Most clients who come to me have done well on their own. They feel fairly confident in their retirement savings, ability to reach their financial goals, and safety net.
Often, they come with what they think is a single question.
‘Should we purchase a rental property?’, ‘What’s the best way to pass on the family cottage?’ Or, ‘Can we retire earlier?’
But that one question quickly unearths many other questions—and opportunities.
I recently had a couple ask if purchasing a rental property would be a wise financial decision. The couple asked this particular question because they had almost $200,000 in a bank account.
Believe it or not, that is far more common than you might think.
So, we answered their question: did it make financial sense to purchase a rental property?
Given market values, interest rates, and a host of other individualized reasons, the answer was no. It did not make sense to purchase a rental property–but it also didn’t make sense to leave that money sitting in a bank account.
There were far better strategies available to make that money work harder for both of them.
First, we created a designated emergency fund. But instead of parking those funds in another savings account, we used a vehicle that guarantees their principal and earns them 4.6%. That gave the couple about $2,000 with absolutely zero effort.
Then we moved and topped up the husband’s RSPs. He preferred a guaranteed return, so we went the GIC route. The rates are high, so that was a good fit for them. Doing this gave an automatic return of $30,000 this year, $15,000 the following year, and $8,000 the year after that. This financial plan was achieved with no new money. No increase in contributions, no cuts to other budget line items– nothing new.
We put the remainder into a non-registered GIC, which returned $4000.
When the wife has more contribution room, we will take some of that maturing GIC and top up her RSPs to return another $15,000. Again, this required no new contributions.
All of this was achieved by simply moving money around strategically. Instead of sitting in a bank account doing nothing, we put their money to work!
With that success, we decided to look at their savings. They were saving about $90,000 a year to put into RRSPs and TFSAs. That sounds good, but I knew we could do better.
Other asset classes are complimentary, which allows you to diversify, have lower risk, and create more stability. For them, these asset classes included whole life insurance and annuities.
By re-directing $24k of the money they were already putting away yearly and moving a portion of their existing assets into a new asset class, we increased their projected investable assets by $660,000 by death. We also increased their projected estate value by $1,000,000. This means that in the future, the wife will have an extra $660,000 buffer upon her husband’s passing, and their estate will be worth far more than they planned.
It is possible to significantly increase your wealth by strategically moving money at opportune times, capitalizing on different asset classes, and understanding what to contribute to and when—no need to increase your contributions or come up with new funds.
You may be doing well on your own–but you could be doing phenomenally, just like my clients. If that sounds appealing, book a call with me.