It’s kind of a morbid question to ask how long you plan for a retirement account to last for. Ideally, once I’m done working there will always be money in the bank, but realistically, I’d rather sort out a way that my wife and I are not over-saving now to have a massive “war chest” of money that we’re never going to touch.
Personally, I have used firecalc to assess my retirement plans, including withdrawal rates for spending, additional dollars being earned (through either my own pension fund, the Canadian Pension Plan, or potentially Old Age Security). I have found it a useful tool, as it has “told” me in several retirement setups that there’s a good chance my money will run out before I need it to.
I picked age 100 for my wife and I when I run these test calculations. I don’t know if in 60 years medical science will have obtained a significant breakthrough regarding age reversal or not*, but this seems to be a conservative age for early retirement planning, with the current average lifespan is much less than that at 81.24 years for Canadians. There are more and more people living past 100 these days compared to even a decade ago, due to enhancements in medical science. While I hope that I won’t be “inefficient” in my planning by working longer than I need to, it does seem prudent to save a bit of extra money just in case either my wife or I does make it past the average expectancy.
My hope is that with my dividend paying portfolio I will never have to touch the principal investments I have made and can essentially live off of some of the earnings, while re-investing the rest. To me, this is one of the benefits of investing in dividends (whether it’s the most efficient way overall to is in question) – hope for some capital return, and take the dividend money off the top. As long as the underlying security remains valuable, my hope is that we will never have to worry about running out of money in old age.
It is an important question to ask when setting up any sort of retirement portfolio, whether you’re planning on leaving the workforce in your 40s or you wait until your 80s – do you have enough money saved to maintain the lifestyle you want to have?
* I’m currently reading an interesting sci-fi book titled “The Postmortal” by Drew Magary that looks at the downside of humans finding a cure for aging. I would recommend it to anyone interested in the world of speculative fiction and likes this kind of story.