In planning for retirement, worry about longevity rather than dying young

Retirement planning seems to involve waging a battle between the extremes of running out of money before you run out of life, or running out of life before you run out of money. The latter possibility rarely seems to occur to people but was aptly described by FIRE blogger Bob Lai of Tawcan in a recent blog on the topic of finding a balance between spending and saving: What if you run out of life?

Or, as U.S. retirement guru Wade Pfau recently put it, “A retirement income plan should be based on planning to live, rather than planning to die.” The Michael James blog recently highlighted that quote.  

Retirement is usually about planning for unexpected longevity, often exacerbated by inflation. After all, a 65-year-old Canadian woman can expect to live to 87—but there’s an 11% chance she’ll live to 100. 

That fact was cited by Fraser Stark, President of Longevity Retirement Platform at Toronto-based Purpose Investments Inc., at a September presentation to the Retirement Club, which we described this past summer. Stark’s presentation was compelling enough that I decided to invest a chunk of my recently launched RRIF into the Purpose Longevity Pension Fund (LPF). A version of Stark’s presentation may be available on YouTube, or you can get the highlights from the Purpose brochure.

Stark confirms that LPF, launched in 2021, is currently the only retail mutual fund or ETF offering longevity-protected income in Canada. Note that LPF is not an ETF but a traditional mutual fund. It aims to generate retirement income for life; to do so, it has created what it describes as a “unique longevity risk pooling structure.” 

This reflects what noted finance professor Moshe Milevsky has long described as “tontine thinking.” See my Retired Money column on this from 2022 after Guardian Capital LP announced three new tontine products under the “GuardPath” brand. However, a year ago Guardian closed the funds, so is effectively out of the tontine business. Apparently, it’s a tough slog competing with life annuities.

Here’s the full list of wealth advisors and full-service brokers that offer it. Included are full-service brokerages (and/or their discount brokerage units) of the big banks, including Bank of Montreal, National Bank, and recently Royal Bank on a non-solicited basis. Among many independents offering it are Questrade and Qtrade. In addition, Stark says iA Financial allows investments in LPF on a non-solicited basis.

Mimicking defined benefit pensions

Purpose doesn’t use the term tontine to describe LPF, but it does aim to do what traditional employer-sponsored defined benefit (DB) pensions do: in effect, those who die early subsidize the lucky few who live longer than expected. 

LPF deals with the dreaded inflation bugaboo by aiming to gradually raise distribution levels over time. It recently announced it was boosting LPF distributions by 3% for most age cohorts in 2026, following a similar lift last year.

Here’s how Purpose’s actuaries describe LPF:

Purpose envisages LPF working alongside annuities for some retirees (see my last column on why annuities aren’t as popular as some think they should be). LPF is not registered as a pension, but it’s described as one because it’s structured to provide income for life, no matter how long you live. It’s offered as a mutual fund rather than an ETF because it’s not designed to be traded, Stark said in one podcast soon after the launch. 

Age is a big variable. Purpose created two classes of the Fund: an “Accumulation” class for those under age 65, and a “Decumulation” class for those 65 or older. You cannot purchase it once you reach 80. LPF promises monthly payments for life but the structure is flexible enough to allow for either redemptions or additional investments in the product—something traditional life annuities do not usually provide. When moving from the Accumulation to the Decumulation product at age 65, the rollover is free of capital gains tax consequences. 

The brochure describes six age cohorts, 1945 to 1947, 1948 to 1950 etc., ending in 1960. Yield for the oldest cohort as of September 2025 is listed as 8.81%, falling to 5.81% for the 1960 cohort. My own cohort of 1951–1953 has a yield of 7.24%.

How is this generated? Apart from mortality credits, the capital is invested like any broadly diversified Asset Allocation fund. The long-term Strategic Asset Allocation is set as 49% equity, 41% fixed income and 10% alternatives. As of Sept. 30, Purpose lists 38.65% in fixed income, 43.86% in equities, 12.09% in alternatives, and 4.59% in cash or equivalents. Geographic breakdown is 54.27% Canada, 30.31% the United States, 10.84% international/emerging, and the same 4.59% in cash. MER for the Class F fund (which most of its investors are in) is 0.60%.  

Stark says LPF has accumulated $18 million since its launch, with 500 investors in either the Accumulation or Decumulation classes. He also referred me to the recently released actuarial review on LPF. 

Longevity income vehicles in the U.S.

While LPF (and formerly) Guardian are the two main longevity product suppliers in Canada of which I’m aware, several products in the United States attempt to tackle the same problem in different ways. A few weeks ago, I did a roundup of the major U.S. offerings by contacting various U.S. and Canadian retirement experts through Featured.com and LinkedIn. The resulting blog covers products like Vanguard Target Retirement Income Fund, Fidelity Strategic Advisors Core Income Fund, Stone Ridge LifeX Longevity Income ETFs, and others. 

For now, it appears Purpose is alone in this space in Canada, apart from fixed life annuities offered by insurance companies. The U.S. market is different because of Variable Annuities with income options. 

In his 2022 interview, Stark said initial interest in LPF came from both Canadian financial advisors and their clients, as well as DIY investors. Advisor John De Goey of Toronto-based Designed Wealth Management says he is a “big supporter of the Purpose product …  I think it is innovative and overdue.  Accepting the usual disclaimer that everyone’s circumstances are unique and you should consult a qualified professional before buying, I was delighted when it was launched because longevity risk was one of the last ‘unsolved challenges’ of financial planning.” 

De Goey is on the FP Canada Research Foundation Board, which commissioned research on why Canadians often take CPP benefits early. One reason is we underestimate how long we’ll live, “ironic, given how the industry is constantly after people to take a long-term view. Risk pooling in three-year cohort groups/pools is a big innovation and is only possible in a mutual fund structure.”

Matthew Ardrey, senior wealth advisor for Toronto-based TriDelta Financial, says LPF offers some interesting hybrid pension-plan-like features for average investors. They can start with a $500 minimum investment and “exchange their capital for a future stream of investment income: much in the same way one would with a traditional pension or an annuity.” 

Ardrey sees LPF’s main drawback as liquidity. “An investor, if they wanted to redeem, would only get back the lower of the NAV and the unpaid capital, which is capital invested less income paid. This would also be the amount paid back upon [the] death of an investor. So the opportunity cost is the potential growth on those funds.”

I asked Purpose’s Stark about adding to LPF once an initial position is established, perhaps from maturing GICs or other investments you wish to lighten up on.  He said investors can reinvest at will as there are no minimums. Many “choose to reinvest their monthly distributions, as a way of rolling over their lifetime income into increased future lifetime income.” However, any purchases, including reinvestment of distributions, can only be done until the day before an investor turns 80 years old. “You can also sell units at any time, for the lesser of their current NAV or unpaid capital (initial investment less the distributions received to date).”  

In the podcast linked earlier, Stark said LPF is not guaranteed, and that the descriptor “income for life” means income can vary. It’s not for everyone, and even for those for whom it may work, it’s likely not suitable to put all one’s money into it. Furthermore, while it’s designed for individuals rather than couples, the latter can decide to put some funds into LPF separately in their names, which can accomplish much the same thing. 

ALDAs

Matt Ardrey says LPF can be a “unique diversifier for a portfolio. It is an investment that can be a hybrid fixed-income product to enhance yield.” For someone looking for higher yield, LPF offers a “better yield than most fixed-income products.”

He mentions a slightly different option than longevity funds for those worried about running out of money: The Advanced Life Deferred Annuity (ALDA), which allows a person to transfer up to 25% of their RRIF value to a maximum of $150,000 inflation-adjusted ($180,000 in 2026) to a deferred annuity that must be paid starting no later than age 85. It can be taken earlier than age 85. 

ALDAs can also be useful in tax planning as they reduce RRIF payments. Depending on an investor’s income level, this may help them avoid OAS clawback.  

Ultimately, longevity-oriented income products are one meaningful solution for retirees betting on living longer than most. Those with traditional employer-sponsored defined benefit pension funds may be sufficiently covered off, but the many who lack DB pensions may well want to investigate some combination of annuities, traditional diversified balanced ETFs, and longevity-oriented products like the ones mentioned here. 

As always, consulting with a retirement or investment/tax expert is recommended.

Read more from Retired Money:

• Unlocking the Annuity Puzzle: Why Canadians avoid what seems to be the perfect retirement vehicle
• The 4% rule, revisited: A more flexible approach to retirement income
• Who you gonna trust: Barry Ritholtz or Jim Cramer?
• Why retirement planners are getting defensive

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