Savings accounts portfolio
Investments
Decumulation — Monte Carlo
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Account types — Canada
Nominal vs. real rate ▾
The nominal rate is the raw return your investment earns. The real rate strips out inflation, showing how much your actual purchasing power grows each year.
Both matter: use the nominal rate to compare against benchmarks; use the real rate to understand what your nest egg will actually buy.
Return estimates used in this calculator ▾
The default rate of 7.3% nominal (≈ 4.6% real at 2.2% inflation) is based on XEQT, an all-world equity ETF by iShares available on the TSX. Since XEQT has limited history, this estimate draws on long-run global equity data (close to MSCI World historical returns). We use the conservative end of published estimates. Change the rate in any account to use your own assumption.
Past performance does not guarantee future results. This is the rate used as a prefill in the calculator — not a prediction or financial advice.
What's an ETF? ▾
An ETF (exchange-traded fund) is a basket of securities — stocks, bonds, or both — that trades on an exchange just like an individual stock, giving you instantly diversified exposure to hundreds or thousands of companies in a single purchase.
Most of the ETFs mentioned on this page (XEQT, VGRO, ZBAL, etc.) are passively managed index ETFs: rather than trying to beat the market, they simply track an index at the lowest possible cost — often under 0.25% per year in management fees (MER), versus 2%+ for a traditional mutual fund.
The 70% income replacement rule ▾
Many planners target replacing 70% of pre-retirement income, but this number varies widely. If your mortgage is paid off, your children are independent, and you plan a simpler lifestyle, you may need considerably less. Travel, healthcare, or supporting dependants can push the number higher.
A better approach: list your anticipated retirement expenses directly rather than applying a percentage to your current income. What you need is a spending question, not an income question.
The withdrawal rate ▾
The classic "4% rule" (Trinity Study, 1998) says you can withdraw 4% of your portfolio in year one, then adjust for inflation, without running out over 30 years. A starting point, not a guarantee.
Conservative Canadians often use 2.7–3.2%, especially with bonds or longer horizons — a range popularized by PWL Capital's Ben Felix (Rational Reminder), who argues US-based 4% studies overstate safety due to survivorship bias in the data. A practical formula: fund return − inflation − safety buffer.
For another take, Morningstar puts its base-case "safe" rate at 3.9% for 2026 (fixed spending, 90% odds of not running out over 30 years) — and as high as 5.7% for retirees willing to adjust spending with the markets (a "guardrails" approach). The gap between 2.7% and 5.7% shows just how much this number depends on the assumptions used and your own budget flexibility.
Risk management: stocks vs. bonds vs. high-interest savings ▾
Stocks offer a higher expected return over the long run, but with more short-term volatility; bonds are more stable, but with a lower expected return. The stock/bond ratio in your portfolio sets your overall risk profile.
The closer you get to retirement — or the more a market drop would rattle you — the more it can make sense to increase your bond allocation to reduce volatility, an approach sometimes called a "bond glide path." Conversely, a long time horizon generally lets you absorb more volatility in exchange for a higher expected return.
Rather than managing and rebalancing several ETFs yourself, asset-allocation ("all-in-one") ETFs combine global stocks and bonds in a single fund at a fixed ratio:
XBB (iShares) shows the 100%-bond end of the spectrum: despite their safe-haven reputation, bonds can still lose value when interest rates rise — XBB fell about 11.7% in 2022 without a single bond actually defaulting. CASH.TO (Global X), by contrast, isn't a bond ETF at all — it's a high-interest savings ETF (HISA): it holds high-interest bank deposits, with an essentially stable value and no duration risk, and a yield that floats with prevailing rates — about 2.3%/yr currently, paid monthly. That's why CASH.TO (or an equivalent) is often used for FHSA savings earmarked for a near-term home purchase: unlike bonds, its principal doesn't fluctuate right before you need to withdraw it.
These estimates blend the 7.3% long-run nominal equity assumption used elsewhere on this page with a 4% assumption for bonds — a reasonable historical average, and close to Vanguard's own current forecast for its own funds. Over a shorter horizon, Vanguard's actual 10-year forecast (VCMM model, 2026 outlook) is more conservative: roughly 4.0–5.0% for US equities, 4.9–6.9% for non-US equities, and 3.8–4.8% for US bonds — notably below the historical average given today's valuations. Past performance doesn't guarantee future results.
The research is genuinely split on the right allocation: a study on SSRN (Anarkulova, Cederburg, and O'Doherty) argues an all-equity portfolio has historically outperformed conventional bond-glide-path strategies across nearly every retirement horizon, while Morningstar calculates its "safe" withdrawal rates assuming a more conservative, diversified allocation.
iShares (BlackRock), Vanguard, and BMO all offer a similar lineup (e.g. VEQT/VGRO/VBAL from Vanguard, ZEQT/ZGRO/ZBAL from BMO) — the provider matters less than the stock/bond ratio you choose based on your risk tolerance and time horizon.
Lump sum vs. dollar-cost averaging (DCA) ▾
If you come into a large sum all at once (an inheritance, a bonus, proceeds from selling a property), you're facing a choice: invest it all immediately ("lump sum"), or spread it out in equal installments over several months ("dollar-cost averaging," or DCA) to average your purchase price.
Mathematically, investing it all at once wins most of the time: a Vanguard study covering US, UK, and Australian markets from 1976 to 2022 found that lump sum beat DCA roughly two times out of three (61.6% to 73.7% of the time depending on the market) — simply because markets rise more often than they fall, so sitting in cash while drip-feeding your purchases costs you missed returns on average. When lump sum wins, the gap is real but modest: about 2.2% higher over 3 months for a 100% equity portfolio, somewhat less for a balanced one.
But the math isn't the whole story. If investing a large sum right before a downturn would push you to panic-sell near the bottom, DCA reduces that regret risk by smoothing your entry price — even though it earns somewhat less on average. Vanguard's own model backs this up: for a genuinely loss-averse investor, spreading purchases out can be the rational choice once the psychological cost is priced in. The best strategy isn't necessarily the one with the highest expected return on paper — it's the one you'll actually stick with without panicking.
This question mainly applies to money you already have in hand today (an inheritance, a bonus, a sale) — if you're investing a portion of each paycheck instead, you're already doing a form of DCA by default. If investing a large amount all at once makes you nervous, spreading it over 3 to 6 months is a common middle ground: you keep most of lump sum's statistical edge while reducing the worst-case emotional scenario.