This Alberta couple has all their children 's education cash in cannabis stocks. What could possibly go wrong?



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Situation: Three kids, three rental properties and a lot of pot stock in portfolios

Solution: Sell ​​rentals, build rsps, tfsa, diversify, cut off income

In Alberta, a couple we will call Emily, 40, and Robbie, 37, are relying on three children for a combined $ 11,447 additional monthly income. Their futures are tied to three rental properties in their city and to their Canadian and US portfolios. There. Stock, many of which are not for the faint of heart. They would like to retire when Robbie is 50 and Emily is 53, then lives half a year in a warm spot far from Canada's winter. Their target is $ 4,000 per month additional tax in 2019 dollars.

(Email [email protected] for a free family financial analysis.)

Family Finance requested Owang Welmolen, a service service financial planner fee, which copies of PlanEasy.ca in London, Ontario, to work with Emily, an occasional health care professional, and Robbie, who manages computer networks.

Lack of diversification

Robbie and Emily have made a big bet on Alberta real estate, all in their own city. Their house plus local real estate investments amount to 70 per cent of their assets in their Rsps and TfSA portfolios. That's a concentrated allocation to one sector in one city in one province.

Not only are the three income properties exposed to rising interest rates, but they are also negative funds. After mortgage payments, property taxes and insurance costs are taken off rental income, they are losing $ 74 per month. Higher mortgage rates will increase the cash loss, planner estimates. Even if the forced savings part of the mortgage, that is, repayment of capital apart from interest, is reflected in these properties having a return of only 2 per cent to 4 per cent.

Reallocating assets

If their three investment properties are sold, then after sales costs of 5 per cent and a $ 9,000 reserve for estimated capital gains taxes, they would have about $ 310,000 in cash left for investment. Some may go into their Tfss to fill space and the remainder can be shifted to RSPs and other savings, including the three children who have a present weight of $ 38,000. When earnings from sales are combined with current financial assets, the family would have $ 921.000 of investment assets with 60-70 per cent in tax-sheltered accounts, the exact amount dependent on their RRPs and TFSA space.

There is an advantage to selling the rental properties. If they sell the properties and then invest as much of the solution as they can in RSPS and TFSA, they'll see a fall in nominal tax revenue. The remaining income and proceeds of the sale can be directed to sheltered accounts. With less frequent income, they may be able to get a larger sum of the Canadian child benefits, Wangmelmolen says.

Emily and Robbie have $ 38,000 in their family res. Although they have suspended contributions, they will be able to provide post-secondary support for their three children, aged 12, 6 and 3. There is a total of $ 120,000 for four years of post-secondary education. If they add $ 2,000 per child per year to the base for every child's age 17, perhaps through kisses in travel and restaurants and eventually reduced childhood care, each would also receive a $ 400 annual Canada Education Savings Grant, the Less than 20% of contributions or $ 500. Each child can have about $ 57,400 for tuition, books, and so forth.

Currently, the RESP is almost quite invested in merijvana stocks. It is bald, but the portfolio is not only diversified, it is their risk that the industry is not even well defined. Robbie and Emily should extend their holdings, suggest Winkelmolen. Adult industries, financial, utilities and small-scale government bonds would cut risk.

Retirement income

Emily and Robbie have $ 422,000 in their Rsps. If they support $ 19,850 a year for their repressions for the next 13 years to Robbie's age 50, then assuming 3 per cent growth after inflation, these accounts will hold $ 929,750 in 2019 dollars and support $ 39,050 per year for the next. 90 years of age 90.

Perhaps they sell the investment properties, they will be able to increase the TFSA contributions by $ 11,000 a year for the next 13 years. If the accounts grow at 3 per cent after inflation, they will have about $ 177,000 in the accounts. That amount, still generating 3 per cent a year after inflation, would support $ 7.435 a year for 40 years for Robbie's age 90.

That's $ 126,000 in Robbie's company defined contribution allowance. He will receive $ 6,189 a year from his employer each year, based on 5 percent gross salary before tax. If the amount grows at 3 per cent after 13-year inflation, it will be $ 284,600 and, after growing at 3 per cent, inflation will pay $ 11,953 a year for the next 40 years in 2019 dollars.

After selling investment properties and investing in tax-retained accounts, they would still have $ 188,550 left in non-registered accounts. Assuming they shift $ 11,000 a year to their TFSA and if their non-registered accounts grow at 3 per cent per year after inflation and pay 1 per cent tax, net 2 per cent growth, and in 13 years they would keep $ 405,500 in 2019 Dollars, anglemalolen calculates. That amount, growing at 2 per cent per year after inflation and tax, would support $ 14,532 a year for Rabbis' 90-year olds for 40 years.

Adding these pieces, in the 15 years of age: 50 to his age 65, he and Emily would have the cash flow of $ 72,970 of inflation-adjusted income. Allowing for a 15 percent average tax rate, they would spend $ 5,200 per month, well above their $ 4,000 monthly tax revenue goal. At age 60, RBI could take CPP at $ 6,873 per year and Emily at $ 3,400 per year. As each turns 65, it would be Old Age Security payments, now $ 7.217 per year for each person.

At age 65, Robbie and Emily would have a gross income of $ 97,677 before tax. Perhaps they would be eligible for a retirement pension and pay an average of 18 percent of their income tax, which would spend $ 6,700 a month, about 70 percent more than their retirement benefit.

Retirement Star: 4 **** from 5

Financial Post

Email [email protected] for a free family finance analysis.

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