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In 2020, during the depths of the pandemic, new parents Paul* and Elizabeth, were sheltering in place with their newborn when they decided to take a chance with their investments. Energy stocks had taken a severe hit and Paul recognized the situation as a “black swan” event. He opened a tax-free savings account (TFSA), did his research, identified historically profitable, dividend paying Canadian energy companies, and went all in.

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Today, the couple’s TFSAs are worth $3.5 million and generate $12,000 in dividends each month. Paul, 48, and Elizabeth, 44, are looking to retire — the sooner, the better. If possible, they would like to retire when they each turn 55, or even 50, just two years from now for Paul.

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Paul and Elizabeth have a combined, equally split, pre-tax annual income of $160,000, are debt-free, pay off their credit cards each month, and, because of Ontario’s prohibitive real estate market, have chosen to rent rather than own. While they have about $120,000 in two first home savings accounts they have no plans to purchase a home, though this may change in the future. Their current monthly expenses are about $15,000 including rent of $2,900. They would like to generate about $20,000 in after-tax income in retirement.

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In addition to their TFSAs, Elizabeth has about $290,000 in two registered retirement savings plans (RRSPs). She has $250,000 in a self-directed RRSP fully invested in Canadian equities and $40,000 in an employer-supported RRSP fully invested in U.S. equities with a predicted valuation at age 65 of $300,000 or $18,000 a year, assuming she and her employer continue contributions for the next 20 years.

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Paul has a defined benefit employer pension indexed to inflation with a commuted value of $250,000. If he retires at age 50, he will receive a reduced pension of $14,000 a year. At age 58, he will receive $40,000 a year, and if he retires at age 64, he will receive $48,000 per year.

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“Would lower pensions be a net benefit to us?” asked Paul. “This would mean paying no tax, as our annual incomes would be below the individual amount for deductions.”

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Paul and Elizabeth would also like to know how to structure Elizabeth’s RRSP withdrawals in the most tax efficient way and when they should each start taking Canada Pension Plan (CPP) and Old Age Security (OAS) benefits.

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The couple have a self-directed registered education savings plan (RESP) for their son, which is currently valued at $70,000. It is also invested in Canadian energy stocks. “We maximize contributions each year and hope to grow it to at least $150,000 within 10 years. Is this a realistic goal and timeline?” asked Paul.

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As the couple prepare to retire, they are looking to diversify their portfolio beyond Canada’s energy sector.