Episode 185: You’ve Hit Your Financial Freedom Number… Now What?

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What happens when you finally reach your financial freedom number—only to realize the journey’s far from over?

You’ve spent years grinding, saving, and investing smart to hit your retirement goals. But once you cross that finish line, a new set of challenges emerges: how do you protect your wealth, minimize tax drag, and set your family up for long-term success without overcomplicating your life? In this episode, Kyle and Jon walk through a real-life case study of a couple with a $10M portfolio who’s grappling with exactly that. From risk tolerance mismatches to looming capital gains, they break down the planning shifts that matter most after you’ve “made it.”

You’ll discover:

• How to transition from aggressive growth to sustainable simplicity—without blowing up your tax bill
  Why timing and method matter when shifting from actively managed funds to more tax-efficient structures
• How legacy strategies like high-cash-value life insurance and corporate class ETFs can protect wealth across generations

Hit play to learn how to evolve your portfolio and mindset for life after financial independence.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX.  

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Achieving financial freedom in Canada requires more than just diligent saving—it demands a strategic blend of retirement planning, investment bucket strategies, and advanced portfolio management tailored to your life stage and goals. Whether you’re pursuing an early retirement strategy or building long-term wealth through real estate investing in Canada, understanding the tax implications, especially around capital gains strategy, RRSP optimization, and salary vs dividends, is crucial. At the core of a robust Canadian wealth plan lies the ability to align your financial vision with effective tools like corporate structure optimization, insurance planning, and corporate wealth planning. For Canadian entrepreneurs, the balance between personal vs corporate tax planning, business owner tax savings, and passive income planning can determine how smoothly you transition from active income to financial security. From legacy planning in Canada to maximizing financial buckets and designing efficient financial systems for entrepreneurs, this approach helps ensure you’re not just earning—but preserving and passing on wealth with intention.

Transcript:

Jon Orr: All right, picture this. Imagine you get to your financial freedom numbers. You’re at retirement stage. You’ve hit, you’ve did it. You Clap, like pat yourself on the back. Give yourself that clap. You got to this place where you had too much money. This is what we’re all after. It’s get to that place where it’s like, no matter what I do from here on out, I am financially secure. I have enough. I have too much.

And now it’s like, okay, if I’m here, what do I do with the money, knowing I have too much? And how do I pass it on without Canada revenue taking a big cut? And that’s what we’re talking about here. So we’re gonna look at a, I want you to fast forward yourself. It’s likely that you’re not there yet or you’re close. And when you get there, I want you to put yourself in the position of

this couple that we just got off on a call with, they’re already there and they’re trying to then structure now some of their pieces to reduce the amount of tax that they’re paying, structure their assets to pass on, to leave the legacy and do all of this and make sure that it’s setting themselves up and keeping themselves going, but also setting their next generation up. And why this is important to you listening right now is because you’re going to get there.

And when you get there, you want to know what to do and how could you be doing now to start planning for that time? Because I think we we’ve talked about this in the past before is that we all structure and what are the optimization moves? What are the what are the vision planning moves? What are all the moves I need to make now to hit my financial freedom numbers? But when I get there, it’s a whole different ball of wax. And now what we want to do is know what those things are. So, Kyle, let’s get into it. We talk with Raj, we talk with Anika. Let’s get into it. Let’s unpack this story.

Kyle Pearce: Yeah, so we’ve got this couple. They’ve done a great job. They did a very good job early and often along the journey to keep the volume high on the amount that they were putting away. And they were invested in all kinds of different assets. They had real estate, had equities, and they also had quite a bit of fixed income through GICs and such. And they’ve now amassed a retirement portfolio of about $10 million.

in total, which is great. And the beautiful part is here. Here’s the crazy part. Some people are like, wow, 10 million that that feels great. Well, it’s only great if it’s enough to sustain your lifestyle. And fortunately for them, they spend between 130,000 and about $180,000 per year. And the reason why it’s such a big wide gap is because of travel. So they do like to do some travel.

In recent years, they didn’t do some traveling that a couple medical challenges along the way and so forth. But because of that number, they’re $10 million. We do quick math on that. That could easily produce around $400,000 of income. And even after tax, if it was all taxed in the highest tax bracket is going to leave them with more than what they need to sustain their lifestyle. So they’ve reached the place. And here’s the crazy part. And I think what intrigued me most about this couple

So along the journey, they were doing quote unquote, the right things. They were putting money away. They were saving a significant amount. They were investing a significant amount and they had a well diversified portfolio, but they’re now at a place where they’re starting to recognize that first of all, they are going to outlive their money or sorry, their money is going to outlive them, which is a good problem to have, but.

they’re now starting to recognize as well that some of the investments that they had made along the journey to help them get there are no longer attractive to them. They don’t like the stomaching of the ups and downs of the market. So they did it to get here. They did a great job, but they are now in a place where they want to simplify. And this is not a unique situation, which is what I thought was worth sharing is like as we explore our journey,

We look ahead, it’s like when we’re early in the game, we are like hyper focused on rates of return. Why? Because usually the pile is really small and we’re like, we want to see significant changes, significant growth. So we do aggressive things, oftentimes make big mistakes along the way. As the pile grows, we might start getting a little more conservative, but we stay pretty aggressive. Once you hit that financial freedom number where you know that basically

you’re not going to run out of money, you start to think a little bit differently. And now they’re in a place where they don’t want to have to check their portfolio daily, weekly, monthly, or even quarterly. They just want to make sure they’re in a set and forget situation where they can live the life that they want to live while also protecting legacy for their two daughters. So we’re going to dig into that a little bit here. And we’re going to talk about some of these strategies that people tend to

start shifting towards as they get closer. So you don’t have to necessarily have a $10 million portfolio to start thinking this way. It’s like as you’re on that journey and when you see that that journey, you’re going to hit that goal. You can start making these shifts a little sooner so that you don’t feel like you have to rip any band-aids off at any point in the journey once you’re ready to start simplifying the portfolio.

Jon Orr: Well, let me ask you this. Let me ask you this. Like you’re saying, what are the some of the things to shift knowing you may be getting closer to that? Like, what is the? What would you say is the problem here? The real problem to making those shifts is the is the real problem saying like, we’re going to shift the 70, you know, the the 60 typical 6040 portfolio into a more safe portfolio. And if so, like, what happens when I start want to start cashing these out? Like, what are some of what’s the real issue here that someone gettin gcloser to this needs to really be considered.

Kyle Pearce: Yeah, well, in this particular case, think some of it is like it’s a bit of a tug of war between simplicity and feeling like they don’t have to pay much attention to it. But then also principle doesn’t go away. What I mean by principle, like the principle of paying more than you need to pay is still annoying. So even though they know they’re not gonna run out of money doing what they’re doing right now, they paid $88,000 in taxes on

GIC and high interest savings account interest and that type of dividends and so forth. And they’re starting to recognize that there’s unnecessary tax drag being created here. So even though once again, it’s sort of like contradictory because we’re going, well, you know, you’re not going to run out of money. So why does that matter to you? But I’m the type of person it’s like, just because I have $300 in my wallet doesn’t mean I like to pay $25 for a drink.

when I’m at a bar, you know, like I want by principle, I want to feel like my money is going to good things. I still want to simplify. So they’ve got some simple conservative investments, but ones that are still not super tax efficient. And then we also have all of the equities are currently sitting in a actively managed portfolio, which is causing some drag when

we look at the fees that they’re paying on it. So they’ve got this big bucket. They wanna get more conservative anyway and less volatile. So active management, while there are some funds and some active managers that their goal is to keep it consistent and make sure the downs aren’t very bad, but the rips aren’t gonna be very awesome either, they’re looking at it going like whatever we wanna keep in the market, we’d rather do it in more of a passive sort of ETF type strategy. So,

We’ve got some challenges though, because as we shift these around, specifically the actively managed portfolio, we are now kind of fighting with the crystallization of capital gains that right now are unrealized and not taxed, but we’re gonna be shifting to taxing those capital gains and anything in the unregistered or in the corporate investment accounts.

Jon Orr: Right, because if you’re trying to shift, you now have to liquidate and then move into a new asset or an asset class. so now all of a sudden it’s like, have never, maybe I have never sold since I bought into these over the course of these years, because it was, let’s say a mutual fund or a managed fund. And now we’ve got to liquidate to move it over into an ETF. And maybe I’m going to do a little bit of self-managing at that point.

So now I’ve got to all of a sudden pay, I’m going to have it all in one year. Like if I do this all at once, it’s like I now have a huge capital gain just to move it. And that sounds like a nightmare, especially for a person who’s trying to, you know, who’s like, I don’t want to pay $88,000 in tax. Now I’m immediately going to pay tax on capital gains here. But you know, in a way, capital gains is not the end of the world.

you know, you’re comparing capital gains and say passive income or say dividend income that’s coming in as actual income and you’re making a lot of money. So what are their options here?

Kyle Pearce: Yeah, exactly. so here’s the challenge, right? So it’s like, if, for example, and really what it comes down to, and this is stage one of our process, right? It’s all about vision and vision changes and evolves over time as well, which is really important because their vision from 30 years ago when they started this journey or 20 years ago is of course now changing. So they were in certain asset classes. They had a higher equity or risk on portion of their portfolio. And they’re basically recognizing now that their vision

was to help them get to this point. And they didn’t really think beyond that to go, know, once I hit that point, then what? So now they’re going, you know, there’s a portion of this portfolio that I want to just be safe. And ultimately, as they articulated to me, they said, I want to be able to essentially have something that I know will not go up or down too volatile, and therefore could sustain our lifestyle just on that portion of the portfolio. And I’m going to argue that’s about 50 % of

their portfolio currently. They have another half of their portfolio that they could keep into equities. They could keep into risk on assets. However, the wife of this couple is sort of going like, she just doesn’t like that at all. Like, she wants to get completely risk off. Husband wants to keep some in risk on. He’s been managing a lot of the investment decisions to date. So what we need to do is we need to figure out what is the priority? Is it getting volatility out of our life?

If so, we might have to pay for ripping a bandaid off to get things out of say equities and realize that capital gain. Like is that worth it for you in order to get the peace of mind you’re after? I can tell that the husband, it’s not worth it to him. To the spouse, it might be worth it to her. So now we have to decide like what does that look like and sound like? And somewhere we can meet in the middle is by maybe planning this out over a number of years.

whether it’s a three year, a five year, a 10 year plan where every year we’re going to start liquidating some of these equity or risk on assets, paying a little bit in capital gain, but then using some of it for their lifestyle in that particular year. And then working to shelter the other funds in assets that are not going to produce more taxable income interest dividends from year to year.

So assuming we make this plan here, they still wanna keep some in the markets. It might not be as heavy equity or heavy growth, but they still do wanna keep equities, probably more blue chip like ETFs. We’ve also recommended that maybe they consider looking at corporate class ETFs. And we’re actually gonna have an episode coming up. I think it’s the very next episode or two episodes from now where we’re gonna take a deep dive into corporate class ETFs. So look out for that.

But ultimately the goal of this style of ETF is basically it’s structured like a mutual fund where all of the earnings, dividends, capital gains, all of that is wrapped up inside of the mutual fund and therefore it’s not producing taxable income unless you choose to sell. And that’s where you’ll see a capital gain happening into the future. So if we can slowly transition some of these equity

assets from the managed portfolio that they no longer want to pay high MERS on and we slowly move it into these corporate class ETFs which don’t necessarily have to have high MER fees either right you can still get a little bit of that risk on to satisfy the appetite of the husband but maybe have less volatility or less of the pile committed to that portion of your growth in the corporate class ETFs.

Jon Orr: Well, talk to me about this transition. to us. Because let’s say I’m listening right now and I’m like, wait a minute. Why slowly? Let’s say I liquidate all now, since it’s capital gain, aren’t I just going to pay the capital gains tax at whatever the current rate is right now and it gets taxed at that? then, wait, that’s going to be income for me.

And now it’s like, okay, now I have to pay more because all of a sudden I have more income. is that the reason to slow? just want to make sure that the listener right now is clear that that doing it all at once is a bad move versus a slow transition over say the five to 10 years.

Kyle Pearce: Yeah, I would say because right now, like the big goal there is like, first of all, they want some of the equity funds to essentially get reinvested into something safer, right? So we could look at corporate class ETF bond funds, for example, in my opinion, going in a high early cash value life insurance is going to be a better play because it’s less volatile than a bond fund, for example, and get similar returns. All kinds of things we can do there. That’s one reason we’re going to do this slowly over time. But then secondly,

If we do rip the bandaid off and there is a large capital gain, which they do have on some of these assets over time, what you’re trying to do, the husband’s trying to minimize the M.E.R., which is like two, two and a half percent, something like that. In order to save that amount, he’s going to get taxed on the entire capital gain. Well, 50 % of the capital gain at his current tax bracket. rather than doing that,

big rip the bandaid off to save a small M.E.R. from year to year, which again can add up over a significant number of years. We’d rather pick some sort of shorter to medium term timeline so that you do need a certain amount of income anyway to live. So let’s take that as our income. Let’s take other portions, other little bits of it and start to reallocate it into these corporate class ETFs like we’ve described. They’ve also been looking at because they have a large

a large high early cash value policy on their own lives. And they’re now older now, they’re starting to look at anything they want to put into fixed income. So that 50 ish percent of their portfolio, they’re thinking about starting to structure it on their daughter’s lives, they’ll continue to own these policies. So they’ll fund them, they’ll own them, they will be part of their net worth, which means they can borrow against them for opportunities if the market tanks and they, you know, I have a funny feeling the husband says he wants simplicity, but like,

When the market tanks again, you know, he’s going to want to get back in there. Like I can just tell the wife on the other hand, she just wants simplicity. She doesn’t want to see volatility or anything. She just wants to know that they’ll be good and their daughters will be good at the same time. So this is like this slow gradual transition. We have to pay some tax every year because they need to get that 130 to $180,000 of income for their lifestyle. That’s after tax, by the way, right? So

you know, it’s a good chunk of change that they’re going to need to build for themselves. So why not start taking it from that active portfolio, while at the same time taking a little bit more each year to start shifting it into these other asset classes, again, the corporate, the corporate ETFs, the corporate class ETFs, I should say, as well as any high early cash value insurance policies that they might want to open up on their two daughters. And what we’re going to start to see

is a portfolio that’s more like 70 to 80 % risk on, and it’s going to slowly work its way down to about a 50-50 split. Now, the wife wants it to go all the way to like, you know, 100 or sorry, 0 % equities and 100 % fixed income. However, I’m arguing that, hey, listen, as long as you can survive on this fixed income portion, well, let’s keep that portion your safety net. Let’s keep it as your financial foundation.

But let’s also keep some of this money in risk on because that’s just gonna help your legacy in the long run, specifically to help out their two daughters when they do move on to the next world, hopefully decades from now.

Jon Orr: Right. Right. So the 50 it let’s assume it’s from it’s 50 50. So we’re going from the 70 80 down to 50 50. In the asset classes where they’re shifting into is we’ve got a portion that it would be good for them to move moving into high cash value life insurer a whole life insurance in the daughter’s name. They’re the owners. But now you’re building the cash value in those those policies when say

they pass, the ownership will pass to the daughter. So in essence, what you’re doing is you’re transitioning your wealth into and passing it to your children, your heirs by using this technique. We’re doing this with our own families. It’s transitioning that wealth this way. It’s gonna build, like you said, like that fixed income portion of the portfolio, but now it will be on the kids’ lives and then they will have access to that.

you know, own that policy and contribute to it or how basically you have now that asset passed into the heirs. And then the other portion you’ve got here in terms of maybe we’re looking at, corporate class ETFs, but some sort of ETF where you’re not pulling dividend income, you’re not pulling any sort of income because you don’t want to pay the tax on that. Like, what can we do here and then we can defer any capital gains?

down the road from that asset class. So slowly shifting from out of the managed funds to reduce that percentage that you’re MER percentages that you’re paying, and then move it over into these two classes here. then you’re also probably saying, well, might as well shift the other 50 % out of that managed fund and put it into say more risk on at the self-managed level.

Kyle Pearce: Yeah, exactly, exactly. And when you’re self-managing, when you pick an ETF, for example, you can pick an S &P 500 corporate class ETF, for example. So you might’ve had a very similar style portfolio at the active managed fund over here. If your goal is to slowly move away from that, doing it little by little is going to be helpful. You’ll then be putting it into another asset, lower fees, still have some risk on.

and you’ll still be essentially creating yourself a little bit of that income from year to year. The other benefit that you’ll see is that, you know, sometimes like let’s pretend for example, that the active portfolio has $5 million of value there, okay? A lot of people immediately assume it’s like, shoot, when I pulled five, if I pulled 5 million out that I have to pay tax on all 5 million, but really has to do with

How much did we actually put in? So what’s my cost basis? How much did I already contribute myself? That money gets to come back to you without any further taxes. And then there’s gonna be a capital gain. So the bigger the capital gain, the more tax sort of issue that you have trying to get this money out. So let’s assume that they had started with two and a half million and it’s grown to five million. There’s two and a half million dollars of money there that they can slowly pull from year to year without.

any sort of gain to to be had, meaning they won’t have any tax on that. So you can take a good chunk of that portfolio of the cost basis slowly out and start putting that into your corporate class ETFs or into this new, highly high early cash value policy on the daughters.

You can do some of these things immediately and then slowly trickle out some of the others. Some choose to take a little bit of a gain and a little bit of a return of capital each year so that you can spread out those dollars further and longer, which allows us not to have to dip into some of these other taxable buckets that will cause taxes along the way. But ultimately here for this particular couple, the reason, you know, big ideas that we want people to have here is that

your goal. It’s funny because a lot of people will say, I am this type of investor. And I want people to constantly be thinking about that’s the type of investor you are today. And it shouldn’t be the same necessarily every single day for the rest of your life, because things are going to change and your goals are going to change along the way and being flexible and fluent and understanding how different types of investments and different types of containers work will actually help you to

modify the journey as you go because you you know in your mind today what you hope to have maybe 10 years from now but when you get there that might have changed a little bit and you know and this is allowing you to really prepare yourself so that you can make these shifts slowly and and intentionally along the way so that you’re actually satisfied not just former you that made the choice 10 years ago but also satisfying current you and setting you up to help you with

Jon Orr: Paul, what you’re making clear is why stage one in the healthy financial system is important, which is vision and projections and knowing what you’re actually striving for. stage one and vision, it necessarily, you know, includes goal setting, but it actually includes knowing the numbers, you know, because the natural question right now is if Raj…

Raj and his his spouse I blanked on the name right there but Raj and his spouse for them to know like they’re at the point where they’re now making it but if you’re listening you’re like I want to like I want to preempt that I want to like when is the right time for me to start making that transition because if I wait maybe all of sudden I’ll lose the drag like I have more drag than I need to and if I if there’s an optimal point where if I

know I’m at that point, then I can start transitioning more funds in these ways into say the high cash value life insurance on my on my children, it’s because I know I’m not going to need that money. And or into this these these tax efficient buckets, because they’re not in that right now. Then you want to know what that number is, which is why we always encourage doing the projections like like map out what the numbers look like, get your spreadsheets out. You know, I know that if you’re like, my gosh, I don’t even like looking at spreadsheets. We do. And this is what we do with our clients.

Kyle Pearce: I think most listeners like it too, you know, it seems like everyone who reaches out is a lot like us, so you know.

Jon Orr: Right. That’s right. So it’s like, you want to be able to like project down, you know, year to year to year to year. Like when is that number? Like when is that year that’s going to hit? If you hit all these goals each year and you keep track, then you want to know when that is so that you can start reverse engineering what this transition out looks like. And I think that also is part of stage one because you need to be able to plan for that. So that’s a big kind of win here for us to think about with this, with this exact case study, this couple.

because they’re going through it now, it gives us the lessons to go, better, I I want to get my crap together to know when this is actually going to happen.

Kyle Pearce: Yeah. Well, and you know, I think that does you did a good job there, like highlighting that they’re actually doing really well in the first stage. So this vision, like they understand what it is they really want. know 10 years ago, if you asked me whether I would have as many conservative foundational assets in my portfolio, I would think you’re a crazy right? Like I was just buying real estate, buying real estate, trying to get that pile up.

The reality is, that things are going to shift along the way. So everyone’s a little bit different. And also as your risk, if you’re a business owner specifically increases, you tend to start this journey a lot earlier, meaning you keep more money liquid. So when we look at stage two here, they’re doing a really great job with their wealth reservoir. We didn’t talk about it much, but they do have a high early cash value policy in place already on their own lives.

they contribute about $100,000 per year to that policy. To be honest, they wish they could contribute more. This is one of those examples where they go, at the time it felt like a good piece. It was about 10 % of their net worth, right? So they were like, that feels like more than I need. And they’re probably right at that time. The one nuance though, is that now they’re older.

The husband’s no longer insurable, right? He had a health scare a few years ago. So thank goodness everything’s worked out and everything’s fine, but he’s no longer insurable. They wish they had a place to put more of those funds they’re transitioning into. That would be a perfect bucket for them. That’s still liquid, still grows much like those safe GICs or bonds and the things they’re trying to transition to anyway, but tax efficiently.

So they’ve done a great job there. And the beautiful part is, is they’re already looking to open additional policies to make up the difference by putting them on the daughter’s lives, but holding on or maintaining the ownership of those policies. So good for them on that. When we look at stage three, they’re doing amazing. Like they picked a great strategy. They had a lot of risk on earlier in the journey, 78 to 80 % was risk on.

They had about 20 to 30 % that was risk off and they reached and surpassed their financial few financial freedom number a number of years ago. But now they’re starting to shift it again. So that optimization stage will never sort of be solved for. It’s just going to constantly evolve just like stage one in the vision will also evolve with you as you learn and grow.

Jon Orr: Right, and the final stage here is legacy and estate strategy. You know, they’re in the stage. know, they’ve been planning for this. some of their strengths, they have a whole life policy in place, like you just mentioned. But they’re also committed to transferring that to their heirs, their children, which is an important part of legacy and estate planning so that you’re doing it optimally. They’ve got a great strategy moving forward with the idea of their own policies there, but also moving their policies into

or owning policies on their children’s lives. So that’s an important part. The other part of say this legacy state strategy is that idea about shifting their assets out of one class into another because of that tax drag that they were occurring. So those corporate class ETFs is an important part of that work. So good work overall here on all four stages of their financial planning.

Again, the important part of what we’re trying to share here today is if you’re there, you want to be assessing yourself around these. You can always go to our assessment over at Canadianwellsecrets.com forward slash pathways. Take the assessment. You can see what stage and what moves you need to be making at those stages. But like I was saying, the important part here is if you’re not there is what you want to be doing and what you want to be structuring. What are the numbers that need to look like? What are the four stages look like so that you can actively plan for optimizing at each stage?

Kyle Pearce: That’s beautiful, my friends. And if you’re looking for a conversation to discuss this idea or any other part of your holistic wealth building plan, you should reach out to us over at Canadian wealth secrets.com forward slash discovery. And we’ll be chatting about you and your current vision and that future vision in no time.

Jon Orr: Just a reminder, the content you heard here today is for informational purposes only. Should not consume any such information or other material as legal, tax, investment, financial, or other advice. And one more reminder, Kyle Pierce is a licensed life and accident and sickness insurance agent and the president of corporate wealth management here at Canadian Wealth Secrets.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

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