Statistics Canada data consistently shows that women, on average, live several years longer than men — a gap that has narrowed somewhat over recent decades but remains meaningful. For retirement planning, this is not a minor footnote: it means a retirement plan built around "average" assumptions may not adequately reflect a woman’s actual planning horizon.
Longevity risk is the risk of outliving your savings — and it interacts with nearly every other retirement decision: how much to withdraw each year, how a portfolio is allocated between growth and stability, when to start CPP and OAS, and how much to budget for healthcare costs that accumulate over a longer retirement.
Why "Average Life Expectancy" Understates the Planning Need
A common mistake in retirement planning is to use average life expectancy as the planning horizon — for example, planning for a portfolio to last until age 85 because that is roughly the average life expectancy for a woman retiring today. The problem: roughly half of people will live longer than the average, some considerably longer. A plan that runs out of money exactly at average life expectancy has, by definition, a very high chance of running out before the person actually needs it to stop.
For this reason, retirement income plans are often built around a longer planning horizon — sometimes to age 95 or even longer — particularly for women, where the probability of living well into the 90s is meaningfully higher than commonly assumed.
How Longevity Risk Affects Specific Decisions
CPP Timing
Delaying CPP from age 65 to age 70 increases the monthly benefit by roughly 0.7% per month delayed — about 42% higher at age 70 compared to age 65. This increase is permanent and inflation-indexed for life. For someone with a longer expected retirement, the "break-even" point (the age at which delaying CPP results in more total income received) is reached earlier in their remaining lifetime — making delayed CPP a more attractive form of longevity insurance for women, on average, than for someone with a shorter expected retirement.
Portfolio Allocation in Retirement
A longer retirement horizon means a portfolio needs to continue generating growth for longer — a portfolio allocated very conservatively at the start of a 35-year retirement (a realistic horizon for someone retiring at 60 and living to 95) faces a meaningful risk of not keeping pace with inflation over that span, even though the same allocation might be entirely appropriate for a 15-year retirement.
Withdrawal Rate
The widely-referenced "4% rule" for sustainable retirement withdrawals was developed based on historical scenarios over roughly 30-year retirement periods. For a retirement that may need to last 35 years or more, a somewhat more conservative initial withdrawal rate — or a flexible withdrawal approach that adjusts based on portfolio performance — may be more appropriate than a fixed percentage based on a shorter assumed horizon.
Healthcare and Long-Term Care Costs
A longer retirement also means more years during which healthcare costs — including costs not fully covered by provincial health plans, such as dental care, vision care, certain prescription medications, and long-term care — can accumulate. Long-term care costs in particular can be significant: private long-term care facilities in Alberta can cost several thousand dollars per month, and the likelihood of needing some form of long-term care increases substantially with age.
Because women, on average, live longer, they also face a higher probability of needing long-term care at some point — and a higher probability of needing it without a spouse present to provide care, since women are also more likely to outlive a male spouse. This combination — longer life, higher care needs, and reduced likelihood of a spousal caregiver — is a specific planning consideration that benefits from being addressed directly rather than assumed away.
| Consideration | Planning Approach |
|---|---|
| Long-term care insurance | Can be considered, though premiums increase significantly with age at purchase — evaluating earlier in retirement (or before) is generally more cost-effective than waiting |
| Self-funding through savings | Requires explicitly budgeting for potential care costs within the overall retirement plan, rather than assuming they will be absorbed by "extra" savings |
| Home equity | For homeowners, home equity can serve as a potential source of funds for care costs later in retirement — though this should be a deliberate part of the plan, not a fallback assumption |
The Single-Income Household Question
For women who may spend some portion of retirement as a single person — whether due to never marrying, divorce, or widowhood — retirement income planning needs to work for a single-person household, even if it is currently being built within a couple’s joint plan. This is particularly relevant for decisions like CPP timing and pension survivor benefit elections, where the "right" answer for a couple’s combined income may not be the same as the right answer for whichever spouse survives longer — which, statistically, is more often the woman.
Inflation Over a Longer Horizon
Inflation compounds over time — even a modest 2% annual inflation rate roughly doubles the cost of living over 35 years. A retirement plan that does not explicitly account for inflation over a multi-decade horizon can significantly underestimate future expenses, particularly for costs (like healthcare) that have historically risen faster than general inflation.
Reframing Longevity as a Planning Input, Not a Worry
It can be tempting to treat "I might live a long time" as an abstract worry rather than a concrete planning input — but in financial planning terms, it is simply a longer time horizon, which is a number that can be incorporated directly into projections, withdrawal strategies, and CPP timing decisions. Once incorporated, it stops being a vague concern and becomes one factor among several that the plan is built to handle.
If your retirement plan was built around an assumption of living to 85, it is worth asking what the plan looks like extended to 95 — not as a worst-case scenario, but as a realistic possibility, particularly for women. The adjustments needed (a different CPP timing decision, a different withdrawal rate, an allocation that maintains some growth throughout retirement) are often modest when planned for in advance, and considerably more difficult to address if discovered only when the original plan’s horizon has already passed.
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