The Canadian Institute of Actuaries is calling on advisors, employers and policymakers to close a widening gap in retirement income planning for middle-income Canadians
A new insight statement from the Canadian Institute of Actuaries (CIA), Promoting Effective Decumulation Strategies for Canadians, puts the decumulation advice gap squarely on the agenda.
Authored by five fellows of the CIA - René Beaudry, Barbara Sanders, Lilach Frenkel, Scott McManus and Martin Dupras - the statement focuses on middle-income households: those in the centre of Canada's income distribution who rely on a mix of government benefits and personal savings but often lack access to comprehensive decumulation advice.
Left unaddressed, the report warns, these retirees face a material risk of either underspending and sacrificing quality of life or overspending and depleting assets too early as health and cognitive demands rise in later life.
Spending patterns don't follow a straight line
The statement challenges the idea that retirement income planning can rely on static rules of thumb. Spending needs evolve across three broad stages: higher discretionary spending early in retirement, more stable needs in mid-retirement, and rising health-care and support costs later on. The CIA describes this as a retirement spending "smile."
Traditional approaches - such as withdrawing four per cent of savings annually, or benchmarking income against a retiree's final year of earnings - are, the report says, too simplistic for a period that can easily span 30 years. Advisors are urged to treat decumulation as a series of decisions made over time, not a one-time conversion at retirement.
Longevity is being underestimated
One of the report's sharpest findings is that many Canadians systematically underestimate how long they will live.
Life expectancy at age 65 is approximately 4.5 years greater than life expectancy at birth for men, and three years greater for women but media coverage tends to report at-birth figures, skewing perceptions downward.
The stakes are particularly high for couples. Retiring 65-year-old couples face a one-in-four chance that at least one spouse will live to age 100, according to the CIA statement.
The report also flags cognitive decline as a compounding risk: the number of Canadians living with dementia is approaching one million, according to the Alzheimer Society of Canada (2024), making self-managed decumulation harder to sustain over the long term.
Government pension timing is a key advisor lever
The CIA report devotes significant attention to the timing of CPP, QPP and OAS commencement - an area where advisors can add measurable value. Roughly 20 to 25 per cent of Canadians attaining age 60 between 2020 and 2024 commenced their CPP as soon as eligible, according to the most recent actuarial report on the Canada Pension Plan. The CIA argues this is often financially suboptimal.
A 2024 research paper from the Université du Québec à Trois-Rivières found that someone who commenced their QPP at age 60 received just 64 per cent of the monthly benefit available at age 65, and 40 per cent of what was available at age 72. Men who started at 65 rather than deferring had a 63 per cent probability of a net financial loss, with a maximum potential loss of $322,000 against a maximum gain of $140,000.
The CIA recommends advisors model deferral scenarios alongside the full decumulation plan - factoring in tax credits, OAS clawback thresholds, pension income splitting and registered account withdrawals - to identify the optimal after-tax income outcome across a range of longevity scenarios.
Emerging tools: dynamic pension pools and smarter defaults
The report highlights two emerging developments advisors and plan designers should watch. Dynamic pension pools - variable payment life annuities under the Income Tax Act - provide lifetime income that fluctuates with investment performance and the mortality experience of a retiree pool.
The CIA argues they offer a middle ground between self-managed accounts and fixed annuities, combining longevity pooling with investment growth exposure. It calls on regulators to create consistent, cross-provincial rules to allow these structures to scale.
On defaults, the CIA draws a direct parallel with accumulation-phase design: just as automatic enrolment and contribution escalation have improved savings rates, strong decumulation defaults could improve retirement income outcomes. It urges the industry to advance policy discussion on automatic conversion features, with appropriate opt-out protections.
The full statement is available at cia-ica.ca.
