/Year Income: Annuity Purchase – Helen's Assessment.