Episode 245: Kevin O’Leary Says You Need $5 Million in Cash For Retirement. Is This Actually Smart in 2026?

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Do you really need $5 million in cash to be financially free—or is that number missing the bigger point?

Many people hear bold retirement numbers from wealthy entrepreneurs and assume financial freedom is a fixed target. But the real question isn’t just how much money you have—it’s how much liquid, flexible capital you control. Without that buffer, investing can feel risky, market swings become stressful, and opportunities pass you by. Understanding your personal “wealth reservoir” could be the difference between constantly worrying about money and confidently making financial decisions.

In this episode, you’ll discover:

• Why the famous $5 million rule is less about the number and more about creating true financial flexibility.

• How a wealth reservoir (your “sleep-at-night” money) allows you to invest, take risks, and weather downturns with confidence.

• The different places your liquidity can live—from home equity and cash accounts to insurance strategies and other safe assets.
  

Press play now to learn how building your own wealth reservoir can give you the freedom to invest smarter—and live on your terms.

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. 
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• 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
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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.

In this episode of Canadian Wealth Secrets, we explore how to design a Canadian wealth plan that supports financial freedom in Canada, using proven wealth building strategies Canada entrepreneurs rely on to build long-term stability. We break down practical approaches to financial independence Canada, including early retirement strategy, passive income planning, and building financial buckets through an investment bucket strategy that balances liquidity and growth. You’ll learn how real estate investing Canada, real estate vs renting decisions, and financial diversification Canada fit into a larger modest lifestyle wealth approach focused on building long-term wealth Canada. The episode also covers key Canadian tax strategies such as RRSP optimization, optimizing RRSP room, capital gains strategy, tax-efficient investing, and salary vs dividends Canada decisions for business owners. For entrepreneurs, we discuss corporate wealth planning, corporation investment strategies, corporate structure optimization, and personal vs corporate tax planning to maximize business owner tax savings and create stronger financial systems for entrepreneurs. Finally, we dive into long-term planning with legacy planning Canada, estate planning Canada, retirement planning tools, and financial vision setting so Canadian entrepreneur finance strategies align with both lifestyle goals and generational wealth.

Transcript:

Jon Orr: I guess I can ask you this question is that, you know, Kevin O’Leary is on record of saying when you think about retirement is that you 5 million bucks. Like that sounds like a lot and 5 million. It’s like I need 5 million in liquid assets to be basically say I can retire. Obviously the numbers should be different for individuals, but I mean that’s what he’s saying. So the question is like, I think he said that a year ago, more than a year ago. you asked him today. I’m sure he’s saying the same thing, but I mean like, is that still, does that still hold up? Like is five million the right amount? And is that, is that even not realistic? Cause I think it’s realistic for the people that we’re speaking to. It’s realistic for us. And so it’s like, is five million safe? know, like is it, is that good? Like is it, is that the right number that we need to really consider?

Kyle Pearce: Well, I think the bigger piece here too is like not even just the number, but he was very specific and we’ll link it up in the show notes as well. So you can, you know, go check it out and so forth. And like he was speaking sort of off the cuff and saying that you actually need 5 million and he’s not talking about like a $5 million portfolio. He was like 5 million in cash and his logic here, which I can respect, but we’ll add our little twist on it a little bit here. Like his logic then was that is the way that you get to have complete control. And actually there’s an individual, I had a call with him yesterday and he listens to the podcast all the time. What did we say his name would be when I would share this? But he said, know, change his profession. Yeah, making up the name. So he said, change my name to Tom. And he said, Tom has a gigolo business is what he told me.

Jon Orr: Did you just make up a name?

Kyle Pearce: And he said his financial freedom goal. Yeah, I know, I know. I forgot to tell you about this last night. But his goal was so that he can look a client. He’s an incorporated business owner. He can look at any client and be able to say, you know, flip the bird and say, I don’t need your business. You know, like that? Well, it’s exactly and I guess that was the definition. Now, he actually shared, you know, all the words, no, no blanks, nothing. And I thought it was

Jon Orr: I love Tom.

Kyle Pearce: awesome. And I wrote it down in my notes, because I think it’s really important for people to recognize. And I think for Kevin O’Leary, that’s what he’s saying. He’s saying, you need like $5 million in cash, like safe money to be able to get to that point. And if we apply that 4 % rule, for example, and again, cash sitting in a bank account isn’t going to earn 4%. So like be cautious about this. you know, if that $5 million was even just making three to 4 % or something. That’s like $200,000 per year. And he’s basically saying like, you should still have other assets. Like he’s not saying like all of your assets should be in cash and $5 million. He’s just saying until you have that, then you you you aren’t financially free. And I think for everyone here, and I think what makes this really important is that, you know, you the top of the the episode was all about this idea is like, is that true? Do we believe it? Do we feel the same about it? And I would argue that that $5 million is different for everyone out there. 

And I know for me, I’m only now starting to recognize that I have certain buckets that are in they’re not cash, right? But you know, we like high early cash value insurance. That’s like where my, you know, F you money is, let’s call it like it’s there. And it allows me to do other things to generate income from other sources. And it’s like, that’s what allows me to sleep at night, to be able to go, I can take more risk in these other areas, because I’ve got my bucket and I’ll full disclosure, I don’t have 5 million sitting there. But it’s like, everyone’s gonna have a different number that they need to get to. That’s the wealth reservoir we’re always talking about to be able to give you the full flexibility to be able to make certain investments and not overthink them or to not lose sleep at night when the market starts to get a little shaky or, I was on a call with a great couple in Toronto and one’s a realtor, the other had a marketing business and they had bought a condo pre-construction basically at exactly the wrong time when they had bought it, condo markets booming and then they just took possession or taking possession of it this year. 

And the market has completely sunk down and we’ve gone through and because that they have enough of a wealth reservoir, they have enough assets and other places, they’re able to take this condo and instead of just, you know, fire selling it like a lot of people would and taking this big loss and moving on, they’re actually okay with taking it on. knowing that they’re negative on paper and they’re actually gonna be cashflow negative for a period of time, but they know that over the longer term, everything is gonna be a okay. 

And I would argue that that couple are in a position that if they’re not quite at this level that Kevin O’Leary is talking about, they’re at a stage where they feel confident that either they’re on their way there, they have a plan to get there. and they have enough capital available to help them weather the storm so that once you know once the tide rises all the ships are going to be floating again right all the boats are going to float and that is a great example for me with what I think Kevin’s trying to get at with that comment is not that you shouldn’t invest until you have five million but ultimately at the end of the day you need to be very aware that taking the extra money and putting it all into your long-term assets, that can be a hard thing for a lot of people to do and it causes inaction because they don’t have enough of that wealth reservoir or that liquidity bucket available for them to be able to pull the trigger.

Jon Orr: Right, yeah. So like your wealth reservoir, you’re really saying is the sleep better at night, the F you money, the money that frees you up to invest freely and have options is in a vehicle that’s high cash value, life insurance. And so I think for a lot of people, and we talked about this, about this tiers of our wealth reservoir, for a lot of people that freedom money is their equity in their home, your HELOC money, your line of credit money, inside your corporation, maybe you’ve got money just stacked in GICs that are spaced out, so every six months you get this influx of cash, and then it keeps you free to go like, do I invest it, do I not, do I put it back in a GIC? And so I guess it’s like, when we think about that, we tend to tell people that, and we’ve said this here on the podcast too, is that you wanna make sure, like, are you leaving money on the table by having it in these other options, these other vehicles, because there’s dead equity in your home? But I mean, like, but if they have a purpose, right? Because that’s what you’re saying is like, you’ve invested in, you know, we’ve got insurance policies that allow you to be flexible, that money is in the insurance policy. It’s like, it’s there, it’s growing at GIC rates. It’s actually somewhere, it’s out there. Just like your home’s value is out there. It’s just like my GIC over in my corporate side. It’s out there. I know where it is. It’s generating whatever. Does it matter where it is? Or does it, is it just that you’ve earmarked that to be your F-U money?

Kyle Pearce: Right. I think it’s a great question. And I think there’s no one right answer for everyone. I think it just depends on, I personally don’t think it matters where it is, but because I love the arbitrage, I love the optimization, the alpha game. I look at it and go, you know, for many years, my wealth reservoir sat as equity in my home. Now I had the home equity line of credit available. I would dip into it up to a point, like I would never fully use my home equity line of credit because I always wanted to have that dry powder there, which is great. It’s fantastic. And it’s a great move. And a lot of people do that and they should continue to do that. Make sure that you’re being very cautious with any sort of leverage that they’re using. But over time, when I discovered a higher early cash value insurance, especially because I have an active business, we have multiple active businesses. 

So they’re earning active income. and had all this money in the corporation that I could just take and send off to investments when I landed on this as an asset that could do what my home equity line of credit does, but also offer me other opportunities like having a cash or a capital dividend account credit down the road for my estate and legacy, having leverage ability in the corporation as well as strategies out of the corporation and to essentially unlock my inability to use more of my home equity to create that tax deductible interest arbitrage on other investments. To me, it was like a permission slip for me to be able to use more of that equity in my home. So for me, that is why I am such a big advocate of having these diverse assets. But ultimately, at the end of the day, certain things don’t actually matter to other people like some people are okay with whatever retained earnings down the road have to be taxed on the way out just like they would with an RSP fairly close anyway and and that’s 100 % fine but for me if I’m able to take a different asset keep that those funds safe and then be able to feel like I can be more aggressive with some of these other assets like my primary residence knowing that I’ve still got my dry powder over here. To me, it’s a no brainer and it’s something that I can sleep well at night doing.

And again, I’ll always, I know this for a fact that I’ll always want to have a certain amount of dry powder there, even if I run all the numbers, you know, and you can run all the numbers you want and people compared this asset to that asset. They compare insurance to investments and all of these things. those are the wrong comparisons to be making. If there’s any amount that you have as dry powder, be it home equity, be it cash and account, GICs or cash value insurance, like if those are where your dry powders are, it doesn’t matter which of those buckets it’s in, but every one of those buckets offers pros and cons, right? Which you have to be okay with. And to me, there’s all the additional benefits in the insurance side of it that I’m like, even if I do have the Armageddon scenario where I’ve got to leverage all of the cash value I can out of those policies, I also am still going to get that death benefit as a bonus. Whereas if I drain out my home equity, or if I drain out my cash account or my mutual funds, or not mutual funds, but my money market funds or wherever those buckets are, I’m just left with zero. Like there’s just zero there. There’s more flexibility, but over here, I get this added benefit. added insurance like to me, I’m all about the arbitrage. So for those dollars for me, that’s where I want to get let them sit. I would never you know, I and I say this very, very, you know, clearly I would never leave $1 million $2 million $5 million like Mr. O’Leary saying in a cash account earning a percent or less in interest like I would be taking it and arbitraging it and using it in other very safe assets to still accomplish the same task, which is to have enough money to truly do whatever the heck you want, regardless of what’s happening in the rest of the world and in the asset markets.

Jon Orr: Right, right, and so I think what you’re saying also is just that the five million is calculated because it allows you to have $200,000 a year, and that seems like a good chunk to be able to do whatever you want with, but not necessarily you need, like the five million he’s recommending is like what you really need, but I think what we’re saying is that you want definitely, you need to consider how much is that wealth reservoir. and how much is really liquid. Like how much is liquid that helps you have the F-U money? Because that’s really what he’s saying is like, you need to have F-U money. I think your F-U money should be this. But you also have to have it super liquid so that you can move and be and tell people F-U or do whatever you want or invest in this or sit on the beach somewhere. But that might not be the same number for you. It probably is not the same number for you, but you do need to think about your reservoir number. You need to think about where it actually lives because that is an important component. You’re saying there’s lots of buckets they could put in. It really doesn’t matter as long as the principle here is that you’ve got liquid money that helps you say, I could do that.

Kyle Pearce: Yeah, 100%. And I would, again, argue you don’t want to wait till you hit that number before you start investing in other things, right? Because I don’t want anyone to misinterpret what we’re saying here. Kevin O’Leary thinks that you should. Kevin O’Leary thinks that you should make sure you’ve got that much money before you worry about any of the other stuff, whereas we are definitely a little bit more, I would say, progressive in ensuring that you’re still doing your investments. You’re still doing all of these things, but you also don’t want to completely ignore that wealth reservoir. For a lot of Canadians, where it’s going to begin is probably in that primary home. If you are a primary home owner, if you’re a renter, you have to start thinking about, you have a wealth reservoir at all? Because one of the things you get by renting is you get a lot less wasted expenses month to month, right? You get a lot less holding costs. but are you taking that difference and doing something meaningful with it? Some will argue you take the exact difference and you put it into long-term investments. I would argue a portion of that should be going into your wealth reservoir, whether that’s in a money market account, a checking account, GIC, something safe, or maybe a long-term, high early cash value policy. You should be doing that because the homeowner is doing it by default by paying off some of that principal. And they’re creating that wealth reservoir over there.

The problem with the primary homeowner is that if they do not actually explicitly think about this and ensure that they have a home equity line of credit, like that either it’s just a flat static one that’s large enough to act as your wealth reservoir or a re-advanceable home equity line of credit so that it actually gets bigger as you pay down that principal and it’s accessible. The problem is, is that if you don’t have that, when you do need the money, guess what the bank’s gonna say? The bank’s gonna say no thank you, right? So you wanna make sure that you’ve got that line of credit ready to go if and when you ever do need to utilize it as your wealth reservoir. You don’t wanna wait until the money is needed because that is when banks and lenders are the most unhelpful. They’re very helpful when you don’t need the money, but when you do need the money, that’s usually when I’m laid off or I’m injured or I’m off work or I quit my job or whatever it might be. Whenever there’s turmoil, that’s where they’re not going to be as helpful to get you access to those dollars. So be sure that you know where that wealth reservoir exists for you. Factor it into your plan and decide like what is that number that you’re going to be able to feel confident that as you’re moving along this wealth building journey that you have enough to deal with the what ifs of life, call it an emergency fund or call it an opportunity fund so that you can do what you need to do when you wanna do it. And hey, if that means telling a client that you don’t need them anymore, maybe that’s what you’re doing it for, but ultimately at the end of the day, make sure that you’re considering these buckets in your wealth building journey.

Jon Orr: Do want to learn more about the wealth reservoir and the tiers of the wealth reservoir? We put in the show notes a link to one of our videos on YouTube and the blog post for the tiers of the wealth reservoir. So scroll down there, click the link. You could be watching that right after this to kind of take a deeper dive into the wealth reservoir. Also, if you want to know where you are in the pathway, whether the wealth reservoir is even right for you right now, head on over to CanadianWealthSecrets.com. Tom, forward slash pathways, fill out a quick assessment there and we’ll send you report on which of the four pillars of a healthy financial system that you need to focus on next. That’s at CanadianWellSecrets.com, forward slash pathways. And if you are looking for some specific recommendations, you can head on over to CanadianWellSecrets.com, forward slash discovery, hop on a quick call with us. We can talk about some strategies for you in your financial planning needs.

Just as reminder, content you heard here today is for informational purposes only. It not construe any of the information of legal tax investment or financial advice. And Kyle Pearce’s licensed life and accident and 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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