{"id":1389,"date":"2025-06-21T04:36:16","date_gmt":"2025-06-21T04:36:16","guid":{"rendered":"https:\/\/www.europesays.com\/us\/1389\/"},"modified":"2025-06-21T04:36:16","modified_gmt":"2025-06-21T04:36:16","slug":"with-2-4-million-and-a-portfolio-of-bank-stocks-what-should-jeremy-71-do-for-an-easy-retirement","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/1389\/","title":{"rendered":"With $2.4-million and a portfolio of bank stocks, what should Jeremy, 71, do for an easy retirement?"},"content":{"rendered":"

Open this photo in gallery:<\/a><\/p>\n

Jeremy will be transitioning into full retirement at the end of this year and his retirement spending goal is $60,000 a year after tax.Jennifer Roberts\/The Globe and Mail<\/p>\n

Jeremy is 71 years old and works as a security guard. He earns $55,000 a year and wants to retire<\/a> later this year.<\/p>\n

He has no dependants, does not own <\/b>real estate, and has no work pension. Jeremy <\/b>rents a modest unit in what was once an affordable Toronto neighbourhood. As a result of his frugal lifestyle, he has accumulated $2.4-million in savings and investments<\/a>. <\/b><\/p>\n

In addition to his registered assets, Jeremy holds bank stocks in his taxable account. \u201cI invested in the banks at the end of March, 2020, when interest rates were way down and COVID-19 tanked the markets,\u201d Jeremy writes in an e-mail. \u201cI went with the banks because of their impeccable record of steady and growing dividends.\u201d His investments have done well \u201cbut I need advice on where to go from here.\u201d<\/p>\n

He has converted his registered retirement savings plan (RRSP) to a registered retirement income fund (RRIF) and \u2013 because he turns 72 this year \u2013 must start drawing the minimum amount; his bank estimates his withdrawal will be more than $59,000 a year. <\/p>\n

Once he retires, \u201cwhat drawdown sequence would be most advisable?\u201d Jeremy asks. \u201cWhat should I do with my cash reserves?\u201d His long-term goals include outliving his savings and living a long, happy and secure life. His retirement spending goal is $60,000 a year after tax.<\/p>\n

We asked Ian Calvert, a financial planner and principal at HighView Financial Group, to look at Jeremy\u2019s situation.<\/p>\n

What the Expert Says<\/p>\n

Jeremy has done an excellent job of saving and investing his surplus income over the years, Mr. Calvert says. <\/p>\n

Jeremy will be transitioning into full retirement at the end of this year. His RRIF minimum withdrawal will be about $60,000 a year. His Canada Pension Plan benefit, which he delayed to age 70, is $22,100 a year, his Old Age Security $8,600 and his life annuity payment $11,940. <\/p>\n

\u201cWithout having to draw on his cash or non-registered portfolio, Jeremy will have cash flow of $102,640 a year,\u201d the planner says. This income, plus the dividends from his non-registered portfolio, will result in an estimated income tax owing of $27,500 a year, including an OAS benefit repayment, or clawback, of about $5,700. Because Jeremy\u2019s taxable income is expected to be around $128,000 a year, he will lose most of his OAS benefit now and throughout retirement, Mr. Calvert says. <\/p>\n

With his health concerns, should Pablo, 59, take his pension as cash when he retires?<\/a><\/p>\n

Jeremy will be in a strong cash flow position given his modest expected lifestyle needs of $60,000 a year, the planner says. \u201cFor instance, his minimum pretax RRIF withdrawals alone will start around $60,000 a year and increase each year,\u201d the planner notes. \u201cWith no desire to leave a large estate and no dependants, Jeremy could certainly consider increasing his annual lifestyle spending well above his current target.\u201d Significantly increasing his lifestyle would not disrupt his retirement plan.<\/p>\n

Jeremy\u2019s portfolio consists almost entirely of four Canadian bank stocks. \u201cHe went all in when the market sold off heavily in March of 2020 at the start of the COVID-19 pandemic,\u201d Mr. Calvert says. \u201cThis was an excellent entry point for many stocks, including the blue-chip Canadian financials.\u201d<\/p>\n

However, Jeremy has a significant concentration risk and his portfolio lacks diversification, the planner says. \u201cThere can always be a shock to a particular sector.\u201d To mitigate this risk, Jeremy could gradually build a strong Canadian dividend stream from other sectors as well. \u201cOther robust dividend sectors in Canada include energy, real estate, utilities, materials and communications,\u201d the planner says. \u201cJeremy could diversify his portfolio while maintaining a strong dividend yield of 3 per cent to 4 per cent annually of Canadian eligible dividends.\u201d<\/p>\n

Because Jeremy has large unrealized capital gains, it would be advisable for him to trim his bank stock position over two or three calendar years to avoid a one-time spike in his taxable income,\u201d Mr. Calvert says. <\/p>\n

How can Ned, 70, avoid paying higher taxes when he moves from Calgary to Toronto?<\/a><\/p>\n

\u201cIf he did it all in one year, he could push himself into the 53.53 per cent marginal tax rate. This starts at income above $253,414. As well, Jeremy is very attached to his stocks because he has done so well with them. A gradual sell-off could help with the behavioural side of the transition,\u201d the planner says. <\/p>\n

Jeremy asks about the drawdown of his investments. With taxable income expected to be around $128,000 a year, Jeremy could consider the following approach: In the first few years of retirement, diversify his portfolio and realize the capital gains. Aiming for capital gains of $50,000 per year, of which 50 per cent would be taxable, would be an ideal target, the planner says. This would bring his taxable income up to about $150,000 a year, the top of the 43.41 per cent tax bracket. <\/p>\n

\u201cOnce the portfolio has been adjusted and the capital gains are behind him, he could consider increasing his RRIF withdrawals by $25,000 a year,\u201d the planner says. This would be all taxable income, maintaining his taxable income of $150,000 per year.<\/p>\n

\u201cJeremy shouldn\u2019t be concerned about the decline of his RRIF because he is maintaining and building his wealth in the right accounts \u2013 his TFSA and his non-registered portfolio \u2013 and his net worth is expected to continue to increase,\u201d the planner says. \u201cBy doing this, he is maintaining a desired tax rate while at the same time positioning his wealth in the right accounts.\u201d If Jeremy increased his total withdrawals to $105,000 per year from his portfolio, $80,000 from his RRIF and $25,000 from his non-registered account, and achieved an average rate of return 5 per cent annually, his asset base would be $2,770,000 by age 90, Mr. Calvert says. Jeremy\u2019s RRIF would decline but his non-registered portfolio and tax-free savings account would continue to grow in value.<\/p>\n

Is Preston, 39 and single, saving too much or too little to retire at age 58?<\/a><\/p>\n

Jeremy also asks whether it would make sense to purchase another annuity. An annuity is a financial product that provides a guaranteed income stream in exchange for a lump-sum payment. \u201cYou\u2019re essentially giving up your liquidity and access to your capital for guaranteed income for as long as you live,\u201d Mr. Calvert says.<\/p>\n

The main benefit of an annuity is for individuals concerned about outliving their savings. \u201cGiven Jeremy\u2019s asset base, age and the high yield on his portfolio, this risk is extremely low,\u201d the planner says. <\/p>\n

Client Situation<\/p>\n

The Person:<\/b> Jeremy, 71.<\/p>\n

The Problem: <\/b>What to do with all his money.<\/p>\n

The Plan:<\/b> Sell some of his bank stocks to better diversify his holdings. Draw more heavily on the RRIF than the other accounts. Feel free to spend a little more.<\/p>\n

The Payoff:<\/b> Financial stability. <\/p>\n

Monthly net income, all sources: <\/b>$8,475.<\/p>\n

Assets: <\/b>Cash $219,000; RRIF $1,160,000; TFSA $136,000; non-registered portfolio $911,000. Total: $2.4-million.<\/p>\n

Monthly outlays:<\/b> Rent $1,000; electricity $50; transportation $210; groceries $300; charity $25; vacation, travel $1,000; other discretionary $200; sports, hobbies $20; health care $100; phone, internet $95. Total: $3,000.<\/p>\n

Liabilities: <\/b>None.<\/p>\n

Want a free financial facelift? E-mail finfacelift@gmail.com<\/a>.<\/p>\n

Some details may be changed to protect the privacy of the persons profiled.<\/p>\n","protected":false},"excerpt":{"rendered":"Open this photo in gallery: Jeremy will be transitioning into full retirement at the end of this year…\n","protected":false},"author":3,"featured_media":1390,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[64,1875,255,67,132,68],"class_list":{"0":"post-1389","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-financialfacelift","10":"tag-personal-finance","11":"tag-united-states","12":"tag-unitedstates","13":"tag-us"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/1389","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=1389"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/1389\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/1390"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=1389"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=1389"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=1389"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}