What is your withdrawal rate?

Ten or twelve years ago, withdrawing 10% annually from your investments was a safe withdrawal rate. GICs were paying 10% interest so your capital was safe.

Now with a five-year GIC paying around 4.8%, less than half, what is a retiree to do with less than half the income as inflation grows?

It is not as simple as some financial experts predict. Do you worry about taking out too much money from your investments? Looking at long-term average returns and base your withdrawal rate on historical averages can be a very costly mistake. Let’s face it, most retirees do not want to spend down capital because of fears of running out of money, or worse losing their health and running out of money.

There is no easy answer but there are several things to consider when planning your withdrawal rate from your investments.

First, is it registered, like an RRSP or RRIF?

Second, what are your life expectancy and your family history?

Third, while we do not know our health care expenses today we can consider what it may cost in a care facility or home care costs in the future.

Fourth the dreaded inflation calculation. This can take its toll on retirement income.

Fifth, what is your asset allocation? What can you see as income generation from your current investments? Is your withdrawal rate 4%, or 6% or 8% annually and can that last?

Sixth, your risk factor. What level of risk are you or your spouse comfortable with? Several retired couples I meet, their risk tolerances are completely opposite, making it worrisome for both.

Seventh, your estate plans, what do you wish to leave behind or protect for future generations or charitable organizations?

Finally, taxation, what level of tax do you pay today and may pay in future years.

All these factors need to be considered before you can decide on how much income you plan to take from your investments.

It sounds like part of a comprehensive retirement income plan, well that is exactly what you need to do. There is no simple answer. Your financial professional can help you answer these questions and has software programs to take into account all of the varying factors. Ask for a comprehensive retirement income analysis to make sure you are not going to take out too much income from your investments leaving you to worry about your retirement future.

Instead of sitting around worrying, find out how you can be secure about your retirement income today.

Click here to read more about SAFE withdrawal rates


  1. peter Gosselin

    All Canadian retirement calculator should include mandatory rrif withdrawals which make a propose a 4% or so take out much more difficult to manage.
    My case:age 71,spousal67,I use my wife’s age to take out my rrif $ at 4.5% but soon it will be at 7.38% plus for both of us.The tax implication will be severe.

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