Retirement Stress Test 1 - Longevity

July 1, 2019


Have you ever found yourself staring at the roulette table hoping the ball will land on your colour?  Most of us understand the odds of betting on either black or red. Hit the colour selected and double your money. Seems straight forward. But let’s look at the actual odds of winning.

In roulette, there are 18 black slots, 18 red slots and 2 green slots (0 and 00) on the wheel. Therefore, your chances of hitting a black or red are equal, 47.4%. This translates to a 52.6% probability that the house will be scooping up all your chips on a black/red bet. The odds are stacked against you. Would you be comfortable with these odds when it comes to your retirement plan?

This is not unlike longevity risk in a standard retirement income plan. A new white paper from the World Economic Forum titled “Investing In (and for) Our Future” suggests Canadians will outlive their retirement savings by more than 10 years, on average.

Financial planners make assumptions on life expectancy when completing a retirement income plan. Let’s say they plan to an age of 90. Well, a healthy 65 year old retiree has about a 50% chance of living past age 90. This means it’s not unlike going to the roulette table and betting on either black or red. Half of the time this retirement income plan will fail. The odds are stacked against you and that’s a bet we are not willing to make for our clients.


Instead, we like to follow the Financial Planning Standard Council of Canada’s recommendation to plan to an age where the individual has a 25% probability of reaching. In other words, an age where the odds are 75% in your favour. In the same example above this means planning to at least age 95.

Don’t gamble with your retirement. Increase your odds of success and plan until at least age 95.

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Warm Regards,

Joe Basque, BA, CFP® | Financial Planner & Investment Advisor
HollisWealth®, a division of Industrial Alliance Securities Inc.

This information has been prepared by Joe Basque who is an Investment Advisor for HollisWealth®. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of HollisWealth.  HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.