Episode 275: Follow This 20 Year Financial Wealth Building Strategy

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Are you a high-income T4 earner who feels financially behind simply because you cannot access the same tax strategies as an incorporated business owner?

It is easy to compare your tax bill, investment returns, or wealth-building options with someone playing a completely different financial game. But incorporation does not automatically mean more spendable income, and chasing strategies designed for someone else can distract you from the opportunities already available within your own plan.

Through the story of a successful T4 earner with rental properties, registered investments, a DIY portfolio, and substantial home equity, this episode explores why knowing more strategies does not always create greater confidence. The real challenge may be choosing a tax-efficient approach that fits your risk tolerance—and staying consistent long enough for it to work.

By listening, you will learn how to:

• Stop comparing two different financial games. Understand why the corporate small-business tax rate does not tell the full story and why incorporated owners still face personal tax when extracting money from their companies.
• Evaluate your next wealth-building move more clearly. Explore the trade-offs between seeking higher returns, taking on more investment risk, increasing your income, and improving tax efficiency through strategies such as the Smith Manoeuvre.
• Build confidence through consistency instead of chasing certainty. Discover why long-term financial confidence rarely comes from finding one perfect strategy—and how a repeatable process aligned with your goals, personality, and comfort with risk can move you closer to financial freedom.

Press play now to learn how to focus on the financial game you can actually play—and build a strategy you can confidently follow for years.

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.

This episode of Canadian Wealth Secrets explores how a high-income T4 earner can improve financial planning, wealth management, and tax efficiency without comparing their situation to an incorporated business owner playing by different tax rules. Using a real listener case involving rental properties, RRSPs, a DIY ETF portfolio, and substantial home equity, Kyle and Jon explain why the small-business corporate tax rate does not equal personally spendable income and why salary versus dividends in Canada must be viewed through both corporate and personal taxation. They examine practical investment strategies, including the Smith Manoeuvre, real estate leverage, RRSP optimization, tax-efficient investing, and using home equity to support long-term wealth building. The conversation also highlights risk management, showing that higher potential returns often require greater concentration, private lending, or other risks that may not fit every investor. Rather than chasing the perfect strategy, listeners are encouraged to create a personalized Canadian wealth plan, define their minimum retirement cash-flow needs, and follow repeatable financial systems that match their investor personality. The core message is that lasting financial freedom in Canada comes from understanding the financial game available to you, choosing a strategy you can confidently maintain, and staying consistent on the path toward financial independence.

Transcript:

Kyle Pearce: All right, John, so I just recently had a strategy call with an individual from the audience, from the Canadian Wealth Secrets audience. And it was a great call. Awesome individual, listener of the podcast and is a wealth seeker. And to be honest, they’ve done a really good job. So they’re in a position where I would argue they’re in a place where if we use some simple back of napkin math, they’re in a spot where they should — and I always say the word, like key word in this conversation today is like should be — well okay, based on where their spending is and what their goals are for the future.

Kyle Pearce: And really, you know, the thing that sort of hit me and we are gonna talk a little bit in this episode was sort of like one of the questions they had had or one of the statements they had made. As a high T4 earner, you know, was kind of comparing themselves and the disadvantage that they had relevant or related to another friend — I guess it wouldn’t be a colleague, it’d be a contact in their network — who is incorporated and gets the advantage of the small business deduction. So that like the comment was like, you know, I would have loved to have been incorporated because I would only have to pay 12%, you know, here in Ontario or 9% in some other provinces and so on and so forth, without really like, you know, understanding that, you know, the game gets so much more complex. If we go down that path, even though there’s many opportunities there, there’s also many ways that we can sort of run into some bad decisions in planning when we incorporate and do some of those things.

Kyle Pearce: So you know, really today what we’re gonna do is kind of unpack the scenario a little bit, but then talk about, you know, sort of the bigger pieces here that we’re hoping people will take away from this particular episode, but then also any type of strategy call we have when we look at strategizing, planning, and really focusing on that vision for your financial freedom into the future.

Jon Orr: So were they just unsure about — like it sounds like what they’re saying is, look, I’m a high T4 employee, a high income T4 employee, therefore like I’m probably in the highest tax bracket. And when I look at my tax return every year, it hurts because I’m seeing like half my income is going to tax. But then when I was talking to that guy, he’s like, wow, in my business, when I earn revenue and I earn income, it gets taxed at 12.2% on the first 500,000. And like, and he’s going, well, I want that. And not really — I think what you’re saying is he’s not really understanding what happens after that. He’s thinking probably making the comparison that like my income now goes in my bank account personally, and I only get half of it. And that guy over there, he gets to keep, you know, 80-something percent of all of that money. And it goes in his bank account, which is not true.

Kyle Pearce: Right. Yeah, exactly. Exactly. And really, you know, sort of where we landed was this idea that they’re playing two completely different games and he’s in a situation where he actually doesn’t have the option to incorporate, right? Like it’s one thing if you’re a sole proprietor and you know, you’re running a business and you want to compare — like there are, that means that you could play that game. And for some people, it makes sense to play that game, you know, to open the corporation. For other people, it doesn’t. If we’re not earning enough money or if we’re expensing so much that we don’t have a ton of profit each year — I say a ton, you know, a significant enough amount of profit.

Kyle Pearce: But in this particular case, it’s like you’re kind of looking over and you’re looking at a completely different game that actually you can’t play. And you’re thinking to yourself, you know, I want to play that game and that’s fine and dandy. But at the same time, you’re almost wasting your time looking over to that game and saying, hey, I want to do that. Because here’s the thing, that’s a complex game and you would have to — let’s say I’m really good at hockey, really good, I wish I was, I’m not really good at hockey, but you know, let’s say I was really good at hockey. And I’m looking over to baseball and I’m like, that seems better for whatever reason. And you go like, I want to go do that. And if I did, the part that gets hard about that is that there’s so many other rules that we now have to learn and I have to do things differently. I have to systematize things differently in order to benefit from the rules of that game. Right? Like it’s not just about skating really hard every single shift every time I’m on the field — like baseball is a very different game. I got to go and like stand around in certain spots and you know, play the ball and do things differently.

Kyle Pearce: And you know, really, when it comes down to it, what I think one of the big conversational pieces we had was like, let’s make sure that the game you are playing — and in this case, it’s the only game you can play right now. You can’t play that game. You’re not allowed unless you completely change sports, completely change careers. Are you playing the game in front of you now at the highest level? And here’s the reality is that you don’t have to play at the highest level, but you should at least know what it would take to be at the highest level. So if I’m playing hockey, I know how I can get better at hockey and I choose not to do some of those things. I choose not to go and shoot pucks. I’m a 43 year old individual. I don’t go into the garage and shoot pucks anymore. But guys in a beer league that I play with, some of them do and they outperform some of the other guys in the league, which is great. But the key piece though, I think, is knowing what I could do versus what I choose to do and decide how good of a player I want to be at the game that I’m currently in.

Jon Orr: So I think what you’re saying is that this person — now here’s the question — did he already know what moves in his game could optimize his performance and he’s just choosing not to do them, or he’s held back on doing them? He’s like, I know. Or was he going, Kyle, okay, you’ve convinced me that that game over there is not the game I can play and I have to stop comparing myself to that game — because that’s hard to do, right? Because you think the grass is always greener. So then it’s like, but tell me, how do I play this game better? Is that what he was asking? Or you got the sense it’s like, I know what moves to make, how to shoot. Was he asking about like which moves do I play, or is it more about like dude you already know the moves you’re just not doing them? And which means like if that’s the case then you actually have to just go — well, why not? And if you are committed to not playing the game that way, stop, please stop thinking you’re gonna get a better outcome.

Kyle Pearce: Well, and this is the really interesting piece. And I think this doesn’t matter which game you’re playing, by the way — not in the real world with sports, but in terms of your wealth planning, whether you’re incorporated or not, this applies in both scenarios. So it’s like I’ve got to understand the game. And in this particular case, I would say he’s got a pretty solid understanding of the game that he’s playing. So he’s got a couple of rental properties. They have some leverage on these rental properties, which is great. So there’s some tax efficiency going on there. He doesn’t necessarily need the rental income for income now. So creates an opportunity for them to take the dollars that they’ve leveraged out of those properties or haven’t had to put in through a down payment and put them in other places. Strong stock portfolios going on. They’ve utilized RSPs. Like a lot of really good things are going on here.

Kyle Pearce: So the really interesting part in this particular case was, you know, they knew what really their next steps are, but here’s what I find people are seeking most often. They’re seeking, how do I get better returns than maybe what I’m already getting? But then we do other things that sort of get in the way. So for example, if I’m return seeking, what often happens is people start to try to do things like, for example, we cut out fees from advisors. So he had taken a portfolio and now he’s DIYing the portfolio. In his case, it sounds like that advisory firm was only putting them in pretty much the same thing as DIY investors would do anyway. So they basically charged him a fee to put them in, like, you know, just a bunch of different index funds that, hey, you could do that yourself. There’s really no added benefit there to having that fee, so not a bad move.

Kyle Pearce: But in order to increase that return, we either have to consider taking on more risk, so that means I have to get more concentrated in something, and what is that something? Who knows — am I gonna go into private deals that I maybe haven’t researched, or am I going to do private lending, and hey, maybe I have to chase a borrower? These are all things that increase risk in order to potentially pump up returns. He wasn’t super favorable on that idea, which was great to hear.

Kyle Pearce: So the next thing that we can really do in this case is there’s really only two options. If we wanna see your net worth increase or to put yourself in a position to feel financially free sooner, you either need to earn more and invest it, or you need to consider looking around and saying, where can I be more efficient? And here’s the interesting part — there was a massive amount of equity in their primary home. And one of the biggest complaints they came in with was the tax issue. So they’re like, well, my buddy’s only getting taxed 12.2%, also not recognizing that he can’t spend that money personally at 12.2%. He’s got to get taxed on the way out as a dividend. So you’re going to get taxed there, taxed here, and you’re going to round trip be in a similar spot.

Kyle Pearce: Or what you can do is you could actually look around and say, hey, are there ways that I can become more tax efficient while also increasing my net worth at the same time? And ironically, he had said, yes, I had explored the Smith maneuver many moons ago. This was like 10 or 15 years ago. And I just straight up asked him, like, why didn’t you do it? And he didn’t really have an answer. And I think this is really important. And I also wanted to make sure he was clear, like there’s no judgment here because I learned about a lot of these things many moons ago as well. And I did not implement them, you know, for at least a decade. So the Smith maneuver, I knew all about it. And my first version of that was borrowing to buy more real estate, which felt safer to me at the time than, you know, investing in the stock market, let’s say.

Kyle Pearce: These are all things that are really important for us to sort of recognize and understand. But what I think he started to recognize is that, you know, by doing some of the moves that he’s made — for example, like, you know, cutting out the advisor on his investment portfolio and now doing it on his own — it actually slows his progress towards getting that comfort level to play the game at the higher level if he chose to do so.

Kyle Pearce: And what I sort of sensed with this individual, and we have a follow-up call booked here in a couple weeks time — what I sensed with this individual is like, they’re like, hey, I’m fine to like manage my DIY portfolio over here on my own, 100% confident there. However, I look over here and I think to the equity of my home, and we talk about this quite often, and for some reason that feels riskier. When you go like, can’t I take some money out of that property, some equity out of that property to add it to what I’m calling a very confident portfolio mix over here? It’s like, we’re suddenly not as confident anymore.

Kyle Pearce: And to me, that sort of shows that it’s like, you kind of know the game, but in a way it’s like — think about some of the athletes that are out there, if they want to get to a high level, oftentimes they’re working with people in the field, they’re working with experts to help them get to that place. I know I can run a marathon, it’ll be easier if I had someone helping me and sort of guiding me and mentoring me along.

Kyle Pearce: What the big takeaway was, you know, for this particular individual — and really like when we get down to it and boil it all down, I’m always trying to get to the real question, which usually is the same, which is like, why does any of this matter to you? Like, does it just bother you that you know, the government’s gonna like waste the money? Does it bother you? Like, do you need more money for life? So it’s like, I don’t really need more money for life. So like, so why does any of this matter to you? Like, why are you listening to the podcast? And many listeners here would probably agree that it’s like, you want to know and you want certainty that everything’s going to be okay, five, 10, 20, 30 years down the road.

Kyle Pearce: And that’s where this becomes really like a really hard game — is trying to get closer to certainty, but also feeling confident enough to do those moves. And that’s where I think someone like yourself is really helpful for a guy like me, where I’m just like this particular client where I’m always seeking certainty in the long run. I don’t need more cashflow now. I don’t need, you know, double digit returns every year. Like I don’t need any of those things. And I also don’t need to save as much tax as possible. But yet here I am still wanting to play this game at a high level and wondering, will it all be okay? 2030, however many years down the road.

Jon Orr: Yeah, yeah, because I think like when you say I want certainty, the issue here — and I think because that’s a main question we always get asked, is like, I want to have more confidence in where we’re going to go. I want to make sure I hit my numbers. I want certainty that I’m going to hit my numbers. But really, I think what’s happening with the certainty idea is that I want to make sure I’m not missing out on anything. Like I want to keep learning because maybe there’s a tweak. Maybe there’s a piece that gets me a little bit closer and I’m an optimizer. But really, the performing the optimization moves allows me to create more certainty. We’re not sure about that, right? We’re like, that could get me closer to my financial freedom numbers. But then I’m now less certain about that because I’m just learning about that.

Jon Orr: And I think the bigger takeaway that we all want, or we all need to think about is if I’m after certainty, if I’m after making sure that I’m not going to miss out on certain strategies or certain moves — think about it — ask less about certainty, because here’s something I’m going to tell you that you already know: you can’t get certainty. And if you do want certainty, go buy an annuity, get yourself a pension, like that’s what that is. But you’re going to sacrifice return. So that’s fine. And that’s the trade off you’re going to make. But if you’re not willing to make that trade off, then just realize that there is no certainty.

Jon Orr: There are moves that you can put into place, but also know that this is the part that people say about longevity — is that if you’re going to play the game for a long period of time, like you’ve got a good runway here, you’ve got 10, 20 years to work with, then in a way, it doesn’t matter the move you make. As long as you make a move and it’s consistent. If you make some moves that are consistent, a repeatable process, and you’re keeping on track with that — which means like, if you’re just dollar cost averaging into, you know, ETFs and index funds over that time, it’s gonna work. Like it’s going to work because of the commitment you’re making. But if you start changing and you’re playing around with optimization structures, then it’s not going to work.

Jon Orr: Like one of the things we talked about a few months ago was thinking about like, yourself — if optimization is ingrained in your blood, you know who you are, like you Kyle, like you want to continually explore. Am I not? And answer the question, I hope I’m not missing out on something. Then allocate a small chunk to allow you to create moves in that world. But then stick with the main move for the long haul. And then only start to shift some moves as you create repeatable habits in this little area over here that you feel more and more confident about, because that’s where you’re going to get certainty from. Certainty doesn’t come from one strategy, it comes from knowing the strategy well.

Jon Orr: And so that’s the part that I think we need to kind of think about. So if you rewind for this individual, he’s coming here going, I wanna make sure I’m not missing out. I was comparing myself over here. I gotta stop comparing myself over here. I gotta focus on what I can achieve. And now I have to decide on what is the move that I can be consistent with most, knowing I wanna get to my financial freedom number. And if it is this move, if it is the Smith maneuver, or maybe I can use some sort of cash damming partly, like wherever I can be putting this move into place, commit to it and commit to that part and go, that’s what I’m going to do for the next 20 years or 15 years. And it will be okay as long as you stay with it. And that’s the big picture, I think, for this individual.

Kyle Pearce: I think it’s so key and I think, you know, one of the other aspects that I think makes this so challenging for us as well is that over time we become different people, like, and it’s — we evolve, you know. And my wife says, thank goodness you evolved, you know, since I met you back when you were 18. It’s like, if I didn’t evolve from the guy I was back when I was 18, she probably wouldn’t be super — you know, maybe she wouldn’t be here with me anymore. Right. So it’s like, you know, I’ve evolved into a different person.

Kyle Pearce: And the same is true for your financial path. And this is what makes it so tricky and so challenging — it’s impossible for us today to know exactly who we’re gonna be five, 10, 15, 20 years from now. And for our business owner friends, it’s also hard because we also don’t know how business is going to go, right? Like there’s less certainty there. I know nowadays more and more T4 employees, people that are working for companies, you know, there is less certainty than there was, you know, back when my parents were working for companies, right? Where you go and you stay at one company and you get your pension and you move on.

Kyle Pearce: You know, ultimately at the end of the day, I loved your suggestion — like you can buy some certainty for some things, but there is a cost to it. So I can promise you this: if you were to buy a pension by buying an annuity at some point in the future, your rate of return on that is going to be very, very low. And so you have to decide at some point what — and I like to set little mini goals and sort of say like, how much money or how much cashflow do you think you’re going to need at a minimum? Like what’s going to be your base case? Like if I really mess this thing up — that’s what I want or need, for most people that’s not just CPP, it’s not just OAS, it’s like more than that, right? Like you need something more. So what is that number where you’re like, yep, I could make ends meet there and I’m not gonna be out on the street and whatever, like, so you can get that comfort, that confidence. And maybe you might have to reserve a portion of your portfolio for that confidence — like if it’s gonna help you sleep at night, everyone’s gonna be different.

Kyle Pearce: For other people, they’re just maximizers. I think a lot of us think we’re maximizers. I’m an optimizer in that I want to know the game. And like I had said, if we go all the way back to the beginning of the episode, it’s like, I want to know exactly what I could do. But then I start to recognize that I actually don’t want to do all of those things, right? And maybe I don’t want to play the game at the highest level.

Kyle Pearce: And I think, you know, for everyone listening, you’ll notice a lot of our content — we’ve got a new YouTube video up right now that is specific about investor personalities. We’ll put that in the show notes on the episode so you can click on that link. Everyone is different and therefore it makes it really complex when we try to find, say, the answer for each and every one of you. You’ve got to find some of that within yourself and that’s really what we’re here to do. Like we’re here to help you, guide you, give you ideas. But you’ll notice something about our model when we’re working with clients. First and foremost, we are education first. So we are working on helping you to understand the game, but then you get to decide what kind of player you want to be. And we’re not here to tell you that this is better than that. I can tell you from a returns perspective, what is better than what based on averages, but I can’t tell you what’s going to be better for you to help you sleep at night.

Kyle Pearce: Now, usually I can help you recognize that by what I’m hearing from you. So this is something that’s really important. As you’re working through your own plans here, you know, there is — the answer always lies somewhere in the middle. You know, everyone’s going to be different and that means your plan may be different. And I think this is what also makes it challenging is that we want to find and we want to, you know, get affirmation from other people that like what we’re doing is the right move. And the problem is that not everyone is — it’s not gonna be the right move for everyone else, but it doesn’t make it necessarily wrong for you. So that’s a really tricky place to be in. And that’s where we’re here to try to help guide you along the way.

Kyle Pearce: Because I would argue, you know, John, you’re process oriented, you can like put your head down and you’re just like follow the process and it’s gonna be okay. Smith maneuver, guys like you — Smith maneuver is like just obvious, you know, you’re like, that’s easy. You know, you’re not losing sleep over it. A guy like me, I’ve got to be much more methodical. I’ve got to like convince myself. I’ve got to remind myself of things on some of these moves and everyone’s going to be different. It doesn’t make you better or worse, but the key is going to be, are we putting the right tools in place? The right pieces to build out the puzzle that you want for your financial future.

Kyle Pearce: And I would argue that if you feel like you’ve got these pieces on the table, which most people do that we chat with — you’ve got pieces there, you know, you’ve got the right pieces, they’re kind of there, but you’re not exactly sure what that puzzle should look like at the end. That’s exactly who we love helping out when we hop on a free strategy call. So we would definitely encourage you to hit a link around this video somewhere down in the description and book yourself a time to chat.

Jon Orr: Just a reminder, the content you heard here today is for informational purposes only. You should not consider this information as legal, tax, investment, or financial advice. Kyle Pearce 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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