Retired Money: Should big savers still fear outliving their money?

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My latest MoneySense Retired Money column looks at the topic of whether average savers transitioning to Retirement really need to fear outliving their money. The piece picks up from a blog this summer from Michael James on Money, which will be republished in its entirety tomorrow here on the Hub.

You can access the full MoneySense column by clicking on the highlighted text: How long will your retirement nest egg last? In addition to citing Michael J. Wiener’s work, the piece passes on the views of two prominent recently retired actuaries: Malcolm Hamilton and Fred Vettese, as well as my co-author on Victory Lap Retirement, ex corporate banker Mike Drak.

Like this blog, despite being online the column’s scope is somewhat constrained by a word limit. In fact, in an email, Hamilton told me he didn’t think such a topic could be addressed in just 800 or 900 words.

Actuary and retirement expert Malcolm Hamilton

“Why? We presume that good advice is universal … that it applies to everyone. It does not, particularly when addressing concerns about running out of money. For years I have looked for evidence that large numbers of seniors spent too much and suffered as a consequence. I haven’t found anything persuasive.”

No one knows how much Canadians should save or how quickly they should draw down their savings after retirement, Hamilton added: “Some people are frugal. They save heavily before retirement and spend sparingly after retirement, leaving large amounts to their children when they die. We all want parents like this. Others are spendthrift. They save little before retirement and live frugally after retirement because they have no money except government pensions.”

Finding balance between extremes of Over-Saving and Over-Spending

Reasonably, most Canadians fall between these extremes, Hamilton continued: “They try to balance saving and spending before retirement and dis-saving and spending after retirement. This is difficult because no one knows how long they will live, what rate of return they will earn on their savings and/or what their future expenses will look like. Somehow, Canadians muddle through. They find a way to enjoy retirement as much, or more, than they enjoyed their working lives.”

What then should people do?, Hamilton asked rhetorically.

“Strive for balance. Behave responsibly. Adapt to changing circumstances. Cultivate inexpensive hobbies. Celebrate friends and family. Hope for good health and long life. Don’t waste your time preparing for, or worrying about, an unpredictable future. Adapt, don’t despair. Make the best of your situation.”

As I say in a personal note at the end of the MoneySense column, I’d rather die with a bit of money to give to our heirs than die broke owning money to the proverbial undertaker but we’re all different. Keep in mind that early in retirement – the so-call “Go go” years — you’ll travel more and indulge in expensive hobbies. If your 80s involves ramping down to the “Go slow” years, odds are you’ll be less inclined to spend a lot by then.

Finally, if, the Lord willing, you make it to the “no go” years of the 90s, then yes the last few years of retirement, and your life, could be medically quite expensive. That would be a bigger issue in the US, where some of the EBRI figures cited in the column apply, since Canada has a more generous universal health system.