TriDelta Investment Counsel Q3 Report – Time to Visit the U.S. Markets

Executive Summary

18011768_sWhen looking at interest rates, currencies, real estate risk, Oil and the overall economy, the Canadian market is looking weaker than the U.S. market.

We believe, in particular, that real estate risks are much higher in Canada than the U.S., and it is playing an important factor in our investment philosophy.

As a result, we have lower Canadian stock weightings than we have ever had, but remain quite positive about other investments – including U.S. stocks – where we feel we will benefit from currency gains and some post election strength assuming a Clinton victory.

How did TriDelta do in Q3?

The third quarter was a pretty solid period, with most TriDelta clients up between 2% and 3.5% on the quarter. 

The TSX was up 5.5% and the S&P 500 (U.S. Market) was up 4.7% in Canadian Dollars.

The Canadian Universe Bond Index was up 1.2%.

Highlights for TriDelta clients included the TriDelta High Income Balanced Fund which was up 5.8% and our Preferred Share portfolio which was up 6.5% and meaningfully outperformed the index.  Our overweight positions in corporate bonds with long terms to maturity led to some solid outperformance on our bond portfolios as well.

Of interest, in such a strong quarter, even solid Alternative Investments that have delivered 8% annual returns, would have ‘hurt’ performance by returning about 2%, but helped reduce portfolio volatility.

Our more conservative clients have continued to have a stronger performance this year overall than our growth oriented clients.  There will, of course, be a time when this reverses itself, but the trend has continued.

For TriDelta, we aim for lower volatility in all markets, and as a result, the highs may not be as high in good markets, and the lows should not be as low in bad ones.  Q3 is a good example of this.

Where we see things headed

Real Estate

We have some heightened concerns on Canadian real estate – in particular in Vancouver.  The impact of a decline in Vancouver real estate prices could be reasonably contained to BC, or could spread to impact real estate across many markets in Canada.  The reason for this concern is a combination of events.  The foreign buyers tax in BC has slowed sales dramatically and will hit the higher end market.  The tightening of mortgage rules will likely dampen increases in the lower end.  At the same time we are seeing all the signs of a traditional market bubble (an outsized run up in prices while there are many empty houses and condos – owned by investors).

Either with a local Vancouver or broader Canadian decline, the impact won’t be great for the overall economy.  It has put a damper on our view of the Canadian stock markets. 


While a rally in oil was driven off of hopes of increased cooperation from OPEC, there are still many factors keeping a lid on prices.  One of the biggest issues is that even with a glimmer of co-operation, OPEC is not able to truly work together in an environment where key players Saudi Arabia and Iran are at such odds.

Other factors include:

*Global economic growth isn’t sufficient to pull demand higher, and

*U.S. oil supply is standing at the ready to increase if prices move high enough.

As a result, we don’t see strong improvements in Oil, certainly not to the degree that would help Canada see higher growth.

Interest Rates

With slow growth from Oil, concern on real estate price declines, and a general lack of growth in Canada, Bank of Canada Governor Stephen Poloz announced that they were much closer to lowering rates than raising them.  This is a very clear indicator that Canadian interest rates are not at risk of going up any time soon, and have some chance of declining in the near term.

The investment impact of this is that higher income investments will continue to be in favour and remain overvalued from a historical perspective for the foreseeable future.

In the United States, it is likely that they will finally raise rates in December post election, after having raised them once in 2015.  Having said that, there does not seem to be much momentum behind sizable rate hikes.  This could be another ‘one and done’ rate hike, which will keep the U.S. in a very low interest rate environment.

Canadian Dollar

Lower real estate, range bound Oil prices, widening interest rate gap between Canada and the U.S., all suggest that the Canadian dollar will see declines in the coming months – possibly back to the low 70s.

If you are in need of U.S. dollars for winter holidays, we would suggest buying now.

From an investment perspective, it encourages us to be more exposed to U.S. dollars.

U.S. Presidential Election

We believe that this will largely be a positive in the markets. It looks increasingly likely that there will be a new President Clinton in the White House, and that there will be fewer surprises ahead than the uncertainty that a Trump Presidency would bring.  Markets will appreciate a little more political calm than it has seen for much of this year.

Overall Impact on our investment portfolios

The above views lead us to a few investment actions.

  • Our Canadian equity weighting is now at our lowest level – in the 30% range. As a Canadian firm, we recognize that there is a natural bias to owning Canadian stocks.  There is no currency risk or costs.  There is a tax advantage with Canadian dividends.  We are all familiar with the investment names and nuances of the Country.  For those reasons we will always have Canadian exposure, but after a period where the Canadian market was among the best performers in the world for much of 2016, we believe there are some better opportunities outside of Canada at the moment. 
  • We do believe that there are better options in stock markets in the U.S, and feel that the currency will be at our back to support overall returns. We will maintain high U.S. equity exposure.
  • We are maintaining bond and preferred share weightings as we can see a long period of low rates ahead. While this isn’t great for yields, low or declining interest rates are generally good for bond prices.  It is a useful reminder that the Canadian bond universe has averaged almost 6% returns over the past 3 years.  High yield bonds should outperform in this environment, and we are keeping a higher than normal weighting in this area.  We also have a little more exposure to US$ bonds than we have had in the past to take advantage of currency moves.
  • We continue to like Alternative income investments in a low interest rate environment, and will seek to opportunistically add to clients positions.

Dividend Growth Check

As we do every quarter, we check on dividend growth among our holdings.  This quarter saw 8 dividend increases with no declines.  The largest 4 were all U.S. companies and the fifth was Restaurant Brands International – which is Tim Horton’s and Burger King.

Intuit +13.3%
Mondelez +11.8%
Yum Brands +10.9%
Altria Group +13.3%
Restaurant Brands +6.7%
Bank of Nova Scotia +2.8%
RBC +2.5%
Verizon +2.2%

There seems to be a feeling of doom and gloom in some areas, and we believe that this may be overstated.  Having said that, we believe that the U.S. will be a better place than Canada for near term investment, in part as the Canadian dollar is prone for some declines.

Other points of optimism, in the U.S. markets the 3 month period from November 1 to January 31 is the best performing 90 days of the year.

One last positive thought.  Based on Ned Davis research of the Dow Jones Industrial Average from 1900 to 2008, you can see that if the incumbent party wins, the Dow Jones average has returned an average of 15.1% in the year following the election.  You can ignore the bottom two lines if you want to remain positive.

Time Period – 12 Months Following

Average Return for the DJIA

President Election Years Overall


Incumbent Party Wins


Incumbent Party Loses


If Democrat Wins


If Republican Wins


May the beautiful colours of the Fall give hope to us all.


TriDelta Investment Management Committee


Cameron Winser

VP, Equities

Edward Jong

VP, Fixed Income

Ted Rechtshaffen

President and CEO

Anton Tucker

Exec VP and Portfolio Manager

Lorne Zeiler

VP, Portfolio Manager and
Wealth Advisor

FINANCIAL FACELIFT: Can travel plan blossom if she works part-time?


Below you will find a real life case study of a couple who are looking for financial advice on when they can retire and how best to arrange their financial affairs. The names and details of their personal lives have been changed to protect their identities. The Globe and Mail often seeks the advice of our VP, Wealth Advisor, Matthew Ardrey, to review and analyze the situation and then provide his solutions to the participants.

Written by: DIANNE MALEY
Special to The Globe and Mail
Published Friday, Oct. 14, 2016

At age 39, Barbara and John are mortgage-free with money in the bank, good professional jobs, a young child and a strong desire to see the world.

John earns about $97,000 a year, while Barbara brings in $39,120, on average, working part-time. They wonder whether she can continue to work part-time until John semi-retires at age 55, and then spend the next 15 years travelling the world together and working part-time.

“We think the world is going to change and travel will become an extreme luxury item,” Barbara writes in an e-mail, adding, “international travel will not be a valid option after 70.”

fotolia_119537068_xs2The Ontario couple have already given in to their wanderlust, travelling extensively over the past two years, but they realize they have to pare back a bit. They need to do some work on their house and save for their daughter’s postsecondary education.

“Are we okay if Barbara works part-time from now until full retirement at age 70?”

We asked Matthew Ardrey, a vice-president and financial planner at TriDelta Financial in Toronto, to look at Barbara and John’s situation. Mr. Ardrey holds the certified financial planner (CFP) designation.

What the expert says

First, Mr. Ardrey looked at the couple’s short-term financial goals. They want to spend $18,000 in 2017, $6,000 in 2018 and $6,000 in 2019 on travel, plus $10,000 for new floors in 2018 and $10,000 for a new furnace and air conditioning unit in 2019. They show a surplus of $20,700 a year, more than enough to cover these expenses. “So there is no need for Barbara to work more hours to cover their short-term spending needs.”

When they semi-retire at age 55, they plan to spend $60,000 a year after tax in today’s dollars, close to what they are spending today after savings are removed, Mr. Ardrey says, plus an additional $20,000 a year in today’s dollars on travel.

John is saving 4 per cent of his income, plus a 4-per-cent matching contribution from his employer, to his defined-contribution pension plan, adding $2,400 a year to his tax-free savings account and $7,200 a year to his registered retirement savings plan. Barbara is contributing $6,000 to her TFSA and $1,200 to her RRSP. The planner assumes all savings end when they semi-retire.

They will both receive Old Age Security at age 65 and Canada Pension Plan benefits at age 70. John will get full CPP, but the planner assumes Barbara will get 70 per cent of the maximum. He further assumes a rate of return on their investments of 5 per cent, an inflation rate of 2 per cent and that they will both live until the age of 95.

Based on these assumptions, the couple will be able to meet their retirement goals, Mr. Ardrey says. They would leave an estate of about $800,000 on top of their real estate and personal effects.

But a couple of items need to be addressed, the planner says. The first is budgeting and saving. After the large expenses are addressed in the next few years, they will have a budget surplus of $30,000 a year.

“They should take a good look at their budget to ensure this surplus is really there because their ability to make large expenditures without taking on additional debt depends upon it,” Mr. Ardrey says.

If they do have a big surplus, “it would be good to save at least half of it to their TFSAs and RRSPs.”

The second item concerns the investment costs they’re paying. For their assets outside of John’s defined-contribution plan, they are investing in mutual funds, which can come with high fees. “Depending on the level of service and planning this couple is receiving, those costs may or may not be justified,” Mr. Ardrey says.

To illustrate how these suggestions could make a big difference, the planner ran a second retirement plan. In it, John and Barbara increased their savings by $15,000 a year until they semi-retired and lowered their cost of investing by half a percentage point a year. It could make a big difference. “Their estate, excluding real estate, would more than double to about $1.98-million.”

Meanwhile, to fully cover their daughter’s postsecondary education costs, assumed to be $20,000 a year in today’s dollars, John and Barbara will need to increase their education savings by $175 a month from now until their daughter is 18. As it is, they will only cover about 70 per cent of this cost. Finally, he suggests they both take out disability insurance.


The people: Barbara and John, both 39, and their daughter, 6.

The problem: Can Barbara continue to work part-time without jeopardizing their long-term travel plans?

The plan: Once short-term expenses are paid, review spending to get a firm handle on surplus. Consider saving half of it to RRSPs and TFSAs. Review investment fees.

The payoff: A clear road map to their financial destination.

Monthly net income: $8,445

Assets: Cash $7,160; her TFSA $5,090; his TFSA $31,440; her RRSP $154,185; his RRSP $107,440; his DC pension plan $51,220; RESP $22,960; residence $350,000. Total: $729,495.

Monthly disbursements:
Property tax $310; utilities $180; home insurance $70; maintenance, garden $190; transportation $485; groceries $750; child care $250; clothing $360; gifts $220; charitable $130; vacation, travel $325; other discretionary $500; dining, drinks, entertainment $365; grooming $50; pet $100; sports, hobbies $250; doctors, dentists $150; life insurance $45; cellphone $17; Internet $60. RRSPs $700; RESP $210; TFSAs $700; his pension plan contributions $300. Total: $6,717. Monthly surplus: $1,728.

Liabilities: None.

Want a free financial facelift? E-mail

Some details may be changed to protect the privacy of the persons profiled.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
(416) 733-3292 x230

If your retirement security is built on your home, now might be the time to sell



If you’re a homeowner thinking about leaving work in the next few years, it may be time to cash in your lottery ticket (also known as your house) and trade it in for a comfortable retirement.

Across the country, but specifically in Vancouver and Toronto, the growth in house values has reached the point where, for many retiree homeowners, their house is by far their largest asset. It is not uncommon to see 75 per cent of someone’s net worth tied up in their home.

As a certified financial planner those stats make me nervous — especially if the person in this situation is a retiree. Here are five reasons why:

1. Concentration risk. If an investment portfolio is too heavily weighted in one sector, we can see the risks. For example, if you owned 30 per cent or more in energy and materials in 2014 and 2015, you were hurt badly. Now, what do you say about someone who has more than half of their entire net worth in residential real estate on one street in one city? That is a very high level of concentration risk.

2.buysell When house prices fall, recovery is very slow. In 1989 Toronto house prices dropped after a big rally. It took 13 years for prices to recover. When adjusted for inflation it took 20 years to recover! As a retiree, do you have 13 or 20 years to wait? The previous spike in Toronto took place in 1974. In that case it took 12 years to recover when adjusting for inflation. Predicting the fall of house prices has been a losing bet for several years, but when home prices start to fall, it can take many years to recover. You don’t want to be forced to sell at a time when prices on your biggest asset are down.

3. Uncertainty. Most people want as much certainty as possible in their retirement and estate planning. If you want very low risk on an investment portfolio, it isn’t that difficult to count on an average return of four per cent. The lower the risk, the lower the volatility. With house prices, you have no control. The value of your home could go up 10 per cent, go up five per cent or go down 10 per cent, and as a homeowner you simply ride the wave. If you want more certainty over your financial future, sell your house and put together a low risk portfolio.

4. Debt. This may not be an issue for some, but for those with debt on their home in retirement, there is an added risk. Today, the borrowing cost is very low, but IF housing markets turn down, it will likely be in part because borrowing costs have gone up. That combination of higher costs and lower equity can have a big impact on a retirement plan.

5. Maybe housing prices ARE overvalued. I am not in the real estate prediction game, but some pretty smart people (including economists with the OECD and IMF) are warning that real estate prices in Canada are overvalued by 30 per cent or more. In Vancouver, a house selling for $1.8 million today was selling for $1.2 million just two years ago. What if the house prices “crashed” to where they were just 24 months ago? That would take $600,000 out of your retirement nest egg. I know they have been saying it for a while, but at some point they will be right. If you are 45, then you might be OK riding out that storm and still selling at a great price in retirement. If you are 65 and thinking of downsizing anyway, that isn’t a storm you want to weather.

Despite all of this, from a pure financial standpoint, I can think of one very good reason to stay fully invested in your home. The benefit is tax. There is almost nothing in Canada today that is as good a tax shelter as your principal residence. Remember that 100 per cent of the capital gains in your home are tax-free. Having said that, keep in mind that this large benefit is only of value on gains. There is no tax benefit to losing money on your principal residence, but cashing in a big capital gain tax-free certainly sounds pretty good.

So, if you are feeling concerned about having too many eggs in the real estate basket, what are your options?

1. Sell and rent: While many don’t like the idea of renting after many years as an owner, from a financial perspective it can end up costing you very little when you subtract all of the real estate taxes and capital expenses that you regularly had to put into your house.

2. Sell and buy something much cheaper in the same city: This will allow you to cash out a good percentage of your lottery ticket while still owning property and benefiting from the tax advantages. One of the challenges with this one is that you will need to pay an extra set of real estate commissions, land transfer tax, etc.

3. Sell and buy less expensive property in a completely different location: This can be the move to cottage country, somewhere warmer or closer to grandchildren (as long as they don’t live in Vancouver or Toronto).

When it comes to your home, there are lots of opinions floating around and nobody has the perfect answer. However, when it comes to your retirement, if you are relying on something that many people say is 30 per cent overvalued today, now might be the time to reduce or eliminate that big risk.

Ted can be reached at or by phone at 416-733-3292 x221 or 1-888-816-8927 x221

Reproduced from the National Post newspaper article 12th September 2016.

CPP – When is the Right Time for You to Take It?


CPP is the one defined benefit pension plan that every Canadian employee receives, so it is not surprising that I am often asked about when is the right time to take it.

I was asked about my thoughts on this very question by MoneySense Magazine.

This article expands on those thoughts and reviews when it is the right time to start receiving your CPP.

Is it better to take CPP at 60 or 65?

To answer this question, let’s take a look at the math, assuming the maximum pension is received either at 60 or 65. Based on the reduction factors for taking CPP early, the pension is reduced by 0.6% per month, or 7.2% per year, to a maximum of 36%. Ignoring the effects of inflation, the cumulative payment of CPP at 65 exceeds that at 60 around the age of 74. Putting it simply, if you live past age 74 you are better off taking CPP at 65 than 60.


If I stop working at 60, should I take CPP at 60 or 65?

Again let’s take a look at the math behind this analysis. CPP works like a fraction with 47 years between ages 18 to 65. This is your denominator (bottom of the fraction). The numerator (upper part of the fraction) is based on your work history. You receive a “one” for every year you maximize CPP and a “zero” for every year you do not contribute at all. The rest of the years get a percentage between one and zero. These are added up and divided by 47 to get your percentage of maximum CPP payable.

However, the calculation does not end there. Everyone is entitled to the general dropout provision, which allows you to drop your eight worst years automatically, making the CPP fraction out of 39 not 47. For example, consider you retire at 60 with eight years of zero CPP contributions. You would receive the maximum CPP at age 60. If you wait until age 65, you will have five years with zero contributions. To determine which option is better, you only need compare the reduction in CPP. If you take it at 60, you will have a 36% reduction in CPP. If you take it at 65, you will have five zero years and a 13% reduction in CPP (100 – 34/39). Ignoring the effects of inflation, the cumulative payment of CPP at 65 exceeds that at 60 around the age of 78 in this example.


What other things can I do to maximize my CPP?

Other than the general dropout provision, which is automatically given to everyone, there is also a child-rearing dropout provision. The child-rearing dropout provision allows the primary caregiver to drop up to seven years of CPP contributions, following the birth of a child, that have earnings less than the maximum. If multiple children are born there may be some years which overlap. These can only be counted once. Unlike the general dropout provision, you must apply for the child-rearing dropout provision

You may share your CPP with your spouse or common-law partner. The portion of the pension that is available to share is based on the number of months you cohabitated while eligible to contribute. To share your CPP, both of you must be eligible to receive CPP and apply for it. This measure does not change the total amount of pension received by the couple; rather, it changes who the pension is paid to and subsequently how it is taxed.

What other considerations should factor into my decision?

What other sources of income do you have during the years you will not be receiving CPP. For many people the decision to defer CPP to 65 is no decision at all, as they need the pension to cover their everyday costs of living.

If your spouse or partner is much older than you, you may benefit from having the extra income now to enjoy with them. Your expenses will potentially decrease as your older spouse can no longer enjoy these activities or passes on.

How does your income compare to the OAS and GIS thresholds. By taking the CPP earlier, it may keep you below these thresholds in the future.

It may be beneficial to defer taking the CPP if you have RRSP assets to draw upon and no other income. You can draw down your RRSP and lower tax rates and the overall lower balance in the RRSP will reduce your future RRIF payments as well.

If your family has a history of longevity, you should include that in your decision. All other things being equal, the longer you expect to live, the more you should lean towards deferring.

The math favours waiting until age 65 to take your CPP for many people today. If you can afford to do so, it is preferable. That being said, you need to look at your personal circumstances and how this choice will affect you and your lifestyle. There is no single answer that is right for everyone.

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
(416) 733-3292 x230

Record debt levels only bad if you’re using the money wrong


ted_bnn_15sep16cTriDelta President Ted Rechtshaffen appeared on BNN TV as a guest speaker to discuss the implications of Canadian household debt levels at new highs.

Ted Rechtshaffen
Posted By:
Ted Rechtshaffen, MBA, CFP
President and CEO
(416) 733-3292 x 221

Financial Facelift: Couple with high incomes needs tighter budgeting to meet their goals


Below you will find a real life case study of a couple who are looking for financial advice on when they can retire and how best to arrange their financial affairs. The names and details of their personal lives have been changed to protect their identities. The Globe and Mail often seeks the advice of our VP, Wealth Advisor, Matthew Ardrey, to review and analyze the situation and then provide his solutions to the participants.

Written by: DIANNE MALEY
Special to The Globe and Mail
Published Friday, Sep.02, 2016

Rose and Ron are feeling squeezed financially despite their high income. Ron, who will be 37 this year, makes $120,000 a year in marketing, while Rose, who will be 40, earns $175,000 working in the health-care field. But they want to renovate their basement and send their children to summer camp. Then there’s the $2,890 a month in child-care expenses and the $2,600 a month in mortgage payments.

They have two children, ages 5 and 2. Their expenses – which they track loosely – seem to eat up nearly every dollar they make.

“How do we put aside enough money for both our kids’ education and our RRSPs while still meeting our monthly obligations?” Ron writes in an e-mail.

“Currently, we do not save any money each month for emergency funds,” Ron writes. “I’m worried that if we have a major home issue, we won’t be able to cover the costs,” he says. “How do we curb our spending? It feels like there’s a never-ending stream of expenses.”

Earlier this year, Rose set up a professional corporation. “With the corporation, how would it be best to shelter income and withdraw it when needed?” Rose asks.

We asked Matthew Ardrey, a vice-president and wealth adviser at TriDelta Financial in Toronto, to look at Rose and Ron’s situation. Mr. Ardrey holds the certified financial planner (CFP) designation.

What the expert says

Fotolia_76895572_XSaThe couple’s three short-term goals are mostly in hand, Mr. Ardrey says. They have borrowed against their house to pay for the basement renovation. With a rate of 2.2 per cent a year and payments of $1,200 biweekly, their $170,000 mortgage will be paid off in five years.

As for retirement savings, Ron and his employer contribute to Ron’s defined contribution pension plan, so he has no extra RRSP room. Rose’s corporation offers a more tax-efficient way of saving for retirement than an RRSP, but more about that later.

They are saving about $2,000 a year to their children’s registered education savings plan (RESP), mainly through gifts. If they top this up to the annual maximum of $5,000 for their two children, they will have enough to pay for a four-year degree for each child, assuming an annual education cost of $20,000 a year for each child, adjusted for inflation, Mr. Ardrey says. “As there is no surplus in their budget, these savings will need to come from a reduction of other expenses.”

As well, they would like to raise their travel budget to $1,000 a month and send each child to summer camp starting when they reach Grade 1. The eldest starts two years from now. The cost initially is $2,500 for Grades 1 and 2, and escalating from there as the children get older.

“By the time they have both children in camp, they will have paid off their mortgage and the funds will be readily available without any further budget constraints,” Mr. Ardrey says.

A major concern for the couple today is budgeting. They have a lifestyle with more than $3,000 a month in discretionary spending alone, plus $1,000 a month in travel costs, the planner says. To achieve all of their short-term goals, they will need to make some adjustments to the expense side of their budget or find a way to increase their income. “The crucial years will be the next five until the debt is paid off,” Mr. Ardrey says. “As they are tight against their budget, they will need all of Rose’s income from the corporation to make ends meet.”

Rose can take dividends instead of salary from her corporation, which will save some tax. Her children (in trust), husband and mother are also shareholders. She might also be able to pay dividends to her mother (depending on her mother’s income), which could further reduce her tax bill.

After five years, when the mortgage debt is paid off, Rose will be able to reduce her draw from the corporation by $50,000 a year and they will still be able to meet their budget, Mr. Ardrey says. This will allow these funds to be taxed at the lower tax rate of a CCPC (Canadian-controlled private corporation) and accumulated for retirement inside the corporation.

When Rose retires, these savings will create a future dividend income stream of $65,000 per year, assuming equal payments from her corporation starting when she retires at 65 and lasting until she is 90. At that time, Rose should look at the income of her adult children to determine if there is any tax advantage to paying them the dividends instead of her, the planner says. “She would pay their reduced tax bill and then take home the larger after-tax income amount.”

When they retire, the planner assumes Rose and Ron will begin collecting maximum Canada Pension Benefits at 65. Their Old Age Security benefits will be clawed back because of their high income. He assumes the rate of return on their investments is 5 per cent a year and the inflation rate that affects their expenses is 2 per cent. He further assumes that they both live until the age of 90.

They plan to spend $85,000 a year in retirement, very close to their spending today once savings, debt repayment, child care and travel expenses are removed, Mr. Ardrey notes. They would like to spend an additional $20,000 a year on travel, inflation adjusted, in today’s dollars, from when Ron retires till he is 80.

Based on these assumptions, they will not only meet their retirement goal, but have a substantial financial cushion. They currently have retirement investment assets of about $1.4-million, and with contributions and growth over the next 25 years those assets will grow to more than $6.5-million, the planner says. They will be able to spend $178,000 a year in current year dollars on an inflation adjusted basis over and above their travel budget. In addition, at the age of 90 they will still own their house.

There are some risks to consider, Mr. Ardrey says. The first is job loss. Though Rose, as a medical professional, wouldn’t likely lose her position, it is conceivable that Ron may lose his job. If that happens it may have a significant effect on their financial plan. Next is insurance risk. Rose has a healthy amount of coverage at more than $2-million, but Ron’s is much smaller at $652,000.

He also suggests some changes to their investment portfolio, which is 28 per cent in cash and 45 per cent invested in Canada. A better approach would be to shift their cash into fixed-income investments and diversify their equity holdings geographically.

Finally, the planner explores how to get funds out of Rose’s corporation tax efficiently. Because the corporation has multiple classes of shares, Rose and Ron can allocate dividends to themselves or their children. Providing dividends to adult children is one way to pay for education or other expenses tax efficiently, Mr. Ardrey says. Once the child is an adult, the attribution rules no longer apply. Thus, dividends can be paid to the adult child directly when they are in a low tax bracket.

Insurance can also be a useful tool, Mr. Ardrey says. Rose could insure her mother on a policy paid for and owned by the corporation. The policy benefit would be paid to the corporation tax-free. Any amount in excess of the adjusted cost basis would be credited to the capital dividend account (CDA) in the corporation and the funds in the CDA could then be paid out tax-free to the shareholders. If Rose’s mother is in good health, this policy would likely pay out close to Rose’s retirement. “This would provide her with a lump-sum, tax-free payment at or near retirement,” Mr. Ardrey says. “This is one of the most tax-efficient ways to get money out of the corporation.”


The people: Rose, 40, Ron, 37, and their two children.

The problem: How to deal with short-term financial pressures and still save. Longer-term, how to take best advantage of Rose’s corporation to shelter tax.

The plan: Look for ways to cut spending now. Use corporation’s share structure to make dividend payments to adult children to help cover higher education costs. Consider using an insurance policy to generate tax-free income for Rose. Review insurance and investments.

The payoff: All their goals achieved with plenty of money to spare.

Monthly net income: $15,250

Assets: GICs $72,000; equities $899,000; his TFSA $61,000; her TFSA $30,890; his RRSP $166,000; her RRSP $188,000; market value of his pension plan $40,300; RESP $37,400; residence $882,000. Total: $2.4-million

Monthly outlays: Mortgage $2,600; property tax $580; water, sewer, garbage $70; property insurance $108; electricity $150; heating $145; security $35; maintenance $250; garden $400; transportation $560; groceries $1,250; child care $2,890; clothing $150; gifts $20; vacation, travel $750; dining, drinks, entertainment $880; miscellaneous shopping $250; grooming $250; sports, hobbies $125; subscriptions $15; uncategorized personal spending (children’s activities, house cleaning; gifts, vet bills) $1,500; dentist, drugs $70; vitamins $35; health, dental insurance $100; life insurance $475; disability insurance $250; cellphone $65; Internet $65; TFSAs $900; his pension plan contributions $350. Total: $15,288

Liabilities: Mortgage $170,000

Matthew Ardrey
Presented By:
Matthew Ardrey
VP, Wealth Advisor
(416) 733-3292 x230