Doctor and retired spouse

Clients:

Clients Jim and Jane are 58 and 55 years old, with 2 adult children; they have a net worth of approximately $5.2 million between their investment portfolio and primary residence. Jane is retired and has approximately $650,000 invested in a personal non-registered portfolio from an inheritance, $115,000 in a TFSA and just over $420,000 in RRSP accounts. Jim is a specialized doctor who last year earned $600,000 and received most of the money as salary. Jim has $360,000 in RRSPs and $115,000 in his TFSA. They estimate their current residence to be worth about $3.5M. Jim and Jane anticipate needing approximately $210,000/year before tax for living expenses. Jim expects to work another seven years. They currently enjoy travelling with the entire family and hope to continue doing that throughout retirement. They have no plans to downsize their existing home. 

Issues to address:

  • Accumulate additional savings to fund retirement. The initial draft of the wealth plan showed a significant deficit based on current projections.

  • Jim is unincorporated and thus earning income as a sole proprietor and being taxed at the highest personal tax rate (>50%). 

  • Existing investments are spread across several smaller accounts at different financial institutions with different investment strategies. The bulk of RRSP and non-registered assets are invested in a concentrated basket of individual Canadian stocks. 

  • Clients expressed their intent to take CPP as early as possible because they don’t have employer pensions. 

  • It is unclear as to whether their accounts are set up in a tax efficient manner.

Our recommended path ahead:

  • Jim needs to start earning his practice income through a corporation. This strategy is an immediate priority as it addresses the primary client concern that they have insufficient savings right now to meet their future retirement needs. After paying himself a salary from the corporation, the remainder is taxed at the small business rate (about 12% vs the current personal rate of over 50%) and the residual funds can be invested inside the corporation. This results in considerably more near-term savings that the clients can rely on in retirement. 

  • Consolidate investments in an evidence-based, globally diversified portfolio. The clients’ current investment accounts have too many different strategies that are not aligned and tough to track.  

  • Defer government benefits to age 70. The clients have other sources of funds to support the early years of retirement and would receive 42% more in CPP by deferring to age 70. 


After reviewing the clients outside account statements, tax returns and insurance policies we were able to create a new wealth plan to quantify the impact of our recommended strategies.