Recently retired, Kathy seeks expert advice on optimizing her financial strategy. With a robust pension, substantial assets, and the desire to assist her children, she aims to ensure long-term stability while making strategic financial decisions. This article explores how Kathy can effectively manage her investments, diversify her portfolio, and support her family without compromising her financial security.

Strategic Investment Management for Sustainable Wealth

Kathy's financial planner emphasizes the importance of tax-efficient withdrawals and portfolio diversification. Given her solid financial foundation, including a generous defined benefit pension and significant non-registered investments, Kathy is well-positioned to focus on maintaining her wealth while minimizing tax liabilities.

To achieve this, Kathy should primarily rely on dividend income from her non-registered investments to supplement her pension. Her current investment portfolio, which includes a substantial amount of company stock, represents both an opportunity and a risk. By gradually reducing her exposure to this single asset class, Kathy can mitigate concentration risk and create a more balanced portfolio. A prudent approach would be to sell approximately $40,000 worth of company stock annually over the next decade. This strategy not only spreads out capital gains but also aligns with her annual cash flow needs. Additionally, Kathy can explore other investment opportunities that offer stable returns and diversification benefits, ensuring her portfolio remains resilient against market fluctuations.

Supporting Family Goals Through Thoughtful Financial Planning

With a strong financial position, Kathy contemplates assisting her children in purchasing their first homes. While this gesture is admirable, it requires careful planning to avoid disrupting her long-term financial stability. Kathy has multiple avenues to provide financial support without depleting her core assets.

One effective method is to allocate smaller, manageable amounts from her non-registered portfolio each year. For instance, gifting between $20,000 and $30,000 annually over a 10-year period would be feasible and beneficial. This approach allows Kathy to maintain her asset base while providing meaningful support to her children. If she prefers a larger one-time gift, Kathy can consider utilizing her Tax-Free Savings Account (TFSA) as a supplementary source. TFSA withdrawals are tax-free, and the funds can be replenished in subsequent years, offering flexibility and tax advantages. Moreover, Kathy can delay drawing government benefits like CPP and OAS until age 70, enhancing these benefits while using the intervening years to manage capital gains from her company stock. This comprehensive plan ensures Kathy can generously support her children while preserving her financial independence.