The 4% rule was never Canadian. Here's what CPP and OAS do to it.

The 4% rule says you can withdraw 4% of your portfolio in year one, adjust it for inflation each year after, and not run out over a 30-year retirement. It came out of US data, using US assets, for a retiree with no CPP and no OAS. We ran 20,000 Monte Carlo simulations to see what it looks like from here — and the Canadian version of the question turns out to be a different question entirely.

First: is 4% even safe?

Portfolio only, no government benefits, 30 years, real returns averaging 4% with 11% volatility:

So 4% fails about one time in five. That's not a rule; that's a bet with reasonable odds. And notice how fast it degrades — at 5%, you're flipping a coin.

If this table were the whole story, the advice would be grim: save more, spend less, hope. But for a Canadian it isn't the whole story, because the table quietly assumes your portfolio is your only income. It isn't.

What CPP and OAS actually change

The average new CPP at 65 is $925.35/month and full OAS is $751.97/month — together, $20,128 a year. That income is inflation-indexed for life, carries no market risk, and cannot be outlived. In portfolio terms, it behaves like an annuity you already own.

That changes the arithmetic completely, because the withdrawal rate that matters is the rate on the gap, not the rate on your spending.

Take a single retiree who wants to spend $65,000 a year. CPP and OAS cover $20,128 of it. The portfolio only has to produce $44,872:

Two things fall out of this.

The good news: a Canadian needs a substantially smaller portfolio than the raw 4% rule implies, because roughly $20,100 of indexed income arrives regardless of what markets do. Applying the naive rule to $65,000 of spending suggests you need $1.63 million. In fact you need closer to $1.1 million for the same odds. That's a difference of half a million dollars, and it is the single most common reason Canadians think they can't afford to retire when they can.

The bad news: the gap is brutally sensitive. Between a $700,000 and a $1,100,000 portfolio, the success rate goes from 21% to 78% — for the same spending. The portfolio is carrying the entire marginal burden, so every dollar of it matters far more than the headline rate suggests. Small changes in spending have enormous leverage in the danger zone.

The part the rule gets most wrong

The 4% rule assumes you spend a fixed, inflation-adjusted amount every year for thirty years, regardless of what happens. No real retiree does this. If your portfolio drops 30% in year three, you don't blithely take your scheduled raise — you delay the car, skip a trip, and wait.

That flexibility is worth more than any asset-allocation decision you will make. Modelling shows that trimming spending modestly in bad years — not dramatically, just responsively — lifts success rates by double digits. The failures in the table above are overwhelmingly sequence-of-returns failures: a bad first decade that a rigid withdrawal schedule turns into permanent damage by forcing you to sell into it.

Which means the honest guidance isn't a number at all:

• The 4% rule is a planning starting point, not a withdrawal instruction. Use it to size a target, then stop using it.
• Your CPP and OAS are the foundation. Delaying CPP to 70 raises that indexed floor by 42%, which shrinks the gap your portfolio has to cover — and is therefore one of the most powerful risk-reduction moves available. See when to take CPP.
• The first five years matter more than the next twenty. Sequence risk is concentrated at the start. A cash or bond buffer covering two to three years of the gap is worth more than an extra half-percent of expected return.
• Flexibility beats precision. A retiree who can vary spending by 10% has better odds than one with a bigger portfolio and a rigid plan.

Run your own

The numbers above are averages, and you are not an average. Your CPP won't be $925 — it'll be your number. Your spending isn't $65,000. Your plan isn't 30 years, it's however long you live. The Monte Carlo simulator runs this with your actual figures and shows the distribution, not just the headline probability. The cash-flow projection shows the year-by-year path, which is where sequence risk becomes visible.

And if you want the underlying framework, the 4% rule guide and how much do I need to retire cover it properly.

Method

20,000 simulations per scenario. 30-year horizon. Real (inflation-adjusted) returns drawn from a normal distribution with a 4% mean and 11% standard deviation, applied annually to a portfolio drawn down at the start of each year. Success = portfolio remains positive at year 30. CPP and OAS treated as constant in real terms (they are indexed). Taxes are not modelled in the success probabilities — withdrawal figures are gross. Normal returns understate tail risk, so treat these probabilities as optimistic rather than conservative; real markets have fatter tails than this model does.

Not financial advice. Every projection is a model of a future that will not happen exactly as modelled.