At 84 years old, Louise is seeking to simplify her investment portfolio, minimize taxes, and ensure she can maintain her current lifestyle, which includes traveling five to six times a year and aging in place in her Vancouver home. Her financial situation raises a classic question in financial planning: the 'Multi-Millionaire’s Dilemma.'
Louise's Current Financial Picture
Louise has built and managed a portfolio largely composed of equities over the years. About a year ago, she sold most of her stocks and now holds $1 million in nine guaranteed investment certificates (GICs) across three financial institutions, paying about three percent every other month. She also has $70,000 in dividend-paying stocks, $80,000 in two equity exchange-traded funds (ETFs), $220,000 in gold wafers, $110,000 in cash, $130,000 in a tax-free savings account, and $110,000 in a registered retirement income fund, both invested in GICs.
Her annual income last year was $66,000, comprising $27,000 from an employer pension, Canada Pension Plan (CPP), and Old Age Security (OAS); $3,000 in dividends; and $36,000 in interest income from GICs. Her largest expenses include monetary gifts to family and 18 charities, including support for two Himalayan children, along with personal costs. She spends $10,000 per month to maintain her lifestyle, cashing in GICs to cover shortfalls.
The Multi-Millionaire's Dilemma
Ed Rempel, a fee-for-service financial planner, tax accountant, and blogger, explains that the 'Multi-Millionaire’s Dilemma' involves a wealthy person with more money than they will ever spending seeing a $100 bill on the sidewalk and debating whether to pick it up. He sees Louise's situation similarly: she has over $1.7 million in investments, spends about $66,000 annually, and is concerned about asset allocation despite having far more money than she will likely need.
Rempel notes that financial anxiety is common even among those with seven-figure net worths. He suggests Louise plan for the next 10 to 15 years, given life expectancy rates, to build confidence. Whether she chooses a conservative approach or invests for growth, she will likely be fine. He adds, 'I meet wealthy people who say, ‘I’m already rich, why make more? I just have to avoid making a mistake and losing any money.’ With this approach, investing in GICs will help maintain her investments so the portfolio won’t be down at the end of her life.'
Key Considerations for Louise
Louise is single, has an independent partner who does not live with her, and has no children. She is debt-free and owns her condo valued at $900,000. She says, 'I am not worried about leaving an estate and prefer to support people and causes while I’m alive.' She made a healthy portion of her net worth in the stock market but, as an octogenarian, worries about not having enough time to recover from a downturn. She no longer fears missing out (FOMO) and wants reasonable placement of her investable dollars and simplification of her financial picture.
She seeks advice on her gold holdings and whether to stay almost exclusively in GICs or direct a portion to an all-in-one ETF or other investment, with tax efficiency also a concern.
