More Canadians are getting older and retiring, while their portfolios are now being asked to work harder and for longer. […]
Some Canadians are fortunate to reach their elder years with sufficient financial assets to generate all the retirement income they need without drawing down their wealth, but they are the minority. Most investors cannot afford to live off the amount of real income their nest egg can safely yield and, thus, they then must decide with professional help at what rate to drawdown their nest egg. The scientific consensus is that no universal decumulation rate is appropriate for everyone and, in particular, the optimal drawdown strategy depends critically on each investor’s longevity risk aversion (LoRa).
By: Moshe A. Milevsky1 and Barry Gordon2
A simple Google search for the phrase “retirement strategy” results in approximately 176 million hits, whereas a search for the phrase “decumulation strategy” leads to only 78,000 results. That is a ratio of almost 2,300 to 1 favouring retirement over decumulation. Yet, an investor’s strategy for the latter is likely to be infinitely more important than the former.3 In fact, the current thinking among gerontologists and pension economists is that retirement (i.e. the complete secession of work at age 65, for example) is unlikely to be affordable for the average Canadian and a recipe for shortened longevity.4
The Forget Retirement whitepaper outlines the following topics:
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- • What LoRa means
- • Why it should be part of the standard investment know-your-client process
- • How to measure LoRa with a simple survey
- • Survey results on how Canadians plan to decumulate
1. Moshe A. Milevsky is a professor, educator, author and thought leader on retirement income planning and this White Paper is written in his capacity as Chief Retirement Architect for Guardian Capital LP. The views expressed here do not reflect the opinions or position of York University or the Investment Advisory Panel (IAP) of CIRO, of which he is vice chair.
2. Barry Gordon is Managing Director and Head of Retail Asset Management for Guardian Capital LP.
3. Google search results on 10 June 2023.
4. Example of one of the many studies published by Harvard Medical School. Harvard Health Publishing, Working later in life can pay off in more than just income, Harvard Medical School, Staying Healthy Blog, published June 1, 2018. https://www.health.harvard.edu/staying-healthy/working-later-in-life-can-pay-off-in-more-than-just-income
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