Open this photo in gallery:Patricia has a pension of $38,500 a year, and Don’s is $10,800 a year. This is about $50,000 combined income not including Old Age Security and Canada Pension Plan benefits.Jesse Boily/The Globe and MailPlease log in to bookmark this story.Don and Patricia are comfortably retired with three children, six grandchildren and a house in small-town Alberta. Don is 75 years old, Patricia 62. Their children are 32, 37 and 40.They are living mainly on their dividend income and looking for ways to help their children and grandchildren financially as well as to keep their income and estate taxes to a minimum.Don manages the family’s investments, which are 95 per cent in stocks that “have done okay.” Their retirement spending goal is $120,000 a year after tax.“What do we do to minimize tax on our estate?” Don asks in an e-mail.We asked Linson Chen, a certified financial planner at RGF Integrated Wealth Management in Vancouver, to look at Don and Patricia’s situation.What the Expert SaysDon and Patricia would like to provide some support for their three children, who have small families and mortgages, Mr. Chen says. “They also want to provide some gifting to their grandchildren.”Patricia has a pension of $38,500 a year, and Don’s is $10,800 a year. This is about $50,000 combined income not including Old Age Security and Canada Pension Plan benefits. “This is an excellent base income that they can depend on for life,” Mr. Chen says.A potential risk for the portfolio is its high allocation in stocks, the planner says. Don has been retired for almost 20 years, and they have lived through some volatile stock-market corrections, including the dot-com crash in 2000, the financial crisis of 2007-2008 and the COVID-19 pandemic.“They have a high risk tolerance because they were able to weather past recessions and still maintain a high stock allocation,” Mr. Chen says. “I would suggest they dial down the risk in their portfolio.”They are able to generate a net spendable income after tax and after inflation of about $185,000 a year until Patricia is 95, the forecast shows. This assumes they earn a 4-per-cent over inflation real rate of return. They could achieve that with a 60-per-cent stock and 40-per-cent fixed income portfolio, Mr. Chen says. Even with a more conservative portfolio, they would be able to generate more than their target of $120,000 a year.“I suggest they prepare their portfolio for income by putting three years’ worth of withdrawals into a cash reserve consisting of a money-market fund and laddered one- and two-year guaranteed investment certificates (GICs).” The remaining amount will be invested in a diversified portfolio.“This strategy is used to take out the volatility of equity-based investments,” the planner says. “If the portfolio has increased in value, you then use the growth to replenish the money market fund. If the portfolio has decreased in value, you will use the matu
Mar. Gen 7th, 2025
