How Long Will $400k Last in Retirement? A Realistic Canadian Breakdown

How long will $400,000 last in retirement? It’s not a trick question-it’s the kind of number that keeps people up at night. You’ve saved. You’ve cut back. You’ve skipped vacations and repaired your car instead of replacing it. Now you’re staring at that $400,000 balance and wondering: is this enough? The answer isn’t a single number. It depends on where you live, how you spend, what you own, and how the market behaves. Let’s break it down with real numbers, real risks, and real options-no fluff, no guesswork.

What $400k Actually Buys in Retirement

Many people assume $400,000 is a solid nest egg. But inflation doesn’t care about your plans. In Canada, the average retiree spends about $45,000 a year-roughly $3,750 a month-on essentials like housing, food, transportation, and healthcare. That’s based on Statistics Canada’s 2024 expenditure survey. If you live in Toronto, that number jumps. Rent or mortgage payments, property taxes, and utilities are higher here than in most of the country. A modest one-bedroom apartment in the suburbs costs $2,200 a month. Add groceries, gas, phone, and prescriptions, and you’re already at $3,500 before you think about travel, dining out, or new glasses.

If you withdraw $45,000 a year from $400,000, you’re taking out 11.25% annually. That’s not sustainable. The widely accepted 4% rule says you should withdraw no more than 4% of your savings each year to make it last 30 years. At 4%, $400,000 gives you $16,000 a year. That’s barely enough to cover basic needs in most Canadian cities. So what’s the real number?

How Inflation Eats Your Savings

Inflation isn’t a buzzword-it’s a silent thief. Canada’s average inflation rate over the last 20 years has been around 2.2%. But in 2022 and 2023, it hit 6-7%. Even if it settles back to 2.5%, that means your $45,000 annual spending will cost $56,000 in 10 years. And $70,000 in 20 years. If you don’t adjust your withdrawals, your buying power drops fast.

Let’s say you start with $400,000 and take out $3,750 a month ($45,000/year), and you increase that amount by 2.5% every year to match inflation. Here’s what happens:

• Year 1: $45,000 spent → $355,000 left
• Year 5: $50,000 spent → $280,000 left
• Year 10: $58,000 spent → $175,000 left
• Year 15: $68,000 spent → $80,000 left
• Year 18: $75,000 spent → $0 left

That’s right. With inflation and no investment growth, $400,000 runs out in about 18 years. If you retire at 60, you’re out of money by 78. That’s not retirement. That’s a countdown.

The Role of Investment Returns

Here’s where most people get it wrong. They treat their retirement savings like a piggy bank. But if you leave it in a savings account earning 0.5% interest, you’re losing money to inflation. To make $400,000 last, you need growth.

Let’s say you invest your $400,000 in a balanced portfolio-60% index funds, 40% bonds. Historically, that kind of mix returns about 5-6% a year after fees and inflation. Now, instead of just spending, you’re earning. You still withdraw $45,000 in year one, but your portfolio grows a little each year.

Using a standard retirement calculator with 5.5% annual returns and 2.5% inflation:

• Year 10: $420,000 left (yes, you have more than you started with)
• Year 20: $380,000 left
• Year 30: $210,000 left

At this rate, your money lasts 35+ years. That means if you retire at 60, you could make it to 95. But this assumes no major health issues, no market crashes, and no surprise expenses.

The Big Risks No One Talks About

Investment returns aren’t guaranteed. The 2008 crash wiped out 30-40% of portfolios. The 2022 bear market did the same. If you retire right before a crash, your portfolio could drop to $250,000 in a year. Now your 4% withdrawal becomes 16% of what’s left. That’s dangerous.

Healthcare is another hidden cost. In Canada, basic care is covered, but dental, vision, hearing aids, and long-term care aren’t. A single dental implant costs $2,500. Hearing aids run $3,000-$6,000 per pair. A year in a long-term care home can cost $60,000. If you need that care at 80, your savings vanish fast.

Family support is another factor. Many Canadians help adult children with down payments or cover grandkids’ tuition. That’s not in the budget-but it happens. One survey found 38% of retirees in Ontario gave over $10,000 to family members in 2023.

How to Make $400k Last Longer

There are five proven ways to stretch your savings:

1. Delay CPP and OAS-If you wait until 70 to start Canada Pension Plan and Old Age Security, your monthly payments increase by 42% and 36%, respectively. That’s an extra $1,000-$1,500 a month tax-free.
2. Downsize your home-Selling a $700,000 house and moving to a $350,000 condo frees up $350,000. That’s another retirement fund.
3. Work part-time-Even $15,000 a year from a part-time job cuts your withdrawal rate in half. Many retirees work 10-15 hours a week in retail, tutoring, or consulting.
4. Use a reverse mortgage-If you own your home, you can borrow up to 55% of its value without selling. That’s cash you don’t have to touch your savings for.
5. Track every dollar-Use apps like Mint or YNAB. Most retirees don’t realize they’re spending $800 a month on subscriptions, dining out, or impulse buys.

What 0k Really Means for You

Here’s the truth: $400,000 isn’t enough for a comfortable, worry-free retirement in Canada if you’re living alone and want to keep your current lifestyle. But it’s not useless. It’s a foundation. With smart moves-delaying pensions, downsizing, working part-time, and investing wisely-it can stretch into a 30-year retirement.

But if you’re planning to retire at 60, live in Toronto, and expect to travel, eat out, and cover unexpected medical bills, you’ll need at least $600,000-$700,000. That’s not a scare tactic. That’s math.

Don’t panic. If you’re 55 and have $400,000, you still have time. Keep working. Invest. Cut unnecessary spending. Talk to a fee-only financial planner who doesn’t sell products. Most importantly, start now. The longer you wait, the harder it gets.

What If You’re Already Retired?

If you’re already drawing from your $400,000 and it’s running low, here’s what to do immediately:

• Stop withdrawing more than 3% a year. Even if you’re scared, this is your lifeline.
• Apply for the Guaranteed Income Supplement (GIS) if you’re on OAS. Many retirees don’t know they qualify.
• Look into provincial senior assistance programs. Ontario has the Ontario Trillium Benefit and property tax deferral.
• Consider renting out a room. A $1,000/month tenant adds $12,000 a year-no taxes if it’s your primary residence.
• Don’t sell investments in a down market. Wait for recovery. Cash is not your friend right now.

You’re not alone. Thousands of Canadians are in this exact spot. The key isn’t having more money-it’s managing what you have better.