In planning how to fund your retirement, you might think about dividing your savings in the same way as you would a pizza. If you believe your retirement will last 30 years, you could divide your savings into 30 slices, one for each year of retirement. However, a typical portfolio will generate 40-60% of the income from investment returns during the retirement period, so the amount and timing of withdrawals can have a big impact on your total income. Add in other complications, such as government benefits and pensions, inflation, taxes and uncertain longevity, then planning decumulation (generating an income from your savings) begins to take on what Nobel prize winning economist Bill Sharpe described as “the nastiest, hardest problem in finance.”1

Fred Vettese, former chief actuary at Morneau Shepell, has written extensively on the challenge of decumulation for Canadians. His most recent book, Retirement Income for Life, subtitled Getting More Without Saving More (which we borrowed for the title of this paper) considers ways to use assets gathered for retirement to generate a lifetime income.

Inspired by Vettese, we seek to quantify in this paper the impact of three of his income-enhancing suggestions:

  • deferring the Canada Pension Plan (CPP) pension
  • relaxing the requirement that withdrawals be indexed to inflation
  • allowing for variable withdrawals from savings

Of these three suggestions, our research confirms Vettese’s observation that, in most cases, variable withdrawals make the most important contribution to income enhancement.