The Longevity Paradox:

You May Live Longer Than You Think… Is Your Money Ready?

 

Here is a question I ask every client who sits across from me as they approach retirement:

How long do you think you’re going to live?

It’s a question that tends to produce a pause. Sometimes a laugh. Occasionally a little discomfort. And almost always an answer that is shorter than the statistical reality.

Because here is the truth that changes everything about how we plan for retirement: most Canadians are going to live significantly longer than they expect. And if your financial plan isn’t built around that reality, the most joyful chapter of your life could quietly become the most financially stressful one.

That is the longevity paradox. And it deserves a conversation.

 

The numbers are striking. As per a 2023 Article from the Globe and Mail, A Canadian woman who reaches age 65 today has a better than 50% chance of living to 90. A couple, both aged 65, has nearly a 50% chance that at least one of them will live past 92. These aren’t outlier statistics they are the median. Half of people in that situation will live even longer.

And yet when I ask clients how long they’ve planned for, the answers I hear most often are “to 85” or “to 90 if I’m lucky.” The word lucky is telling. Most people think of a long life as a bonus something to hope for, not something to plan for.

But from a financial planning perspective, longevity isn’t luck. It’s a risk. A beautiful, wonderful, deeply welcome risk but a risk nonetheless. And like every other risk in a well-constructed financial plan, it needs to be acknowledged, modelled, and managed.

When clients imagine a long retirement, they often picture the early years the travel, the grandchildren, the freedom. And those years are wonderful. But a retirement that stretches twenty-five or thirty years doesn’t look the same at every stage.

The early years roughly 65 to 75 tend to be the most active and the most expensive. Travel, lifestyle spending, and the joy of finally having time to do everything you’ve deferred. These years often cost more than people expect.

The middle years roughly 75 to 85 tend to be quieter and somewhat less expensive, though healthcare costs begin to emerge as a meaningful line item. Prescription costs, specialist visits, hearing aids, mobility aids none of these are dramatic on their own, but together they add up in ways that surprise people who haven’t planned for them.

The later years 85 and beyond are where the financial picture can shift most significantly. The possibility of long-term care, whether in-home support, assisted living, or a care facility, introduces costs that can be substantial and sustained. In Ontario, quality long-term care can cost anywhere from $3,000 to over $10,000 per month depending on the level of care and the type of facility. For a couple where one partner requires care for several years, these costs can fundamentally alter the financial landscape.

None of this is said to alarm. It is said because the clients who navigate these stages most gracefully are the ones who planned for all of them not just the first one.

 

Here is another dimension of longevity risk that deserves more attention than it typically receives: the quiet, compounding effect of inflation over a long retirement.

At a modest 2.5% annual inflation rate close to the Bank of Canada’s current target range the purchasing power of a fixed income stream is cut roughly in half over 28 years. What costs $5,000 a month today will cost approximately $10,000 a month in 2054. If you retire at 65 and live to 93, that gap is entirely within your retirement timeline.

This is why income strategies that simply replicate your pre-retirement paycheck without building in growth or inflation protection can leave clients feeling increasingly pinched in their later years even when the plan looked perfectly adequate on paper at the outset.

A well-constructed retirement income plan needs to account for the fact that your dollars will be worth less over time, and ensure that your income sources have the flexibility to keep pace.

 

For clients who have a defined benefit pension and many of mine do, having spent careers at companies like 3M, GDLS, or in the public sector the longevity question is central to one of the most important financial decisions they will ever make.

Whether to commute or defer a pension. Whether to take the unreduced pension at 65 or accept a reduction to retire earlier. Whether to elect a joint and survivor benefit or a higher single-life payment. Each of these decisions carries different implications depending on how long you and your spouse are likely to live.

A pension that looks generous at 65 may look different at 88 if it has no inflation indexing. A commuted value that seems like a windfall may look different if you live to 95 and the markets have had a difficult decade along the way.

These are not simple decisions. They require careful modelling, an honest assessment of your health and family history, and a clear understanding of your income needs across all three phases of retirement. They are also decisions that, once made, cannot be undone. Getting them right matters enormously.

 

If you haven’t reviewed your retirement plan through a longevity lens recently, here are five questions worth bringing to your next advisor conversation:

 

• How long have we planned for? If your plan runs to 85 or 90, ask what happens if you live to 95 or beyond. The answer should not be alarming but it should be honest.
• How does inflation affect my income over time? Ask to see how your purchasing power changes over a 25 to 30-year retirement. The picture may surprise you.
• What is our strategy for healthcare and long-term care costs? One of the most underdiscussed areas of retirement planning in Canada and one of the most financially consequential.
• Are my income sources indexed or fixed? CPP and OAS are indexed to inflation. Many defined benefit pensions are not, or only partially. Understanding which of your income sources will grow with inflation is essential.
• What happens to my plan if I live alone? Whether through widowhood or divorce, many people spend a portion of their later years as a single person. A plan that works beautifully for a couple may need significant adjustment for one.

 

I want to be clear about something. The goal of planning for longevity is not to spend your retirement worried about running out of money. It is precisely the opposite.

When clients have a plan that genuinely accounts for a long life that models the income, the healthcare, the inflation, and the what-ifs they experience something remarkable. They feel free. They take the trip they’ve been putting off. They help the grandchild without guilt. They make the renovation. They live generously and fully, because they know the numbers support it.

That is the gift of good planning. And it is entirely achievable but only if we plan for the life you’re actually likely to live, not a shorter, safer, more conservative version of it.

A long life is not a financial problem. It is a planning opportunity. And the best time to seize that opportunity is before you retire, not after.

 

“Wealth isn’t just about your money. It’s living along the way.”