Ross and Emily: A Retirement Planning “Case Study”

Retirement is a significant milestone in one’s life, representing a well-deserved transition from the daily grind to a more relaxed and fulfilling chapter. However, for many Canadians, the path to a worry-free retirement can be filled with uncertainties and financial challenges. In this blog post, we’ll follow the journey of Ross and Emily, a married couple on the brink of retirement, as they navigate the intricacies of retirement planning and discover a path to financial freedom.


Ross and Emily

Ross and Emily are planning to retire at the end of this year. As the day draws nearer, a sense of alarm begins to creep in. They think they are in a good financial position, but they aren’t sure. Although they’ve committed themselves to this path, they are feeling a sense of disequilibrium. Ross turned 64 and Emily 62 earlier this year. Are they truly ready?


The Issue

This tension, or discrepancy if you will, between Ross and Emily’s stated plan to retire at the end of the year and their lack of confidence in their ability to retire successfully, which they define as having enough money to live a contented retirement lifestyle for the remainder of their lives, is not uncommon. Many couples delay retirement for several years beyond what’s necessary.


Habits Die Hard

Part of the reason is that Canadians who are disciplined in their saving habits find it extremely difficult to turn saving off and start spending instead. Ross and Emily are going to be successful retirees because they were successful savers for the last 40 years. However, a habit that has been trained into a couple’s lifestyle for that many years cannot be simply turned 180 degrees. The drive to save, to enable them to retire without worry, is the same drive that keeps them uncertain. Saving and investing are straightforward. Retirement, on the other hand, is full of uncertainty. According to William Sharpe, a winner of the Economics Nobel, the hardest problem in finance is retirement spending. While we all know people who have retired successfully, the challenge is not so much retirement itself as the uncertainties associated with retirement.


Variables Not in Our Control


Consider the things that are not in a retiree’s control. We might have a reasonable sense of our life expectancy. A Canadian who has made it to age 60-65 has about a 50/50 chance of making it to age 89 or so. However, we don’t know if we are going to draw the short end of the stick and die earlier than our peers or live well beyond the average and eventually join the increasingly common centenarian club.


Inflation Rate

For many years, we have been experiencing low inflation. According to the Bank of Canada, in April 2020 the median Consumer Price Index (CPI) showed a rate of 1.9%. In April 2021, the CPI had increased to 2.3%, and increased again, to 4.7% in April 2022. However, the April 2023 figure dropped to 4.2%. Regardless of whether the CPI continues to decline, holds steady, or increases again, it is out of our control. Larger economic forces are at work. The best we can do is construct a reasonable response to inflation.


Variables in Our Control

Among the following variables, there is some degree of control available to us.


Required Annual Income in Retirement

The income we need is somewhat within our control. We can alter our lifestyles to increase or decrease our cost of living. For example, Ross and Emily may have used two vehicles before retiring, but perhaps they only need one after retiring. Their work may have required that they live in a major city with more expensive housing costs. Upon retiring they may choose to move to a community where it is less costly to live. On the other hand, in the early years of retirement when energy is still available, travelling may become a major source of expenses.


Accumulated Retirement Savings

There are multiple sources of retirement savings. During our working years, we have a fair bit of control. We can seek out jobs that offer good pension plans or higher incomes. Not everyone can move for work, however, which may limit job prospects. And in these days when couples are typically both working, moving to take advantage of a job opportunity for one spouse may negatively impact the prospects of the other spouse.


Nevertheless, within certain personal limits, it can be argued that choices are available to us concerning saving up for retirement.


Saving Rate

According to Statistics Canada, the average household saving rate was 6.0% in the fourth quarter of 2022. Given the high cost of housing and other living expenses these days, that Canadians manage to save anything at all is laudable. But of course, many save much higher percentages. Those who subscribe to the FIRE (Financial Independence, Retire Early) movement are routinely saving 50% or more of their income to become independent of the need to rely on a job to sustain themselves. Not all aspire to join this lifestyle, but I suggest that it does make the point that many Canadians can improve their saving rate and thereby improve their situation in retirement.


Another benefit of increasing the percentage of income that we save is that we establish a lifestyle that lives on less now and trains us for that lifestyle later in life as well.


Expected Investment Returns

No, this does not mean that we can control how much of a return we will get from our investments. The word “expected” is a deliberate choice. In a recent blog post, I wrote about projected investment return guidelines as published by FP Canada. Based on several factors, FP Canada projects long-term expected returns for various investment categories. For the risk-averse among us who keep all our money in cash or cash equivalents, things like savings accounts, money market mutual funds, cashable or short-term GICs, etc., the expected return is about 2.3% before fees and taxes. In a world where long-term inflation is projected at 2.1%, the return is likely negative. In other words, “risk-free” savings will tend to put our ability to live a contented lifestyle at risk. The point is that by going further out on the risk spectrum, retirees and near-retirees can increase their expected returns. There may be somewhat greater fluctuation in investment returns from year to year, but probabilities suggest that adding a bit more risk in exchange for the potential for greater investment returns is the way to go. Having said that, that risk needs to be calibrated to not just our financial needs in retirement, but our ability to cope with the increased probability of negative returns like many long-term investors experienced in 2022. Of course, someone who is in the enviable position of having a well-funded pension plan that adjusts for inflation may need to take little or no risk at all.


Developing a Retirement Plan

We spend a lot of time on certain decisions and justifiably so. Momentous decisions are made about marriage or the purchase of a home. I wonder, though, whether we put more time into deciding what kind of vehicle to buy than we do about developing a retirement plan. The previous paragraphs sought to point out that there are a lot of impactful decisions that we have some degree of control over.


Let’s return to Ross and Emily to learn a little more about their situation immediately before retirement. They don’t know how long they will live but decide that Ross’s health history argues that at age 64, they should plan for him to live to age 90. For her part, Emily’s health history and the general tendency of women to outlive men leads them to project her lifespan to age 100. Even though how long they live is out of their control, beginning to develop a plan gives them a sense of confidence that they can control more than they thought.


The Retirement Plan

Ross and Emily decide that it is time to hire a financial planner to give them some reasonable projections for their retirement.


Income and Expenses

Ross and Emily have been spending between $50,000 and $75,000 after tax each year for the last several years. This has allowed them to build up financial assets worth $3 million, which includes about $500,000 in inheritances they have received from the estates of their respective parents.


After testing various assumptions, their planner tells them they can easily spend an inflation-adjusted $100,000 per year without running out of money. In addition, they plan on spending $50,000 annually for the first three years of their retirement on renovations to their home. Also, in 2027 and every 10 years thereafter, they plan to spend approximately $40,000 on a new vehicle. In fact, at this rate, they anticipate that in nominal dollar terms, Emily is likely to die at age 100 with more money than they started with.


Both Ross and Emily have decided that they will delay receiving CPP and OAS until they turn 70. They don’t need the money immediately, and the benefit of increased payments is an extra level of reassurance in the event of disastrous investment returns.



Ross and Emily both have RRSPs, TFSAs, defined contribution pension plans, and non-registered accounts worth a combined $3 million in a combination of index funds and Guaranteed Investment Certificates (GICs). Their asset mix is currently 54% equity and 46% fixed income and cash equivalents. After reviewing some risk assessment questionnaires, they decide that they could moderate their asset mix somewhat to 50/50 equity/fixed income.


Emily also has a Defined Benefit pension plan that is not indexed for inflation. She is already receiving payments of $800 per month.


Their planner recommends that they spend down their RRSP/RRIFs in the first few years of their retirement and spend down their defined contribution plans, which they plan to convert to LIFs, next. Ross and Emily can sustain the balance of their retirement spending need from the income generated by their non-registered assets as well as small withdrawals from the capital. However, projections indicate that the non-registered accounts will continue to grow. Although they don’t contribute to their TFSAs anymore after retiring, neither do they need to withdraw any funds. Ross and Emily have designated their TFSAs as well as their house as assets set aside for an inheritance.



Although no one likes to pay taxes, Ross and Emily know that their registered accounts will have taxes due anyway. They would rather pay those taxes earlier than leave heavily taxed assets to their heirs. The TFSAs will be tax-free, or nearly so, when the surviving spouse, presumed to be Emily, dies. While the non-registered accounts are taxable, only the capital gains portion needs to be worried about.


They also plan to mitigate their taxes somewhat by continuing their pattern of donating to registered Canadian charities. They like the idea of contributing to worthy causes while simultaneously getting a tax credit for donations.



Emily had privately purchased term life insurance when she was younger. In their last 10 years, however, she let that lapse, as there were no longer any debts to cover, and their children had reached adulthood. Ross was not eligible for privately purchased life insurance. They both have group policies that will disappear when they retire. They have been assured that they have sufficient funds to cover the needs of the surviving spouse.


Legal Matters

Both Ross and Emily have appointed each other as powers of attorney to handle their financial and personal care issues if they lose the necessary competency to handle those affairs themselves. They are giving some consideration to appointing one of their children as alternates but have not done so yet.


The Outcome

Thanks to the review of their assets and spending, Ross and Emily feel encouraged and confident as they enter retirement. With the help of their financial planner, they have anticipated several of the consequences that may arise and have taken steps to secure their financial well-being over the long term.


Ross and Emily’s journey is a mash-up of existing and fictitious financial planning clients. The amount of money they have may be substantial and it has been buttressed by inheritances. However, they did not work in jobs with “gold-plated” pensions. Their lifestyle while working has been marked by a degree of frugality that allowed them to accumulate significant assets. As you embark on your own retirement planning journey, remember that there is much that remains in your control. Some professional guidance to help you make decisions for your long-term benefit can lead you on a journey to a contented and enjoyable retirement.


This is the 198th blog post for Russ Writes, first published on 2023-05-22


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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.


Image by Susanne Nicolin from Pixabay