Case Study: How Long Will the Money Last? - Hai and Biyu's Story

Hai and Biyu are updating their financial plan prior to retiring next year when they respectively turn 66 and 63 years old. Their portfolio of defined contribution (DC) pension, RRSP and TFSA accounts totals $1 million. It has a balanced-profile asset mix of 60% equities and 40% fixed income/cash.

They think they have enough money to maintain their lifestyle, but want to run a number of retirement scenarios using different investment rates of return and cost-of-living adjustments to “stress test” their retirement plan. The scenarios will:

  • Set the monthly withdrawal payment at $5,000 (to be withdrawn from the investment portfolio)
  • Vary the investment return and inflation rates

Hai and Biyu's Question

Since we're healthy and both of our families have long-lived members, we want to plan for a long retirement, up to 30 years. Is it realistic for us to withdraw $5,000 per month from our investments? How long will the money last?


A conservative, long-term average rate of return for a balanced portfolio was used as the base-case scenario for Hai and Biyu's stress test. This scenario modeled a difference of only 2%, between the assumed 4% investment return and a 2% rate of inflation (their annual cost-of-living adjustment).

The results from the “How Long Will Your Savings Last?” calculator were not what Hai and Biyu expected. The money would only last for 20 years and 4 months, as shown below.

Using the calculator, they ran more scenarios, increasing the rate of return on the portfolio and varying their cost-of-living adjustment. They compared each subsequent scenario to the base case. It took three more tries before finding a combination that achieved a 30-year payout.


Rate of Return

Opening Balance

Initial Monthly Withdrawal Payment

Cost-of-Living Adjustment

Money Lasts

Base case


$1 million



20 years 4 months

1% higher return with 1% higher inflation


$1 million



20 years 5 months

1% higher return with same inflation as base case


$1 million



23 years

2% higher return with same inflation as base case


$1 million



30 years


The money lasts for just over 20 years in the first two scenarios because the 2% spread between the rate of return and cost-of-living adjustment (rate of inflation) is identical. Only when the spread widens does the length of time increase before they run out of money.


The base case is not realistic. Only by limiting cost-of-living adjustments to 2% and achieving a 6.52% long-term rate of return would the portfolio last 30 years.

  • The 4.52% spread between inflation and the rate of return is relatively wide for a retirement portfolio and may be hard to achieve.
  • Hai and Biyu should re-examine their expenses. A lower monthly payment, at least in their early retirement years, would make the principal last longer.
  • They must decide which is more important: a $5,000/month withdrawal payment or a 30-year payout period.
  • Periodic review and adjustment are recommended to maintain the portfolio.