Episode 232: This Retirement Plan is Built On Hope. Is Yours? A Canadian Case Study

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Are you relying on “just growing the pile” to fund your retirement?

Too many Canadian business owners hope their savings will be “enough” without ever truly running the numbers—or questioning the assumptions behind their plan. In this episode, Jon Orr and Kyle Pearce break down a real case study of a listener preparing to retire at 55. They uncover the common blind spots around equity-heavy portfolios, the behavioral traps that derail even the smartest strategies, and why knowing your number isn’t the same as building a system that gets you there. Whether you’re 5 or 15 years out from retirement, this deep dive is full of insights to tighten your approach.

You’ll discover:

• Why a clear monthly cash flow target is more useful than a vague retirement “pile.”

• The risks of a 100% equity portfolio during the decumulation phase—and how to mitigate them.

• How to align your investment strategy with your behavior, so your plan doesn’t fall apart when the market does.

   

Press play now to find out where this listener nailed their strategy—and where small shifts could mean a more confident, flexible retirement.

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.

If you’re a Canadian business owner aiming for financial freedom and early retirement, having a clear, structured wealth plan is essential. This episode explores how to align your investment strategy, tax planning, and retirement tools into one cohesive system—so you’re not just building wealth, but building it with purpose. Learn how to balance RRSP optimization, corporate wealth planning, and capital gains strategies, while making smart decisions around salary vs. dividends and personal vs. corporate taxes. Whether you’re navigating real estate investing in Canada, considering your legacy planning, or simply trying to make sense of your financial buckets, this conversation is packed with actionable insights to help you build long-term, diversified wealth. It’s a must-listen for entrepreneurs ready to take control of their finances and design a financially independent future in Canada.

Transcript:

Jon Orr:
In this episode, we’re going to unpack a recent conversation we had with one of you Canadian business owners. We regularly meet with Canadian business owners every single day. We help them with their retirement strategy planning. We help them with their wealth planning strategies. And what we’re gonna do today is we’re gonna unpack this story about questions around retirement, questions around financial freedom, questions around what happens. you know, what is my retirement planning system look like? What should I do in this scenario? What should I do in this scenario? These are the common like, probably the most common question we get is will I have enough? And which what am I missing out on and have a look at my my my scenario and tell me how I’m doing. So what we want to do is relate that conversation here to you stick around to the end, we’re going to unpack the four, you know, the four key components of a healthy wealth system and how this client and this case study relates and we’re gonna give them a great level on each of those four. So let’s get into it, Kyle. Talk to us, give us a little snapshot of the scenario here that kicked this conversation off.

Kyle Pearce:
Yeah, absolutely. And actually, this was a Canadian Well Secrets listener who was a early listener and had originally reached out back in 2024, I believe it was. So it’s been a little bit of time since we last spoke. And as you may or may not know, we are an education first based company. So like what we do, we share on the podcast, we share on the YouTube channel, we try to educate all Canadians, high net worth individuals and specifically incorporated business owners around some of the quote unquote rules of the game. you know, folks can come back, they can have these calls, we don’t charge any, any fees, nothing like that. Sometimes the structuring makes sense. And they require those structures. And many times people do choose us to help them put them in place. And other times they don’t. Our biggest goal here is to try to help educate as best we can. And with these particular clients, to date, it’s just been some guidance along the way. And to be honest, they’re doing fantastic along the journey. So today we’re gonna talk about where they’re at now, what they have going on, and really we’re gonna talk about like some optimization opportunities along the way. So we’ll unpack it through our four stage process as you’ve articulated. And then we’re going to talk about some of the things that we can do to improve and help them get a little bit closer to their goals. Now, big caveat here I want everyone to understand is as we do this type of work in this process, what ends up happening is at the end of the day, the most important thing is, do we have enough volume of investments? And are we doing the quote unquote work? And in this case, they are. So will they be fine if they just continue carrying on? I think they will. However, could we do better? Could we be more efficient? Could we be more effective? The answer is usually yes. And the question we’ll come down to at the end of this episode is really trying to figure out who we are behaviorally, like what’s gonna make it easiest for us to follow through with a plan, like creating that plan and following through versus just simply following the spreadsheet, right? The spreadsheet makes the answers easy but sometimes makes the actual actions a little bit harder. So let’s dig in here, John. We’re gonna start with vision. Explain to everybody, what is it that we’re looking at when we look at stage one in our vision around wealth planning?

Jon Orr:
Yeah, yeah, so for us, like every health, you know, a healthy wealth plan involves, what does it look like when we hit retirement? What does it look like at each stage of our life? You have to clearly map that out. You have to know. Like otherwise all paths lead to somewhere and it might not be where you wanna go. So you need to kind of like have those conversations with. you know, your family, your spouse, your loved ones and going, what does retirement look like for us? Like, can we define it? Can we understand the numbers? So a lot of times our vision planning process here is understanding those numbers to help us get there. Like, do I have enough to live my financial freedom now? Or am I saving the right amount of savings? Am I investing the right amount of investing if we’re going to then eventually hit this number? Because I’ll think a lot of times, when you think about your retirement, many people we talk to, Canadian business owners, try to grow a pile. And then they’re like, I hit the number. The pile is the pile, and that’s gonna do the job. Or they just, I think a lot of people in reality go, I’m just gonna accumulate as much as I can and hope it’s the right amount. So that’s the vision kind of process out of the four different stages in having that number’s essential. And helps you make the right decisions for now and that’s the part that I think we’re gonna also make sure that we clearly Articulate throughout the episode and we do this try to do this in every episode is that? You should not look at it like am I doing the right thing and then set and forget It’s it’s a system you want to you want to develop the habits to keep coming and reflecting and making sure that you’re working the sim So so when you think about the number or the pile here’s here’s something you I want to I want to dig into because you said they were doing great. And they were in then you mentioned this key word, I think we should really unpack is you mentioned the volume, like it was like, hey, there’s a volume of investing happening here. Let’s unpack that. Like, tell me what that means. Tell me like, is it it is that just the pile that we’re talking about? Or or is there some sort of caveat and nuance to this this term volume? Because I think we all get this this pile image of like, Yep, the pile is just big enough.

Kyle Pearce:
Yeah, absolutely. And I think what it really comes down to, it’s this consistent allocation of funds towards your wealth building endeavors. you notice, I’m not just saying investments, because it’s not just investments. Like we have to allocate funds strategically. We have to utilize them strategically so that we can get closer to our goal. And for some people, that goal is going to be very different than others. Like the goals typically the same from a vague standpoint. Am I going to be okay, right? But the problem is, is that looks and sounds very different for you than it does for me than it does for the next person. So in this particular case, they are doing a fantastic job taking their cashflow and reallocating it into wealth building tools. Specifically in this case, they’re using a lot of ETFs here. They also have some real estate, okay? Now this is an incorporated business owner. However, This business isn’t like spitting out cash nonstop. Like it’s not like an endless stream of retained earnings here where it’s actually created like a significant tax problem for them. So what they’re doing with this extra cashflow is doing the right thing and putting it into longer term investments because it’s not a very cashflow sensitive business either. This is not always the case when we go from business owner to business owner. was speaking with another gentleman the other day, he needs about $300,000 in his corporate account just to float the business, because there’s money in and out for payroll for inventory for different things that are going on. So like, that’s like the ground level for that particular business. In this case, this individual is more of a consultant. So there’s a lot less, there’s some fixed income, or fixed expenses, you know, monthly subscriptions and things like that. So they’ve got a handle on that and they don’t need to have too much cash sitting and waiting. So what they’ve been doing is they’ve been very aggressive in terms of their investment and their vision is very clear. So this individual is around 50 and the plan is by 55 or sooner, he would like to essentially quote unquote wind up the business and be able to live off of their assets. So that’s kind of like the goal now. Here’s the interesting part about a goal. Like you can set a goal for yourself to reach that level and then you can still decide you wanna continue working, right? So this is the big part that I think’s important for everyone to recognize is like, you’re not letting yourself down if you reach the goal financially and then choose to continue working longer. So for this individual though, it does sound like, he’s actually like, if I didn’t have to work and do this business anymore, I wouldn’t do it. And it’s very reliant on him. So it’s not something that, He’s able to systematize and sort of like set and forget and let it, you know, continue doing its thing. So he’s essentially taking this business, this money making machine, this money printer, and he’s taking those dollars and he’s trying to reallocate them. So they’ve got some investment property, not a huge amount, but some. Actually that is on the business, no, sorry, on the personal side, they had this. So I believe this purchase was made, before they started in the business. And as I mentioned, the business doesn’t have like a massive amount of retained earnings every year. It does have a nice amount for investing, but not something where it’s like, you know, we’ve got way too much and we got to make sure that we defer it off in there. Exactly, exactly. So they do have a corporate brokerage account. They also have their personal accounts. They’ve done a great job. building up RSPs, they’ve got a few hundred thousand in the RSPs, they’ve got tax-free savings accounts that are pretty much buttoned up somewhere around, you know, a couple hundred thousand in there as well. And then they’ve also got some non-registered accounts on the personal side. And the one part about the vision planning here is I love that they knew the cashflow goal that they had, which is about $8,000 of after-tax money cashflow per month, that’s sort of like their goal. And they had said though, they like or would prefer if they had about 10,000 just to provide that little extra buffer. So it’s kind of like they know their range that they’re after, if they hit eight, great, but it sounds like they would much rather have that 10, probably so that, you know, hey, who knows, maybe if the market dips or if anything, you know, were to happen. that they’ve got a little bit of buffer and they don’t have to feel like they’re penny pinching along the way. these are things that are really important for us. They’re not the only parts of vision, but it’s a really solid foundation around what it is that we’re trying to achieve here. It’s not just about growing a pile endlessly, which sometimes we can get ourselves caught up in.

Jon Orr:
Yeah, it sounds like he’s clear on his timing of when that’s gonna happen. And sometimes, know, understanding the vision process that we helped our clients and teams, you know, families go through is thinking about the gap between expectation and reality. And sounds like this individual and this couple actually have a great understanding of where they are and when that numbers actually going to like, if I’m going to retire at 55. And I mean, this age now, then I know that I’m on track to making that happen with that volume you were talking about. So, so like that gap sometimes is a mysterious timeframe, between the math and understanding, like, if I keep doing this, I will get to that number or because of this date, it’s kind of like there’s people that we’ve had lots of conversations with, like, I want to retire at 55. And they’re Well, what’s your plan? Like, tell me about what that volume looks like. to make that happen. They’re like, oh, well, I’m not sure. It’s that gap between expectation and reality. this is great for this individual. Also, great to know this is what my expense is going to be. And I know that we can adjust that for inflation moving forward. But knowing what those numbers are is extremely important. So this gives this person an A in vision stage right now. thinking about this, and I want to ask this because it would lead into some of the other stages, especially the third stage. And I a lot of times these aren’t like, you have to go in order for stages are more like pillars, they’re more components. But but when you think about like you’re saying the volume and the investments, and there’s some real estate, and there’s some you know, some of the corporate side is the plan here, like, did you get a sense that the plan was like, I’m going to again grow my pile? and then my pile will be big enough and I can just start with extracting from the pile. And that’s my plan. my actual retirement plan is to do the typical. I’m just, I’m gonna retire, which means I’m gonna have no income anymore and I’m gonna start taking money out of the pile. And because the pile is so big, then, and with say, maybe you can shed some light. Is it dividends that he’s thinking about? And is it say, the capital out, know, the capital growth that it’s gonna happen in here and the pile is just gonna get bigger and bigger and bigger and it’s gonna be offset by my withdrawal rate. Like is he relying on that 4 % rule to kind of like hope and pray that this is actually gonna work out in the end.

Kyle Pearce:
Well, and that’s something that we did discuss is sort of like getting a handle on like, what are we going to use as sort of a guide or a goalpost to figure out like, are we there yet? know, one thing we could do is we could look at our historical performance. The challenge with doing that is that for many of us is like your historical performance oftentimes isn’t long enough to like really know what could happen, right? So for example, if you’ve, you know, been seriously investing for five or 10 years, then you know, that performance may look really good. And can we reliably expect the same performance over the next 10 years, right? If we go all the way back, you know, 20 or even 30 years there, you know, there was a few things that had happened, right? 2000 had a big crash 2008, we had a big crash. 2020 we had a crash and for most people it’s like if you were newer, like if you were a investor after 2008, like and I’m talking serious investor, like you had a serious amount of capital invested after 2008, you’ve seen pretty blue skies, you know, all the way through even if you made it through 2000 because. March 2020, I remember I was actually away. We were on our March break as we know it here in Canada. I remember just watching, it just seemed like the market just kept going down and down and down. And it was on my mind. But we had a massive quick recovery. And it was almost forgotten. And I think for a lot of us, we can look at that downturn. And sometimes it can skew our understanding of what like a big dip looks like because we’re like, wow, if I could drop 30 % and be recovered by like June, that’s not that bad. Like I can do that, but that’s probably the most forgiving, you know, market rebound that, you know, we’ve seen, you know, in our adult lives, right? So that’s not something that we wanna be doing. So you had mentioned the 4 % rule and I think that’s always a good rule of thumb. to kind of get us to a place where we can try to feel more confident in our strategy. Now, when we do the the 4 % rule, and we talk a little bit about this and we’ve talked about it on previous episodes, it’s not really a rule, it’s kind of like a starting point, right? And I like it, it’s fairly conservative, it assumes a 60-40 portfolio, which in this case is not the case, so he’s not in a 60-40, so could that 4 % go up? sure it could, but I always like to use it as a bit of a starting point. So if he needs $8,000, you know, a month, and then we, we, you know, push that out to a per year, we’re looking at like $96,000 of after tax money, then the 4 % rule would say somewhere around $2.4 million would allow you to get there. Right now, this individual’s at about a million dollars of liquid assets. However, their net worth is at about $2.5 million. So like in some ways they’ve reached the goal in terms of their entire net worth, but I would argue that that’s now including their primary residence and the equity in that property and it’s including their other rental property and so forth. So liquid, they’re at a million. illiquid and including their personal residents, you know, they’re at they’re essentially at that 4 % rule. So now he’s got about a five year window here to try to in my opinion, if he’s going to be using more liquid assets like the market, which sounds like where he’s at, he’s kind of thinking about using equities as sort of like one of the big generators, his property, his rental property that they own is actually cash flow negative right now, which I think leaves a bad taste in someone’s mouth, especially if they’re approaching retirement. They’re like, do I wanna go more real estate and put more money out of my pocket or do I wanna transition to an asset class where I could essentially hit the sell button or receive dividends every month in order to try and maximize my own cashflow plan?

Jon Orr:
Now you mentioned they were not a 60-40 portfolio. What balance are they at?

Kyle Pearce:
They’re essentially, in my opinion, like they’re at essentially 100%. Now they do have some cash, 100 % equities, right? Now the way the strategy right now, and this is something that a lot of people will see, and actually I enjoy learning about income strategies that are out there. There’s all of these covered call ETFs out there. There’s these high yield ETFs out there that are basically, taking an index typically, it’s not always, there are some that are very focused on like NVIDIA or focused on a stock. And what they’re doing is they’re using strategies to create income through selling options. So there’s some good and bad to that, but the goal there for a lot of these funds is to produce a higher yield. Now, there’s no free lunch, right? So it’s really important for us to recognize, like, so some of these funds are producing an 8 % yield, they pay them out monthly, typically, some are producing 15 % yields, like, right away, you look at that number, and you go like, wow, like, I want that, but there are some other risks associated with them. And when we compare them to the underlying, you know, that can be difficult. So what this individual has, and I’m going to round the numbers here, but basically instead of it 6040 equities and bonds, this individual investor is 60 % invested in these high yield equity ETFs and a variety of them, right? So there’s some diversification there. And then 40 % in just the ETF itself, like, you know, the S and P 500 or the NASDAQ or whatever other ETF there might be that they’re invested in. So on the one hand, we’ve got 60 % of all of these liquid assets. So 600,000, we’ll call it in this case are invested in these high yield funds, which are making money off of indexes in the equity market. And then over here, we’ve got the actual indexes. So the SPI or the QQQ or the Canadian versions of these, you know, low fee or low MER fee funds. And one’s producing a high income, the other one is producing less income and more capital gains. So on one hand, you’re like, that’s pretty awesome. Like I feel diversified, but the problem here with doing this is where we’re doing these things. So first of all, Am I being taxed unnecessarily for some of this income from some of these high yield funds? And then on the other hand, we have to recognize that essentially 100 % of our portfolio is in equities. And therefore, if the S &P 500 goes down, and I have a good chunk of the 60 % in the S &P high yield fund, and I’ve got, you know, a good chunk of that 40 % in the growth. S &P 500 fund that doesn’t produce a high yield. The result is both are going to go down in value. One is still going to pay out yield, but that yield is also going to go down because now they’re making income on a lower number. So these are things that are just really important. And as long as we recognize what we’re doing and we’re okay with that, you know, that strategy and that what will happen if and when the market goes down that it can work, but it is more highly concentrated and would be considered, in my opinion, a full equity portfolio, which may or may not continue to grow into the sunset for the next year, two years, five years, or if we do see a major pullback, then we’re gonna see a major pullback in the entire portfolio. So these are just things we have to recognize and be okay with, right?

Jon Orr:
Exactly, exactly. like when we start to talk about moves, we start to talk about structures and especially in the transition from your accumulation period, your working period into your decumulation period or your retirement period, knowing what those structures, like you mentioned tax optimization, like we got business investments, we got personal investments, like this is the third component, the third pillar, which is the optimization. moves you want to be continually thinking this is the part that we we try to help our our our clients and the people that we’re meeting with business owners think about it as a system like what is the system that you’re building what is the continued habit that you can be commit to on an ongoing reflection or an ongoing work on the business this is like that flywheel it’s like what is what how can I make this my new business and and what is that what does that look like that’s for us that’s what we help our team you know our families with when we think about that component. So when you’re talking about these structures, we’re really talking about that third stage of wealth planning. And I have a feeling what you’re leaning towards here is there’s some work to do for this person in this area. You we got what you’re saying 100 % equities, we’re moving into retirement in the next few years. Is this the right strategy? they have they have they maybe, because like we’ve talked about this many times, the math says, if you wanted to like just play the math, which means like hold your portfolio for the long term, then investing 100 % equities is going to be a winner for you, right? And so maybe this is where their mindset is, right? Historically over many years, right? Like the sequence of returns will play a factor, however, but the math here, maybe the this individual is relying on the math here to move them forward through this period as well. So my worry and my wonder is, these the moves they’re planning to continually hold 100 % equities through this period? And what happens when we take the 20 % dip? When you take that 20 % dip and you’re relying on your pile, the sequence ever, we have a whole episode on the math of retirement. last year on three different parts, we looked at sequence of returns, like what happens when you start withdrawing? You know, you’re in that period of life, we’re gonna start withdrawing from that and you’ve taken a 20 % dip. You’re not only, know, especially if you’re relying on that as income, then you’re not only making less income because there’s less money to generate that return, but you’re now withdrawing on those, you know, that pile, which means you’re taking more, you’re taking a bigger percent of the pile out every year. because you need that money to live. Otherwise, unless you’re adjusting based off the 4 % rule, you know what your income actually is. So it’s like you’re making less and you’re pulling more. So it’s like, it’s a double duty on that. is there the worry here is, is, is we’re gonna ride that out? And are we okay to ride that out? Or is there alternative strategies? Like in those episodes, we talked about, you know, in way cash damning, and we talked about like, like different different piles, we could start pulling from to to accommodate, say, those dips. So this is probably where most of the work is, and they’re on the report card here, but I want to get a sense of what you heard from this team.

Kyle Pearce:
Yeah, and you know, we’re not here to say whether, you know, whether they’ll be okay to weather that storm or whether, you know, they should be okay to like that. It’s not really for us. Like it’s about it’s a question for the actual individual or the couple or the business owner to be thinking about just to make sure that they have asked themselves that question. Right. So like, we’re not here to say whether it’s the right move or not, it’s like, is it the right move for you? And is it the move you think you’re making? That’s a really important part here, right? So when we go 100 % into equities, for example, or 100 % into anything, the question is, is like, what’s the move if we do experience that dip? Hopefully the the move isn’t to pull the money out, because that’s obviously, you know, all the research would say the vast majority of people end up doing that, which is problematic. So you know, probability says most people think they’re not gonna do that and then they do, so that’s not good. But let’s say you’re like, nope, I am like super solid, super firm, I’m not gonna do it. Well, one advantage of a 60-40 portfolio and the method of using, you know, it doesn’t have to be 60-40, it’d be 70-30, or having some sort of allocation that is not equity is that you can take advantage of the reallocation or balancing the portfolio. So when markets are down, the idea is then you look at your number and all of a sudden you’re not 6040 anymore because all of a sudden your 60 chunk went down and now you might be at like 6040 the other way and the idea is that you would like sell some of that. safer asset, and in many cases, be bonds that the traditional portfolio would be in order to take advantage of the dip that you have in the equity market. Like that’s a really important factor that a lot of times people don’t take into consideration. Like that’s one of the goals there is like that now you’ve got some fun. whether that’s bonds or money markets, or whether it’s a high yield or a high cash value policy that you’re going to leverage against, like whatever you choose as that goal or that bucket. having that available can be helpful. Otherwise, you just gotta wait it out and you’re just gonna ride it out. So that’s a really important part. But now when we think about this and we go, okay, if this is my strategy, one thing that’s worth noting as well, not to say whether it’s the right or wrong move, the math is gonna say that having income funds before you need the income is actually the wrong move, okay? The math is gonna tell us that. I’m not telling you that makes this individual wrong, but the math says that if I’m going to do a high yield S &P 500 fund or NASDAQ, I was on LinkedIn and I mentioned, you we were in a conversation with someone on LinkedIn about QQQI, which is one of these high yield funds on the NASDAQ. So we’ll use that as the example here. Mathematically, you’re gonna get that income, but that income’s coming back to you and it’s based on covered calls that they’re selling on this fund and essentially it’s capping some of the upside. And not to mention it’s putting income in your pocket, which means you’re essentially taking on some tax unless it’s all a return of capital. Some of those funds are. So the reality though is like if you’re just gonna drip it back into that fund itself, you’re actually better off to just hold QQQ. which is the NASDAQ or an equivalent. It doesn’t have to be QQQ. That’s the most popular one, but you you can hold the Canadian issued version of the QQQ or a corporate class version of it. And the reason why is because there’s no actual drip that has to take place. I don’t have to pay out anything and I don’t need that income anyway. So it’s all gonna go into the capital gain. It’s gonna protect that from a tax perspective. So. Ideally, for the next five years, it actually would make more sense for this particular individual investor to essentially avoid holding that 60 % that’s all in these income generating funds and actually own the underlyings and just allow the growth to do their thing. And then when they need the income in five years, you might transition, maybe not all in one day, maybe it’s slowly over time, you slowly transition. into getting into those income funds. Now, the math still says you’re gonna do worse by doing these funds in general over the long term. And the reason why is because when we have dips, they’re gonna be affected as well. The results are gonna be affected. But then also when we have rips, okay, when we have like a big spike and when there’s hot like volatility, they can earn more money on the options they sell, which is great. It’s great for the income. but it often caps the upside as well. like it really what ends up happening is these funds typically in general, and I’m sure there will be one that may not do it for the next little while, but over the long run, these funds tend to actually lag behind the underlying that they’re making this income on. Now that might not matter to me too much if I’m in retirement and if I need that income for my lifestyle, I might like seeing this money in. coming into my account. And actually that’s the behavioral aspect that this particular individual is loving. Like they’re loving watching the income hit his account every single month and it’s making him feel confident in his plan that when he wants to retire in five years that this could be a strategy that works for him. So behaviorally I love his plan, but like mathematically I would say it’s not quote unquote the most optimized plan. Now the question then becomes is, does it make it right or wrong? And the answer is, it’s only up to him to decide, right?

Jon Orr:
What we, I think what we always say is what is right is what you can commit to and what makes you sleep at night, right? Like that’s why it’s different for everyone because there, again, that gap between expectation and reality is that you could have the expectation that I follow the math every single time, but the reality is that that might not be the habit you can stick to. That’s where the system part comes in. Like I’d rather see them say, you know what, if I took out the dividend approach, you know, and seeing that money hit my account. But then I all of sudden started questioning what was happening on the on the, you know, then all of sudden, now I’m not, you know, dumping money here or committing to this. It’s like, that is that that’s what the little wins that help you get down that pathway, then stick with it. Because I think this is not I think this is what I know is that the better long term approach for you is to think about what what your habits will look like. What is the system that you can commit to? Like, even like, even you think like I’ve said habits a few times, like if you think about James Clear’s atomic habits, he, right in the book, he’s like, we don’t rise to our goals. Like you don’t rise to like, hmm, I’m gonna hit these numbers. You fall to your systems. So you have to have that system that you can commit to. And I think I’d rather see them stick with that than try to move away from that. And all of a sudden the system falls apart.

Kyle Pearce:
Yeah. And you know, the what we came to that there was no conclusions necessarily on like if they’re going to change anything for now, like five years is not that long. Like it’s long enough that it could make an impact. It could make a difference in terms of like where the net asset value of his portfolio might be if he does transition now. But like you said, if he’s going to keep with it and he’s comfortable with it, he’s OK to leave a little bit on the table there. carry on the one other aspect that I would always recommend though is then deciding if I’m using the 60 40 split 60 % of this quote unquote portfolio is being a high income funds or high yield funds and 40 % are in the capital gain funds. Right now he’s doing it in every account. So it’s like in every account I’m 60 40 right so I’m in my RSP 60 40 tax free saving 60 40. corporate account 60-40, unregistered or non-registered 60-40. So what I’d recommend it as I said, listen, even if let’s say you choose to stay on this path, transitioning to make these high yield funds, the ones that are inside your RRSP and your tax-free savings account, if you can make those buckets, all of your high yield funds, at least you’re not paying tax. on those distributions now, even though there’s gonna be a potential lag over the long term, but at least by reallocating here, we’ve got an optimization move that he can still go against what the spreadsheet’s saying about what he really quote unquote should do. He’s gonna do the behavioral approach and say, I wanna see this income coming in, but let’s have it go in those accounts because why do I wanna pay any sort of passive income tax on the income generated inside my corporate account or in this non-registered account outside of the corporation. Let’s do it in these tax deferred buckets and at least you will save on that aspect. So it sounds like that’s gonna be a next move for him from the optimization standpoint. Sounds like behaviorally is liking the asset mix, which is great. And ultimately I think at the end of the day, This is one of the biggest and most important parts, whether you’re a DIYer or whether you’re gonna choose to have someone else manage your investments on your own, understanding what your choices are and what you’re saying yes to versus what you’re saying no to is really important. It doesn’t mean that you have to always take the optimal, you just have to know what’s on the table so that you know what you’re leaving and what you’re taking, what risk you’re gonna take, what risk you’re gonna leave in order to get there because that’s gonna truly allow you to build the habits as you had mentioned to stick to a plan and make sure that you follow through even when times get tough, the markets get shaky or there’s uncertainty. If I’m not clear on the goal, if I’m not clear on what I’ve been doing and why I’ve been doing it, It’s when things get risky and shaky, that’s when you start to get, they call it shaken out. You get shaken out when you don’t actually have conviction in the plan. You thought you did, but you didn’t understand it well enough that it allows you to get shaken out. And that is what we want to avoid because that’s where you’re gonna see the greatest, the greatest negative impact on your portfolio is if we make these behavioral moves at the exact wrong time.

Jon Orr:
Right.
Yeah, this is where the bulk of the conversation with this business owner happened is in this kind of stage is trying to make some of these optimization moves. So in our opinion, you know, he was a B, B plus, but making these moves will move him into an A in this area. Now, Kyle, last, we focused mostly on that zone, that area, let’s quickly though touch on the other two areas, but let’s do it all together because sometimes our wealth reservoir which is our kind of second pillar, second stage, second component, ties into the legacy approach, which is the fourth is like planning for legacy. So, you know, where did they stand? You know, what would be their grade in this area, knowing that we’ve been probably talk about that so much in this in this call?

Kyle Pearce:
Yeah, well, I would say that, you know, they were we did discuss like, where is the extra money and the extra money is in a open home equity line of credit. So they do have room on that home equity line of credit to help them for emergencies. They didn’t necessarily say they would dip into it if let’s say a dip in the market came and you know, in order to take advantage, but they do have that. But then they also started asking about like a state and legacy. And here the big question really comes down to, again, if the plan truly is going to be, let’s say for the liquid assets, is going to be 100 % equities over the long run, they’re probably going to be okay in terms of even a state and legacy planning. As long as they’re able to stick to it. the numbers on the page are gonna show like you’re going to be okay. You’re gonna trigger more tax as well, but you should have enough growth there to offset a lot of these taxes along the way. As I mentioned earlier in the episode, they don’t actually have what I consider a significant amount of retained earnings that’s gonna make it difficult for them to slowly drain it out over time. So because of that, that insignificant amount of retained earnings now, and there’s only a five-year runway until he stops the business and he’s 55, Then he’s got another, call it 40 years, right, to get to 95. That’s like a long time. There’s not a lot of retained earnings in there. So there’s no like urgency for them to look at high early cash value insurance if they had a wealth reservoir other than the home equity line of credit. Like if they explicitly were like, want to have a volatility buffer and not have all of my money in the market. then we might start discussing how that tool could help them hit two birds with one stone, right? Which is wealth reservoir, that’s gonna be your volatility buffer, it’s gonna be your safe fund, and it’s also gonna help you to deal with legacy and estate planning because it will be worth more down the road when we pass than when we were living, and it will pay out tax free. So we get the bonus there. But what I don’t wanna see people do, is taking too much out of their growth assets. If you already are committed to the growth assets and you feel good about them and you’re not going to waiver again, we don’t know if that’s true or not. Once we get to those places, but as long as you’re confident, then we don’t need to, you know, start funneling, you know, 30 % of it into a policy if that wasn’t really what their plan was, because that 30 % is going to have bigger growth in the market. Again, like I said, as long as they’re willing to be unwavering during the tough times, which we have not experienced at least in these recent years.

Jon Orr:
Exactly.
And if that switches, this is the system part of that switches, knowing there’s tools out there that can help them make that adjustment is important to know. Because you might decide that’s not my pathway, my vision is shifting as well. So you know, when we think about the this case study and over the the this conversation, and in this episode, if we reflect on the four, the four pillars, the four components of a healthy financial system for yourself, go back to the vision, we were giving this person an A on the vision, they were very clear, they were going to be their numbers, they knew where they wanted to go and what was going to get them there. The second component is our wealth reservoir, they have access to capital when capital needs to be deployed, whether that’s an emergency or whether it’s an opportunity, there is access there, they had some they could do some work here, depending on, you know, what, like what we were talking about with some of their choices in the market or later on. So we’re giving them a B here because they could have a tool here in place that could be useful down the road, but it’s not necessary for them at this time. their health or HELOC can be act as that wealth reservoir. So we got to be here. We also got to be an optimization because we have some moves moving forward, which I know that will change into NA after some of these moves can be can be made. And then also a B in legacy planning because we are thinking about that we do have the corporate side. But we have some work, we have some room there to to learn and take those nepsets. Oftentimes, most of the people we’re talking about are getting a B there, mostly because we need to make the other pieces optimal first, we need to get the A’s, the A’s, the A’s before that that A happens over on legacy, legacy and estate and planning. So we hope that you kind of got a sense of the four big areas of a healthy wealth. planning system that you’re going to want to think about and plan for and also where this person lie was laying in in the in the assessment of those four we do this every time we talk with people is think about these areas and help how to help them optimize those areas and strategies to shift them and for the better of their net worth and their goals and their financial goals. If you want to know what those strategies are for you. We have an assessment you can head on over to Canadian well secrets comm for pathways take our assessment there We’re going to get a report on those four zones Where you where you stand? If you want to reach out to us to have a conversation like we did with this individual you can head to Canadian well secrets comm for Discovery just a reminder the content you heard here today is for informational purposes only should not construe any of this information as legal tax investment financial advice one more reminder Kyle Pierce’s licensed life and accident Insignia’s insurance agent and 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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