Decumulate & Downsize

Most of your investing life you and your adviser (if you have one) are focused on wealth accumulation. But, we tend to forget, eventually the whole idea of this long process of delayed gratification is to actually spend this money! That’s decumulation as opposed to wealth accumulation. This stage may also involve downsizing from larger homes to smaller ones or condos, moving to the country or otherwise simplifying your life and jettisoning possessions that may tie you down.

When is the right time for Retirees to Consider Annuities?

Posted By Financial Independence Hub | October 17, 2025

Retirement planning experts suggest current market conditions may present an opportune moment for retirees to consider annuities. With potentially higher yields available in today’s interest rate environment, strategic approaches like partial annuitization and laddered purchases offer ways to enhance retirement security. Financial advisors emphasize the importance of weighing tax implications and long-term income stability before making decisions about annuities in a changing economic landscape.

Ladder Annuity Purchases to Capture Peak Rates
Favorable Market Creates Opportunity for Retirement Security
Strategic Timing for Annuities in High Rates
Consider Tax Implications before Rushing to Annuitize
Tax Strategy matters more than Current Rates
Lock in Higher Yields while Maintaining Diversification
Balance Security and Flexibility with Partial Annuitization
Act Now before Rate Cuts Lower Lifetime Income

Ladder Annuity Purchases to Capture Peak Rates

Through my work with United Advisor Group helping advisors serve elite clients, I’m seeing a critical window right now for partial annuitization that most people are missing. The current 5-6% immediate annuity rates are the highest we’ve seen in over a decade, but here’s what’s different from typical advice.

I’m recommending clients ladder their annuity purchases over 12-18 months rather than going all-in immediately. We’re working with carriers like Lincoln Financial where a Phoenix client recently locked in 5.4% on a $300K immediate annuity in January, then waited until rates hit 5.8% in March for another $200k portion. This staging approach captures rising rates while securing baseline income.

The sweet spot I’m seeing is 30-40% annuitization for near-retirees, not the 20% most advisors suggest. With our four-custodian structure at UAG, we’re tracking how this higher allocation actually reduces overall portfolio risk more than expected. A Scottsdale couple we work with annuitized 35% at current rates and can now be more aggressive with their remaining assets.

What makes this timing unique is the Federal Reserve’s clear signalling about holding higher rates through 2024. Unlike previous cycles where advisors played wait-and-see, the current economic indicators we track suggest these annuity rates have more staying power, making the decision timeline less pressured than typical rate environments. — Ray Gettins, Director, United Advisor Group

Favorable Market creates Opportunity for Retirement Security

Annuities aren’t flashy: but in today’s rate environment, they’re finally getting their moment.” With interest rates at multi-year highs, this is one of the most favorable environments we have seen in a long time for retirees to consider annuitizing or partially annuitizing. Higher rates mean better payout terms, especially for fixed annuities, giving retirees more predictable income in retirement. But timing is still very important. The decision to annuitize should still be in line with your personal retirement goals, risk tolerance & need for guaranteed income. Partial annuitization provides a great balance for retirees, allowing them to create a stable income stream to cover essential expenses and still have portfolios flexible enough for legacy planning and growth. It’s much more than a response to market conditions. It’s a calculated move towards peace of mind.

— Harold Wenger Jr., Partner and Wealth Manager, Kingsview Partners

Strategic Timing for Annuities in High Rates

Now might be the smartest time in 15 years to consider annuitizing.

It’s actually quite a favorable time for retirees to annuitize, partially or fully, considering the interest rates today that are at their highest levels since before the Great Financial Crisis. Higher interest rates essentially mean stronger payouts than what we have seen over the past decades. This makes them a more attractive option for those looking for a guaranteed lifetime income. Having said that, I still recommend retirees to think of annuitization the same way they think about diversification, strategically, not emotionally. While having a steady stream of income for essential expenses can provide peace of mind, I would never recommend anyone to put all their eggs in one basket.

Employing a blended approach — one that combines annuities with passive real estate investing or dividend-generating assets — can be a much smarter way to go. It’s the right time now to explore annuities as part of a broader retirement strategy. Just make sure that it aligns with your lifestyle goals, risk tolerance, and legacy planning. — Lon Welsh, Founder, Ironton Capital

Consider Tax Implications before Rushing to Annuitize

After working with retirees for 19 years through my accounting firm, I see this timing question differently than most financial advisors. The real issue isn’t just interest rates: it’s the massive tax implications that nobody talks about.

I had a client couple from North Carolina who were considering annuitizing $300K of their retirement savings when rates hit 5.8% last year. Before they pulled the trigger, we ran the numbers on their overall tax strategy. That annuity income would have pushed them into a higher bracket and made 85% of their Social Security taxable instead of 50%.

Instead, we structured a business strategy where they started a simple consulting venture based on his 40 years of manufacturing experience. Now they’re deferring some retirement income, writing off business expenses that were previously personal costs, and timing their annuitization for when they can control their tax bracket more effectively.

The current rate environment is tempting, but I’m seeing retirees lock themselves into higher lifetime tax bills. Run the tax projections first: sometimes waiting 2-3 years while implementing proper business structures saves more money than chasing today’s rates. — Courtney Epps, Owner, OTB Tax

Tax Strategy Matters more than Current Rates

I believe the decision to annuitize in today’s higher-rate environment is more complex than most retirees are told. The bigger question isn’t just the interest rate, it’s how the IRS will tax that income stream over time. Continue Reading…

Avoiding the big retirement mistakes

Posted By Financial Independence Hub | October 14, 2025

By Mark Seed, myownadvisor

Special to Financial Independence Hub

In a few posts on my site over the years, I’ve shared some big retirement mistakes to avoid. This becomes even more important now that we’re entering a new chapter in our lives: semi-retirement / work on own terms.

Are we ready? Can we avoid some big investing and related retirement mistakes that experts share?

In that spirit as part of new pillar post I hope to update annually and anchor my progress around, here are some of the ways I hope to avoid some big retirement mistakes.

I certainly won’t be perfect but I’ll do my best based on this infographic and more below:

20-common-investing-mistakes - Visual Capitalist November 2023

Attribution/thanks to Visual Capitalist. @VisualCap

1. Expecting too much

I believe I/we have reasonable long-term return and inflation assumptions. Our projections include at the time of this post:

5% annualized returns from a 90% equity/stock + 10% cash/cash equivalents portfolio (excluding my small workplace pension), and
3% sustained inflation.
Some go-go spending years from now until age 79/80 give or take.

I’ll link to my latest Financial Independence Budget update at the end of this post to support any planning assumptions you might have.

What are your key assumptions?

2. No investment goals / 3. Not diversifying

I think we should be good:

We remain invested in our Canadian and U.S. individual stocks near-term, although I could see a near-term day in 2025 or 2026 whereby I sell off all remaining/handful of U.S. individual stocks we own and just put all ex-Canada stocks into a low-cost ETF like my favourite to date: XAW. I would however keep my existing 25 Canadian stocks for income and growth for now; to avoid capital gains in our taxable accounts.
We are not focused on short-term returns since we remain 90% equities. That said, short-term, we are hopefully setting aside enough cash/cash equivalents in 2025 to draw down said cash in 2026 and 2027. Planning for 2028+ has not started yet but we have time to organize ourselves …
We have our long-term drawdown plan: NRT which means a mix of living off dividends from our Non-Registered Accounts (N) with corporation withdrawals, drawing down our RRSPs (R) over time, and therefore leaving our TFSAs (T) until the end.

Our hybrid investing approach using a mix of stocks and ETFs is not going to change:

We own a number of Canadian dividend-paying stocks (with some U.S. stocks for now) for income and growth.
We own a few low-cost ETFs for extra diversification.

4. Focusing on the short-term

Fail!

I’m looking forward to the short term!

We are looking forward to our semi-retirement years and seeing what opportunities may appear in the coming years. I get what the infographic is saying though.

5. Buying high and selling low

I can’t predict the future, can you?

I’m at a point in my investing life whereby if I have the money, sure, I will invest more but I don’t have to.

Besides, when you index invest, the best price is today’s price. The stock market is a forward looking tool.

“Someone is sitting in the shade today because someone planted a tree a long time ago.” – Warren Buffett

6. Trading too much

Nothing really to worry about here. I’m no longer 22-years-old and into penny stocks on this list!

Here are other ways to kill your retirement plan:

7. Paying too much in fees

No longer a problem via owning many individual stocks; no trading, I only do some periodic buying and we maintain low-cost ETFs for growth.

8. Focusing too much on taxes

In other articles on my site about investing mistakes, I’ve seen some expert concerns about dividend income in a taxable account and at the same time, I’ve seen the same experts say not to let the taxation tail wave the investing dog per se.

Mixed messages for sure.

When it comes to dividends, I continue to remain on record that dividends are not the be-all, end-all but work for us especially in our non-registered accounts in that:

any company that does not pay out a dividend, may alternatively provide other forms of shareholder returns: in the form of future capital gains, stock price increases, share buybacks, other.

This means dividends aren’t everything and never have been but they can be very good.

So I do like them. I will spend them. I hope to get more of them over time!

9. Not reviewing regularly

We review our portfolio every few months, in detail. We are good.

10. Misunderstanding risk

I like this one. I feel market volatility and risk while related are not the same.

Volatility:

Consider this like the price swings – how much an asset value fluctuates in price over time.
High volatility means prices swing up and down sharply, while low volatility suggests a smoother, more predictable up and down ride.

Risk:

Possibility of losing money over time, with many specific types of risk: stock market risk, credit risk and housing market risk and so on.
Risk can be framed as short-term or long-term, like “there is a risk of cash losing out to inflation over the next 2 years.”

Volatility isn’t the same as risk but they are related. Some stocks in some sectors might be highly volatile, like tech-stocks, but not all stocks nor all tech-stocks may carry the same risk.

11. Not knowing your performance

I monitor our portfolio performance often but I’ve largely given up on detailed benchmarking since it makes no sense to obsess over benchmarking if you are not meeting your objectives.

As long as you are meeting your goals, that’s good. That’s the priority.

Obsessing over a benchmark and feeling the need to meet an index because some expert said it was a good idea, is not.

12. Reacting to the media

Guilty.

I mean, recent tariff wars have been terrible for many reasons. While I have not yet adjusted my portfolio due these wars, I do find all the annexing of Canada rhetoric both very problematic and very concerning.

13. Forgetting about inflation

See above.

I use 3% higher spending per year in my projections.

Is that enough I wonder? You? Continue Reading…

Safe Retirement Withdrawal Rate Strategies in Canada

Posted By Financial Independence Hub | October 10, 2025

By Kyle Prevost

Special to Financial Independence Hub

The concept of a safe withdrawal rate (and the 4% rule) is a key planning tool for Canadians of all ages. After all, if you don’t have a general withdrawal plan, how can you know how much you need to save in the first place?

If you have been reading MDJ for years, you already have an idea of how to use a Canadian online broker account to DIY-invest your way to a solid nest egg.

Now you’re planning for retirement (whether it’s 20+ years away or next year) and you’re wondering how to take money out of that nest egg. Perhaps hoping that there is a rule for how much you can take out each year in retirement, and never go broke. That concept is generally referred to as a safe withdrawal rate, and we’ll go into detail on how this works in just a second.

We’ll even look at how to incorporate multiple accounts, such as your TFSA, RRSP, and a non-registered account into your safe withdrawal rate – as well tax rules surrounding the withdrawal of investments from those accounts.

And finally, we’ll seek to answer the question you probably really want answered: How do I turn my nest egg into a usable stream of money that I can depend on and spend as I look forward to retirement?

Surprisingly, when it comes to discussing Canadian safe retirement withdrawal rates, and talking to folks who have retired at all ages, spending their retirement savings represents a massive mental strain for them. I guess (as someone who has never retired or sold investments to pay for retirement) that I always thought that saving for retirement would be the hard part.

Isn’t spending supposed to be more fun than squirreling away?

It turns out that once you get into that savings mindset, it can be hard to flip the switch back to enjoying spending the fruits of your labour. This is especially true for folks who are looking at retirement withdrawal strategies for an early retirement because they are much more likely to have been super-aggressive savers during their time in the workforce.

I didn’t go into the topic of safe withdrawal rates for retirement expecting the topic to be so deep and full of variables! After all, the concept seems simple enough, right?

How much can I take out of my investment portfolio each year, if I need that nest egg to last for 30, 35, 40, or even 50 years?

Is your Retirement Savings on Track?

Each year BMO does a retirement survey that asks Canadians a wide range of questions.

The problem is that most Canadians don’t really understand how their income and expenses will interact in retirement. Are you saving enough? Find out for sure with the first online course for Canadian retirees (click here for more details).

The 4% Retirement Withdrawal Rule

Ok, so let’s maybe start with the rule of thumb that advisors have used when looking at retirement drawdown plans for a while now.

Back in 1994 a financial advisor named William Bengen looked at the last 80 or so years of markets and retirement, did a bunch of math, and arrived at a concept we now call “The 4% rule.”

The basic idea of the 4% retirement withdrawal plan is that someone could safely withdraw 4% of their investment/savings portfolio each year and – assuming a 60/40 or 50/50 split of bonds/stocks in their portfolio – they would never run out of money.

This idea of withdrawing a certain percentage of your portfolio to fund your retirement is called the Safe Withdrawal Rate (SWR). The math behind this magic 4% figure means that if you have the nice round $1 Million investment portfolio that we all dream of, you could safely pull out $40,000 the first year, and then adjust for inflation and withdraw 4% plus inflation after that. (So if there was 2% inflation between year one and year two, you could now withdraw $40,800.)

Bengen, and another highly influential study took their rule and retroactively applied it to retirees from every single year from 1926 to 1994. They found that nearly 100% of the time (depending on what was in the investment portfolio) people could retire, and withdraw 4% of their portfolio for 30 years of retirement: and not run out of money.

In fact, over half of the time, if retirees followed the 4% rule, they not only didn’t run out of money, they finished life with more money than when they started retirement!

Keep in mind, these authors didn’t worry about OAS or C P P, or a workplace pension, or even the tax implications of different types of withdrawals. They were simply trying to come up with a useful rule of thumb for how much a person could safely withdraw from their retirement portfolio.

What the 4% Rule Means for your Magic Retirement Portfolio Number

If you can safely withdraw 4% of your portfolio to fund your retirement, then the simple math tells us that if you can accumulate 25x your annual retirement budget, you no longer have to work.

Here’s the breakdown:

Jane looks at her budget and realizes that once she retires she will have a lot less spending demands. She carefully weighs the numbers and believes she’ll need $40,000 per year to quit her 9-to-5.
Consequently, Jane needs the magical “4% of her portfolio” to equal $40,000 per year.
For a 4% withdrawal to equal $40,000, Jane will need a $1,000,000 portfolio.
If Jane reassesses and realizes she needs $60,000 per year in retirement, Jane would need 25 times $60,000 (because 4% goes into 100% twenty-five times) which is $1.5 Million.
Jane might not need anywhere close to $1.5M if she intends to do a little part-time work in retirement, and is willing to use some math + research strategies to help herself out a bit when it comes to managing her nest egg! But more on that later…

4% Safe Withdrawal Rate for Retirement: Potential Problems

Up until the 4% rule became a thing, when financial advisors were asked about safe withdrawal rates, the only thing they could really say is, “it depends.” Continue Reading…

Mark Seed on the 2% Retirement Rule

Posted By Financial Independence Hub | October 6, 2025

By Mark Seed, myownadvisor

Special to Financial Independence Hub

Well hello!

Welcome to some new Weekend Reading related to an article I read on not 4% rules, not 3% rules but the 2% retirement rule.

The 2% Retirement Rule

“The best retirement withdrawal strategy requires flexibility and course corrections depending on the market environment, inflation and your personal spending levels. No one actually follows through with this stuff like it shows on a spreadsheet.”

These are statements that really reasonated with me from Ben Carlson’s post entitled Why the 4% Rule is More Like the 2% Rule.

I desire flexibility related to our retirement income spending needs.
I want to use an approach that enables course corrections to happen easily.
I have never lived my life in a spreadsheet yet some tracking is necessary.

The 2% rule occurs when many retirees who even worry about the 4% rule constantly underspend from their portfolio from fear of outliving their money.

As Ben writes:

“There is a psychological hurdle that exists with some people because you worry about outliving your money, inflation, high healthcare costs, sequence of return risk or something coming out of left field.”

This also speaks to me.

It will be interesting to see how I combat these fears as my wife enters retirement next month and I consider retirement myself from current part-time work in 2026. Lack of a steady paycheque will be new territory to us.

Things we are considering for our retirement income spending as early retirees at least:

Be flexible with our spending. If markets are good/positive, we’ll consider spending more. If markets are unfavourable, then we’ll spend a bit less. Spending a bit less means cutting back on travel plans.
Keep a cash wedge at all times. Any money needed for spending in the next 1-2 years will be maintained in cash/cash equivalents. This way, when market corrections happen that I can’t see coming, we are ready to cover spending in advance.
While we don’t budget (I recently wrote about that) we do track our spending and we’ll continue to do so. This will ensure we are spending money on things we value and/or are aligned to our values.

Retirement will be uncharted waters for us. My wife begins her journey next month. Our psychological and emotional hurdles when it comes to spending money without two steady paycheques will begin very soon: it will interesting to see and feel how we manage that.

I’ll keep you posted.

Other than 1, 2, 3 above, what other advice do you have for me? Words of wisdom from folks that have been there, done that?

5 Steps to a Successful Retirement Investment Plan

Posted By Pat McKeough | September 19, 2025

Build a retirement investment plan more successfully when you focus on tried and true ways of saving, like using an RRSP and a RRIF, among other strategies

Instead of taking on extra risk, take the safer route to retirement planning. Save more now, work longer, or plan to spend less. Retirement leaves you with lots of free time, and filling it costs money.

But postponing retirement, or working part-time as long as you’re able, can pay off in higher current income, more contentment and greater long-term security.

Here are five retirement investment plan tips to help you prepare for a successful future.

1.) Turn frugality into a game as part of your retirement investment plan

Retirement income planning doesn’t have to be about moving money around. Sometimes it’s easier to live frugally. People who come from humble circumstances often develop a degree of both frugality and industriousness early in life.

It’s easy to let frugality evaporate in mid-life, when money becomes more plentiful. But some find that if they return to frugality later in life, it’s more fun than ever. It’s a little like taking pleasure from a game that you haven’t played since you were young.

Your enjoyment of, or distaste for, frugality is partly a matter of attitude. But that’s under your control. Don’t think of it as penny-pinching. Think of it as taking charge of a part of your life, so that more of your money goes to things you choose.

2.) Invest in a Registered Retirement Savings Plan (RRSP) as part of your retirement investment plan

RRSPs are a great way for investors to cut their tax bills and make more money from their retirement investing. RRSPs are a form of tax-deferred savings plan. RRSP contributions are tax deductible, and the investments grow tax-free. (Note that you can currently contribute up to 18% of your earned income from the previous year. March 1, 2025 is the deadline to contribute to an RRSP for the 2024 tax year.)

When you later begin withdrawing the funds from your RRSP, they are taxed as ordinary income.

If you want to pay less tax on dividends while you’re still working, investing in an RRSP is the way to go.

3.) Convert your RRSP to a RRIF at age 71 to get the maximum benefit

Convert your RRSP to a RRIF at age 71 to make sure that you get the maximum. RRIFs offer more flexibility and tax savings than annuities or a lump-sum withdrawal. And like an RRSP, a RRIF can hold a range of investments.

If you have one or more RRSPs (registered retirement savings plans), you’ll have to wind them up at the end of the year in which you turn 71. When you do, you’ll have three main retirement investing options: Continue Reading…

Decumulate & Downsize