Financial Post Article: This retired woman needs to figure out what to do with potential $50 million in savings
The Financial Post asked me to review the finances of a single, retired 50-year-old woman who doesn’t have children and lives with her aging parents.
She wants guidance on how to enjoy a comfortable retirement without risking outliving her money.
This is a particular interesting client case story, as she actually has more money than she will ever spend.
We see this type of story often, especially in the FIRE community. She saved a few million by living frugally. Now she can’t stop being frugal. Still scared of running out of money. Can’t adjust to slowly selling investments for her retirement lifestyle.
If she continues, her investments will compound for 40-50 years and she will die with a huge fortune. That is not her ideal life. That’s a lot of life NOT lived.
In this article you’ll learn:
- Why even wealthy people need a financial plan, because it’s a life plan.
- The options for the wealthy – she could live frugally and die with $50 million or give back in some way.
- The difference between Ed’s “Unconventional Wisdom” and other advisors, and how he’s been able to calculate exactly how much she can afford to spend each year before and after tax.
- Why the amount she’s currently spending per year is less than the tax she’s paying because of her dividend stocks, and how to overcome this.
- How she can invest in a tax-efficient way for long-term growth, and how she can bring her tax bill down to $13,000 a year, instead of $83,000 a year.
- Why people with lots of wealth have their own financial issues because it’s hard shifting to drawing down on your investments after decades of building wealth.
- How to enjoy life after being frugal all your life.
CLICK THE LINK BELOW TO READ THE ARTICLE BY MARY TERESA BITTI:
This retired woman needs to figure out what to do with potential $50 million in savings
Ed
Planning With Ed
Ed Rempel has helped thousands of Canadians become financially secure. He is a fee-for-service financial planner, tax accountant, expert in many tax & investment strategies, and a popular and passionate blogger.
Ed has a unique understanding of how to be successful financially based on extensive real-life experience, having written nearly 1,000 comprehensive personal financial plans.
The “Planning with Ed” experience is about your life, not just money. Your Financial Plan is the GPS for your life.
Get your plan! Become financially secure and free to live the life you want.
Hi Res,
To lessen the impact of dividend paying stocks, stop investing in them! Dividend investing is a brain fart. I define it as, “the odd beleif that taking money out of your investment does not take money out of your investment”.
It is most effective to invest in stocks based on fundamentals like risk/return and growth potential. Ignore dividends entirely. Just own the best stocks or have a broad index or a portfolio by an All Star Manager.
Tax efficient cash flow from investments is with self-made dividends. You just sell a bit of your investment each month. This can usually be automated. Part of the proceeds are a capital gain of which only half is taxed, while the rest is your original investment which is tax-free.
For example, you invest $500,000 and it grows to $1 million over time. Based on the 4% rule, you take out $40,000/year. Of this amount, half is your capital and half is a capital gain, since your investment has doubled. You have a $20,000 capital gain. Only 50% is taxable, so your tax return shows $10,000 taxable income.
If you received $40,000 in dividends, it is “gross-up” by 38%, so it shows on your tax return as $55,200 taxable income.
$10,000 taxable income vs. $55,200 taxable income. Yes you get a dividend tax credit, but you still pay more tax in most cases.
Self-made dividends is better than dividend investing IN EVERY WAY.
Details are here:
https://edrempel.com/dividend-investing-perfected-with-self-made-dividends/
Ed
”Why the amount she’s currently spending per year is less than the tax she’s paying because of her dividend stocks, and how to overcome this.”
would like to know more about how to lessen the impact of dividend paying stock…