In a weak moment, I agreed to appear on a podcast.  I like podcasts, but I’m not trying to build my brand or anything like that, so my sole motivation is to help others.  This can be a weak motivator in the face of doing actual work. But Robert Moysey asked me many good questions about CPP and OAS, and I’ll be appearing on his investing webinar series on Thursday, May 29th at 2:00 pm. For those with average health and who have enough money to live on through their 60s, it makes sense to consider waiting until age 70 to start collecting CPP and possibly OAS too. Here are the particulars for those interested in watching: DATE : Thursday, May 29, 2025 @ 2 PM ET TITLE : Is it a mistake to take CPP and OAS early? DESCRIPTION : Some retirees like to take Canada Pension Plan (CPP) and Old Age Security (OAS) payments as soon as they're eligible for them in hopes of maximizing the value they draw from those programs. Are they making a massive mistake that could cost them dearly in reti...

Actuary Frederick Vettese has a third edition of his excellent book, Retirement Income for Life: Getting More Without Saving More .  He explains methods of making your retirement savings produce more income over your entire retirement.  These methods include controlling investment fees, optimizing the timing of starting CPP and OAS pensions, annuities, Vettese’s free Personal Enhanced Retirement Calculator (PERC), and using reverse mortgages as a backstop if savings run out. This third edition adds new material about how to deal with higher inflation, CPP expansion, new investment products as potential replacements for annuities, and improvements to Vettese’s retirement calculator PERC.  Rather than repeat material from my review of the second edition , I will focus on specific areas that drew my attention. Inflation “We can no longer take low inflation for granted.”  “An annuity does nothing to lessen inflation risk, which should be a greater worry than it was befor...

On episode 289 of the Rational Reminder podcast, the guests were retirement spending researchers, David Blanchett, Michael Finke, and Wade Pfau.  The spark for this discussion was Dave Ramsey’s silly assertion that an 8% withdrawal rate is safe .  From there the podcast became a wide-ranging discussion of important retirement spending topics.  I highly recommend having a listen. Here I collect some questions I would have liked to have asked these experts. 1. How should stock and bond valuations affect withdrawal rates and asset allocations? It seems logical that retirees should spend a lower percentage of their portfolios when stocks or bonds become expensive.  However, it is not at all obvious how to account for valuations.  I made up two adjustments for my own retirement.  The first is that when Shiller’s CAPE exceeds 20, I reduce future stock return expectations by enough to bring the CAPE back to 20 by the end of my life .  These lower return expec...

The origin of the so-called 4% rule is WIlliam Bengen’s 1994 journal paper Determining Withdrawal Rates Using Historical Data .  Experts often criticize this paper saying it doesn’t make sense to keep your retirement withdrawals the same in the face of a portfolio that is either running out of money or is growing wildly.  However, Bengen never said that retirees shouldn’t adjust their withdrawals.  In fact, Bengen discussed the conditions under which it made sense to increase or decrease withdrawals. Bengen imagined a retiree who withdrew some percentage of their portfolio in the first year of retirement, and adjusted this dollar amount by inflation for withdrawals in future years (ignoring the growth or decline of the portfolio).  He used this approach to find a safe starting percentage for the first year’s withdrawal, but he made it clear that real retirees should adjust their withdrawal amounts in some circumstances. In his thought experiment, Bengen had 51 retire...

Ben Carlson says You Probably Need Less Money Than You Think for Retirement .  His “favorite research on this topic comes from an Employee Benefit Research Institute study in 2018 that analyzed the spending habits of retirees during their first two decades of retirement.”  Unfortunately, this study’s results aren’t what they appear to be. The study results Here are the main conclusions from this study: Individuals with less than $200,000 in non-housing assets immediately before retirement had spent down (at the median) about one-quarter of their assets. Those with between $200,000 and $500,000 immediately before retirement had spent down 27.2 percent. Retirees with at least $500,000 immediately before retirement had spent down only 11.8 percent within the first 20 years of retirement at the median. About one-third of all sampled retirees had increased their assets over the first 18 years of retirement. The natural conclusion from these results is that retirees aren’t spending...

A recent research paper by Chen and Munnell from Boston College asks the important question “ Do Retirees Want Constant, Increasing, or Decreasing Consumption? ”.  The accepted wisdom until recently was that retirees naturally want to spend less as they age.  This new research challenges this conclusion. What we all agree on is that the average retiree spends less each year (adjusted for inflation) over the course of retirement.  However, averages can hide a lot of information.  The debate is whether this decreasing spending is voluntary or not.  However, it’s important to recognize that the answer is different for each retiree.  Some don’t spend less over time, some spend less voluntarily, and some are forced to spend less as their savings dwindle. I’ve been saying for some time that not all spending reductions by retirees are voluntary and that this affects the average spending levels across all retirees.  I’ve discussed this subject with many people...

How much can we spend from a portfolio each year in retirement?  An early answer to this question came from William Bengen and became known as the 4% rule .  Recently, Ben Felix reported on research showing that it’s more sensible to use a 2.7% rule .  Here, I examine how a seemingly minor detail, the size of the sampling blocks of stock and bond returns, affects the final conclusion of the safe withdrawal percentage.  It turns out to make a significant difference.  In my usual style, I will try to make my explanations understandable to non-specialists. The research Bengen’s original 4% rule was based on U.S. stock and bond returns for Americans retiring between 1926 and 1976.  He determined that if these hypothetical retirees invested 50-75% in stocks and the rest in bonds, they could spend 4% of their portfolios in their first year of retirement and increase this dollar amount with inflation each year, and they wouldn’t run out of money within 30 years. R...

Frederick Vettese has written good books for Canadians who are retired or near retirement.  His latest, The Rule of 30, is for Canadians still more than a decade from retirement.  He observes that your ability to save for retirement varies over time, so it doesn’t make sense to try to save some fixed percentage of your income throughout your working life.  He lays out a set of rules for how much you should save using what he calls “The Rule of 30.” Vettese’s Rule of 30 is that Canadians should save 30% of their income toward retirement minus mortgage payments or rent and “extraordinary, short-term, necessary expenses, like daycare.”  The idea is for young people to save less when they’re under the pressure of child care costs and housing payments.  The author goes through a number of simulations to test how his rule would perform in different circumstances.  He is careful to base these simulations on reasonable assumptions. My approach is to count anything ...

My portfolio’s return for 2021 was 16.7%, which is the same as my benchmark’s return.  Even with higher inflation, markets delivered a double-digit inflation-adjusted return for my overall portfolio.  For a few years now I’ve been thinking that the probability of a correction in stocks has been rising, but that correction has never come.  Instead, the opposite has happened; stocks keep rising.  It’s a good thing I don’t act on my specific guesses about the future of markets.  I try to make sure I’m well positioned for a wide range of possibilities. As stock prices grew to nosebleed levels, I thought about if and how I should respond.  However, I had no interest in making emotional portfolio decisions.  In the end I decided to use the blended Cyclically Adjusted Price-Earnings (CAPE) ratio of my stocks to make small adjustments to both my bond allocation and my expectations about future stocks returns .  These adjustments are simple formulas that a...

A very low risk way to handle your portfolio in retirement is to invest the whole thing in inflation-protected government bonds and choose a spending level that will have your money last for a very long life.  A related idea is the Annually Recalculated Virtual Annuity (ARVA) where you invest as you see fit and choose your retirement spending level as though your portfolio were invested in inflation-protected government bonds.  Then each year you recalculate your spending level based on your new portfolio size, your new age, and prevailing bond interest rates. The ARVA idea was introduced by Waring and Siegel in their well written and accessible paper The Only Spending Rule Article You Will Ever Need .  Investors who use the ARVA idea will have annual retirement spending “that fluctuates with asset values, but they can never run out of money.” The ARVA idea is broadly similar to my own retirement spending plan that is designed to adapt my retirement spending as my portfol...

It’s no secret that the interests of financial advisors and their clients are not well aligned.  Even financial advisors who mean well can believe that a choice is best for the client when it’s really best for the advisor.  That’s the nature of conflicts of interest.  These conflicts will shape how advisors use the book The Boomers Retire: A Guide for Financial Advisors and Their Clients , whose fifth edition was written by Alexandra Macqueen and David Field.  Lynn Biscott wrote the earlier editions. Throughout my review of this book, I will sometimes be commenting on the substance of its contents and sometimes on how financial advisors might use or misuse the contents, which is arguably not the fault of the authors. The book covers a wide range of important topics that financial advisors should understand, including government benefits, employer savings plans, personal savings, investing, tax planning, where to live in retirement, insurance, and estate planning....

David Trahair’s recent book The Procrastinator’s Guide to Retirement has a great title.  With so many Canadians fearful that they’re way behind on retirement readiness, this book seems like it could rescue them.  Unfortunately, the actual contents leave a lot to be desired. The main idea is that if you save a lot of money every year during your last decade of work, you can build an acceptable retirement.  There are detailed examples overflowing with numbers where people whose big mortgage and child expenses fall away in time for a decade-long sprint to retirement.  However, if you can’t suddenly save a lot of money every year, this book offers no magic for building wealth. Questionable Analyses and Advice A chapter on whether to contribute to an RRSP or pay down your mortgage begins with a question whose answer “is obvious”: “Should I contribute to my RRSP or pay down my credit card, which is charging me 20 percent interest per year?”  Trahair proceeds to expla...

If you’re thinking of retiring today on your own savings rather than a guaranteed pension, how do you factor in the possibility of a stock market crash?  If you’re like many people, you just hope that stocks will keep ticking along with at least average returns.  However, this isn’t the way I thought about timing my own retirement. I retired in mid 2017.  At the time, stock prices were high, so I assumed that the day after retiring, the stock market would drop about 25% or so, and then it would produce slightly below average returns thereafter.  By some people’s estimations, I over-saved, but I didn’t want to end up running out of money in my 70s and be forced to find work at a tiny fraction of my former pay. What actually happened in the 4+ years since I retired was the opposite of a stock market crash.  My stocks have risen a total of 60% (11.5% compounded annually when measured in Canadian dollars).  If I had known what was going to happen, I could have ...

Just in case you’ve ever wanted to read a book about both retirement planning and the music of the 60s and 70s, Daryl Diamond has you covered with Retirement for the Record: Planning Reliable Income for Your Lifetime … to the Soundtrack of Your Life .  This book’s main focus is the value of an advisor (and his firm in particular) in retirement financial planning.  However, about a third of it is stories about the music most relevant to those born near the peak of the baby boom. I expected more discussion of how to plan your finances in retirement, but the consistent message is that such planning is difficult, you need help, most advisors aren’t good at it, but Diamond and his firm do it well.  An early chapter tells us that there are no cookie cutter solutions, because the answer to most retirement planning questions is that “it depends” on your particular circumstances.  There is some truth to this, but it would certainly be possible to lay out 6 or 8 examples that ...

Most of the books I’ve read about retirement have focused on saving, investing, and decumulation strategies.  However, the whole point of being able to retire is to enjoy life.  Not everyone deals well without the structure of work, but Ernie J. Zelinski is here to help with his book How to Retire Happy, Wild, and Free .  If even a small fraction of this book resonates with someone who finds retirement unsatisfying, it can help. For younger people who dream of having less time pressure in their lives, the idea that too much leisure could be unsatisfying may seem ridiculous.  However, many people end up having no good answer to the question “What will you do with your time if you have never learned to enjoy your leisure?”  Zelinski offers hundreds of ideas in categories of lifelong learning, friends, travel, relocation, and more. Whether we choose to stop working or have it forced on us by an employer, retirement is in most people’s futures.  Finances are an...