13. Longevity Risk
Planning for retirement to last well into your 90s is a necessity. Savings must continue to
grow and individuals need to be prepared to support their lifestyles for 25 years or more.
14. The Cost of Living – Inflation Risk
Year
Inflation
Rate
Cost of
Item Year
Inflation
Rate
Cost of
Item
1 2% $102.00 1 4% $104.00
5 2% $110.41 5 4% $121.67
10 2% $121.90 10 4% $148.02
15 2% $134.59 15 4% $180.09
20 2% $148.59 20 4% $219.11
25 2% $164.06 25 4% $266.58
15. INITIAL INVESTMENT $100,000
A B
Starting at Age 50 Year 1 -13.00% Year 3
Year 2 7.0% Year 2
Year 3 27.0% Year 1
Repeating Repeating
INVESTOR A INVESTOR B INVESTO
INVESTMENT YEAR-END INVESTMENT YEAR-END
AGE RETURN VALUE AGE RETURN VALUE
51 -13% 87,000 51 27% 127,000
52 7% 93,090 52 7% 135,890
53 27% 118,224 53 -13% 118,224
54 -13% 102,855 54 27% 150,145
55 7% 110,055 55 7% 160,655
56 27% 139,770 56 -13% 139,770
57 -13% 121,600 57 27% 177,508
58 7% 130,112 58 7% 189,933
59 27% 165,242 59 -13% 165,242
60 -13% 143,760 60 27% 209,857
61 7% 153,824 61 7% 224,547
62 27% 195,356 62 -13% 195,356
63 -13% 169,960 63 27% 248,102
64 7% 181,857 64 7% 265,469
65 27% 230,958 65 -13% 230,958
MONEY INVESTED $100,000 MONEY INVESTED $100,000
NET PROFIT 130,958 NET PROFIT 130,958
RETURN PER $ $1.31 RETURN PER $ $1.31
COST PER $ $0.764 COST PER $ $0.764
INTEREST RATE
Sequence of Returns
No Risk Without Withdrawals
18. May 27, 2011
RECYCLING DAY 3
You will hopefully be retired for at least 20 to 30 years. Think back 30 years to food and gas prices, interest rates, market levels
and the demographics of the Canadian population for an idea of how much everything can change during that period. As most
advisers spent their careers helping people accumulate money for retirement, there has traditionally been a lack of training and
experience with designing income plans.
Sequence of Returns – Big Risk with Withdrawals
19. May 27, 2011
RECYCLING DAY 3
You will hopefully be retired for at least 20 to 30 years. Think back 30 years to food and gas prices, interest rates, market levels
and the demographics of the Canadian population for an idea of how much everything can change during that period. As most
advisers spent their careers helping people accumulate money for retirement, there has traditionally been a lack of training and
experience with designing income plans.
Sequence of Returns – Big Risk with Withdrawals
To give you a vivid example of why this is so important, let's look at someone who retired at the end of 1962 and withdrew a constant
seven per cent from their investments, which were a balanced portfolio of 60 per cent stocks and 40 per cent bonds. Thirty years
later, that person had run out of money.
20. May 27, 2011
RECYCLING DAY 3
You will hopefully be retired for at least 20 to 30 years. Think back 30 years to food and gas prices, interest rates, market levels
and the demographics of the Canadian population for an idea of how much everything can change during that period. As most
advisers spent their careers helping people accumulate money for retirement, there has traditionally been a lack of training and
experience with designing income plans.
Sequence of Returns – Big Risk with Withdrawals
To give you a vivid example of why this is so important, let's look at someone who retired at the end of 1962 and withdrew a constant
seven per cent from their investments, which were a balanced portfolio of 60 per cent stocks and 40 per cent bonds. Thirty years
later, that person had run out of money.
However, if that same person had retired at the end of 1963 with the same amount of money, they would still have almost all their
capital left 30 years later.
21. May 27, 2011
RECYCLING DAY 3
You will hopefully be retired for at least 20 to 30 years. Think back 30 years to food and gas prices, interest rates, market levels
and the demographics of the Canadian population for an idea of how much everything can change during that period. As most
advisers spent their careers helping people accumulate money for retirement, there has traditionally been a lack of training and
experience with designing income plans.
Sequence of Returns – Big Risk with Withdrawals
To give you a vivid example of why this is so important, let's look at someone who retired at the end of 1962 and withdrew a constant
seven per cent from their investments, which were a balanced portfolio of 60 per cent stocks and 40 per cent bonds. Thirty years
later, that person had run out of money.
However, if that same person had retired at the end of 1963 with the same amount of money, they would still have almost all their
capital left 30 years later.
This brings us to concept of: Luck. The most comprehensive and
sophisticated analysis of data from the last 150 years concluded that the
No. 1 determinant of financial success in retirement is luck, and more
specifically, the timing of the retirement.
22. May 27, 2011
RECYCLING DAY 3
You will hopefully be retired for at least 20 to 30 years. Think back 30 years to food and gas prices, interest rates, market levels
and the demographics of the Canadian population for an idea of how much everything can change during that period. As most
advisers spent their careers helping people accumulate money for retirement, there has traditionally been a lack of training and
experience with designing income plans.
Sequence of Returns – Big Risk with Withdrawals
To give you a vivid example of why this is so important, let's look at someone who retired at the end of 1962 and withdrew a constant
seven per cent from their investments, which were a balanced portfolio of 60 per cent stocks and 40 per cent bonds. Thirty years
later, that person had run out of money.
However, if that same person had retired at the end of 1963 with the same amount of money, they would still have almost all their
capital left 30 years later.
This brings us to concept of: Luck. The most comprehensive and
sophisticated analysis of data from the last 150 years concluded that the
No. 1 determinant of financial success in retirement is luck, and more
specifically, the timing of the retirement.
Proper retirement planning is about eliminating the effects of luck and the potential ill effects of bad timing.
It's also about measuring progress regularly throughout retirement and making adjustments as necessary.
dchristianson@wellwest.ca
Republished from the Winnipeg Free Press print edition May 27, 2011 B16
30. Those Are The Major Retirement Risks
What Can Be Done About Them?
31. Those Are The Major Retirement Risks
What Can Be Done About Them?
Do Some Risk Management
32. Those Are The Major Retirement Risks
What Can Be Done About Them?
Do Some Risk Management
How Do You Manage These Risks?
33. Those Are The Major Retirement Risks
What Can Be Done About Them?
Buy Some Guarantees
Do Some Risk Management
How Do You Manage These Risks?
34. Those Are The Major Retirement Risks
What Can Be Done About Them?
Buy Some Guarantees
Click On Guaranteed Variable Investments
Do Some Risk Management
How Do You Manage These Risks?
35. Those Are The Major Retirement Risks
What Can Be Done About Them?
Buy Some Guarantees
Click On Guaranteed Variable Investments
Click On Income For Life
Do Some Risk Management
How Do You Manage These Risks?
37. DISCLAIMER
The ideas and concepts presented her were not originally my ideas. They
were collected by reading publications and attending presentations. I
assume you don’t have time to invest/spend your time doing those things.
38. DISCLAIMER
The ideas and concepts presented her were not originally my ideas. They
were collected by reading publications and attending presentations. I
assume you don’t have time to invest/spend your time doing those things.
I agree with them or know them to be true. You are welcome to question
the concept or facts.
39. I Refer To My Work Here As Research. Others Might Call It Plagiarism.
-Brian Penston
DISCLAIMER
The ideas and concepts presented her were not originally my ideas. They
were collected by reading publications and attending presentations. I
assume you don’t have time to invest/spend your time doing those things.
I agree with them or know them to be true. You are welcome to question
the concept or facts.
40. I Refer To My Work Here As Research. Others Might Call It Plagiarism.
-Brian Penston
DISCLAIMER
Thank You!
The ideas and concepts presented her were not originally my ideas. They
were collected by reading publications and attending presentations. I
assume you don’t have time to invest/spend your time doing those things.
I agree with them or know them to be true. You are welcome to question
the concept or facts.
41. I Refer To My Work Here As Research. Others Might Call It Plagiarism.
-Brian Penston
DISCLAIMER
Thank You!
The ideas and concepts presented her were not originally my ideas. They
were collected by reading publications and attending presentations. I
assume you don’t have time to invest/spend your time doing those things.
I agree with them or know them to be true. You are welcome to question
the concept or facts.
Brian Penston
