Retired Sales Exec Seeks Investment Advice

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Retirement,Investments,Pension

Kathy, a 60-year-old recently retired sales executive, seeks advice on managing her $3.35 million net worth. She has a defined benefit pension of $120,500 per year, $700,000 in company stock, and a $1.5 million house. She wants to know how best to draw down her investments, diversify her stock portfolio, and how much she can comfortably give her children to help them buy their first homes.

Kathy retired recently from her decades-long career in sales. She is 60 years old with two children, 23 and 28. The younger child is living at home and going to university.

“Although the stock has performed very well, I am a bit concerned about having so much of my assets tied up in one area,” Kathy writes.We asked Ian Calvert, a principal and certified financial planner at HighView Financial Group, to look at Kathy’s situation.“Overall, Kathy is in a terrific financial position,” Mr. Calvert says. Her net worth is about $3.35-million. This includes a principal residence of $1.5-million, non-registered investments of $1.

She also has $500,000 in her RRSP she could use, which would be taxable withdrawals. “With her taxable income projected to be about $155,750 from her pension and portfolio income, she will be in the combined tax bracket of 40.7 per cent, the planner says. “In other words, the lower, more favourable tax brackets are already filled up.”

A figure to aim for is $40,000 per year, he says. “This is a good target number for a few reasons.” Firstly, it’s a manageable figure each year, which dovetails nicely into her cash flow needs. Secondly, if this was executed over the next 10 years, it would be complete by the time she is 70, when she will certainly experience a rise in her taxable income from her Canada Pension Plan benefit.

By waiting until age 70, she will receive the enhanced CPP benefit that is 42-per-cent higher. For her OAS, there is a high probability it will be fully clawed back each year, the planner says. “When it comes to the optimal age for receiving government benefits, there is not a one-size-fits-all answer,” he says. It should be based on cash flow, asset base and expected longevity, which is the most challenging variable to plan for.

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