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Alberta-based couple, Greg* (50) and Giselle (46) are parents to three teenage children and have hit a pivotal point on their road to retirement in five years.

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They plan to sell one of their two rental properties this year, and want advice on the right asset mix that will allow them to build up their current investment portfolio to their target of $4 million in 2024 dollars by 2030. This will allow them to generate $6,000 a month in 2024 dollars after tax and net of inflation – the amount of their current monthly expenses. When Greg does retire, he and Giselle would like to make a more conservative shift in their investment portfolio to enable them to meet their expenses without drawing down principal savings.

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Greg works at a growing software startup and earns about $210,000 a year before tax with scheduled annual increases of about $22,000 for the next five years, so that by 2030 his annual income will be about $320,000. Giselle is a musician and earns about $10,000 a year. The couple equally own both rental properties, which, combined, generate about $96,000 a year net of expenses.

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They continue to save and their current investments are worth about $2.87 million. This includes the two rental properties. The first is valued at $1.2 million and has a $300,000 mortgage, and they are in the process of selling it. The second is valued at about $1.1 million and does not have a mortgage. Their investment portfolio also includes $380,000 in a registered retirement savings plan (RRSP) for Greg and $493,000 in Giselle’s registered retirement income fund (RRIF).

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Additionally, the couple has set aside $240,000 in registered education savings plans (RESPs) for their children. Their primary home, which they own outright, is valued at $600,000. And each have $400,000 in permanent life insurance.

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The $4 million target includes $450,000 earmarked for their three children ($150,000 each to help them purchase their own homes); a $200,000 emergency fund; and $50,000 for charitable giving. The rest should fund the couple’s retirement. Ideally, Greg would like to stop work entirely in 2030, but he is open to working part-time if necessary. Giselle will likely continue to work as a musician and they will still have one of their rental properties, which generates about $5,000 a month after expenses.

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Here’s what the couple would like to know: How can they best allocate funds from the sale of the first rental property this year? How can they invest Greg’s additional income from raises? What balance of real estate, equities, bonds, and alternative investments should they aim for? How can they maximize tax-efficient growth?

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After 2030 when Greg retires, how should they structure withdrawals to sustain $6,000 per month (in 2024 dollars) without drawing down the principal? When should they start drawing from their Canada Pension Plan (CPP), Old Age Security (OAS), RRSPs, and RRIFs? And how can they minimize taxes during retirement?