Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Real Life Investment Strategies #8: Transferring Wealth to your Children, Sensibly

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Passing on Financial Prosperity while balancing Generosity and Responsibility

Lowrie Financial: Canva Custom Creation

By Steve Lowrie, CFA

Special to Financial Independence Hub

Canada is in the midst of a historic intergenerational wealth transfer, with more than $1 trillion expected to pass from baby boomers to younger generations. For many families, the question isn’t just how much wealth to transfer but when and how to do so responsibly.

Should you give small, incremental gifts during your lifetime or leave a traditional large estate inheritance? Each approach has its merits, but both require careful planning to avoid unintended consequences like fostering dependency or jeopardizing your own financial security.

This blog introduces these two contrasting wealth transfer strategies. Along the way, we’ll explore how these approaches can be tailored to align with your goals while leveraging Canada’s tax rules and financial tools.

The Case for Incremental Giving

Giving while you’re alive allows you to see the impact of your generosity firsthand while offering opportunities to guide your children in managing their finances responsibly. In Canada, there’s no formal gift tax, making this approach particularly appealing.

For example, gifting funds for specific purposes — such as contributing to a child’s Tax-Free Savings Account (TFSA) or helping with a down payment on a home — can provide meaningful support without being life-changing. A parent might gift $10,000–$50,000 annually or on an irregular basis for specific needs, ensuring the funds are used purposefully while avoiding dependency.

Benefits of Incremental Giving:

  • Tax efficiency: Cash gifts to a child that they use to contribute to their TFSA grow tax-free, and funds can be withdrawn without penalty.
  • Accountability: Smaller and/or variable wealth transfer encourages children to not be reliant on wealth transfer and to develop financial discipline under your guidance.
  • Flexibility: You can adjust the size and timing of gifts based on your financial situation and outlook. It should be expected that every few years, financial markets will “correct” or pull back, although the route cause is always different. When this happens, you may choose to be more conservative in your giving to ensure your long-term financial well-being.
  • Delight in their Enjoyment: By transferring wealth in stages while you are still around, you get to see the fruits of your labour passed on to the next generation, giving you the satisfaction of a well-lived life.
  • Targeted Giving: The recipients of your wealth transfer might go through different ages and stages of their lives requiring very specifically timed financial influx. For example, you may consider a very different giving scenario for a 25-year-old just finishing university vs. a similar-aged child who has two children and is buying a house.

Considerations of Incremental Giving:

  • Negative Impact of Over-Giving: Overzealous incremental giving can affect your long-term financial plan. It’s important to work with your financial advisor to plan conservative giving rather than putting the cart before the horse and realizing too late that you’ve over-extended your finances.
  • Focus on Planning: It’s important to consider how you are moving the money – from where, to where, when, etc. – so that it doesn’t trigger negative consequences like capital gains on the giver. Or that needs to be taken into account when transferring your wealth.
  • Attribution Rules: There are a complex set of laws that apply if you give money to minors so it’s important to be aware of these attribution rules as income earned by money given to the minor can be taxed to the parent.
  • Expectation Misalignment: You may have a wealth transfer plan that works best for you and aligns with your long-term financial plan. However, your children may have pre-conceived thoughts of how and when the money will flow to them. So, it is important to discuss it so everyone can be on the same page, leaving less likelihood of misunderstandings.
  • Conflict due to Giver Oversight: If you are giving money while you are alive, you get to delight in watching your children enjoy it. However, you also get the opportunity to observe and potentially be critical of how the money is being used. This can cause unintended conflicts and pressure on your relationship.

The Traditional Large Estate Gift

On the other hand, some families prefer to focus on building their estate and passing on a significant inheritance after death. This approach allows you to retain full control of your assets during your lifetime while simplifying the logistics of wealth transfer.

In Canada, there’s no inheritance tax, but all non-registered assets are subject to tax on all unrealized capital gains upon death. Proper planning — such as using life insurance or owning assets jointly  — can help minimize these taxes and preserve more of your legacy for your heirs.

Benefits of a Large Estate Gift:

  • Control: You maintain full access to your wealth throughout your life.
  • Simplicity: A single transfer avoids the complexity of multiple smaller gifts over time.
  • Tax Planning Opportunities: Tools like trusts or charitable donations can reduce estate taxes significantly.

Considerations of a Large Estate Gift: Continue Reading…

Taking on Tariffs with Defensive Stocks & Sector ETFs

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By Dale Roberts, cutthecrapinvesting

Special to Financial Independence Hub

The year 2025 offered the third bear market for U.S. stocks in the last 6 years. That is surprising in itself. Canadian stocks didn’t go into a bear market but they did fall by near 13%. The good news for readers of this blog is that Canadian defensive stocks rose to the occasion. South of the border defensive sector equities were even more robust. Defensive stocks take on tariffs, on the Sunday Reads.

Image via Cuttheecrapinvesting/Unsplash

There’s more than one way to manage risk. Within a balanced portfolio the most common strategy is to use bonds to manage stock market risk and volatilty. We might then turn to gold that makes the balanced portfolio better. I also like using defensive equities, working in concert with bonds, cash and gold.

2025 Total Returns (through May):

Gold $GLD: +25% Developed International $VEA: +17% Canadian $XIC :+7.1% Silver $SLV: +14% Bitcoin $IBIT: +12% EM $IEMG: +9% US Bonds $AGG: +3% Cash $BIL: +2% Nasdaq 100 $QQQ: +2% REITs $VNQ: +1% S&P $SPY: +1% US Dollar $UUP: -7% Small Caps $IWM: -7% Oil $USO: -11%

Defensive sectors for retirement.

That’s a common theme or discussion in our Retirement Club for Canadians.

Let’s take a look at Canadian defensive stocks during the tariff-inspired bear market. The worst decline in 2025 for Canadian equities was January 30th to April 8th. The TSX Composite fell 12.9%.

From the beginning of the tariff tantrum to end of April …

Stock market down, defensives up – nice! 🙂

  • Consumer staples (XST-T) up 12.1%
  • Utilities (ZUT-T) up 11.1%

And be sure to check out this post – investing in Canadian utility stocks and ETFs.

Defensive sectors in the U.S.

If we look to U.S. stocks for the first quarter …

testfolio

The U.S. defensive sectors all rose to the occasion. IVV = S&P 500.

Consumer staples (XLP), Utilities (XLU), Healthcare (XLV). Keep in mind, these are U.S. Dollar ETFs for U.S. dollar accounts. The most favourable tax treatment will be offered in your RRSP and Taxable accounts.

The defensive equities strategy has worked out wonderfully on both sides of the border.

Here’s the models in a retirement funding scenario from February through to the end of April. We start with $1,000,000 and spend at 4.8% of the portfolio value = $4,000 per month.

Of course, stocks have started to recover as Trump backs away (at times) from his tariff threats. Continue Reading…

Tariffs: Great in Theory … Dumb in Practice

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Public domain image via Outcome

I saw her today at the reception
In her glass was a bleeding man
She was practiced at the art of deception
Well, I could tell by her blood-stained hands, sing it

You can’t always get what you want
But if you try sometimes, well, you just might find
You get what you need — You Can’t Always Get What You Want, by The Rolling Stones

 

By Noah Solomon

Special to Financial Independence Hub

Apropos of what has been clearly driving markets over the past several weeks, in this month’s commentary I will discuss tariffs. Specifically, I will demonstrate that although they can, in theory, produce certain benefits, in reality, they are far more likely to cause more harm than good, both for economies and markets.

A Boon to Humanity

The entire world has benefitted immeasurably from global trade in the postwar era. Its expansion has vastly expanded the supply of most goods, leading to lower prices. In simple terms, globalization has led to more things at lower prices, which has made the world far wealthier and led to a phenomenal increase in standards of living.

Consumers and businesses in the U.S. and other developed nations have benefitted from the fact that most things can be made for less in other countries. To be sure, the windfall of cheaper goods has involved the dislocation of manufacturing jobs over the last several decades. However, the percentage of the American workforce in manufacturing currently stands at roughly 8%, and less than 14% in 2000.

Furthermore, most experts agree that technology and automation, as opposed to trade, have been primarily responsible for the decline in manufacturing employment in the U.S. Also, given that the U.S. is currently at full employment, it stands to reason that dislocated jobs have been replaced. Importantly, the net benefit of trade has been massive, enabling citizens of advanced economies to enjoy higher standards of living than if they were forced to buy only domestically produced goods.

The Theoretical Benefits of Tariffs

Although the benefits from free trade are undeniable, governments are periodically tempted to tweak trade relationships in their favour to maintain or augment globalization’s existing benefits while minimizing or eliminating its relatively minor drawbacks. These initiatives entail some degree of restrictions on trade. Today, the U.S. is pursuing such policies by imposing tariffs on imported goods.

The purported benefits of these particular tariffs are:

Benefit #1: Improved government finances: This argument contends that tariff revenues will afford the government some flexibility with respect to fiscal policy. Specifically, the revenue which is collected via tariffs will be used to reduce the ever-expanding U.S. deficit. Alternatively, these revenues could serve to increase government spending and/or reduce taxes without a deterioration of the government’s fiscal position.

Promise #2: A manufacturing renaissance: Another potential benefit involves the bolstering of certain industries via reduced competition from imports, with an associated boost to employment in these areas. The current U.S. administration has been particularly vocal about the ability of tariffs to revitalize manufacturing in states where it was once prominent.

Promise #3: A Better Deal: This argument holds that tariffs will force other countries to the negotiating table and put the U.S. in a strong position to secure better trade agreements and/or end unfair trade practices that hurt its economy.

Einstein’s Warning

Albert Einstein famously stated, “In theory, theory and practice are the same. In practice, they are not.” In theory, tariffs can deliver on the aforementioned promises, but the reality is that not only are they unlikely to do so but stand a very good chance of causing more harm than good.

Very little, if anything, in the modern global economy occurs in a vacuum. One specific policy or event can easily start a chain reaction of subsequent policies and events. Although some of these cascading effects can be anticipated, their magnitude is almost impossible to predict. More ominously, many of them are unforeseeable (the technical term used by economists for such developments is “unintended consequences”). As a result of such reverberations, few, if any of the purported benefits of tariffs are likely to materialize, should they remain in place. Moreover, their associated consequences could prove severe.

Improved Government Finances: Robbing Peter to Pay Paul

Escalating tensions and the prospect of long-lasting trade wars have resulted in a heightened state of uncertainty among both businesses and consumers, which may have a significant impact on their investment and spending. Continue Reading…

Buying an Annuity versus Equities

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Billy Kaderli, RetireEarlyLifestyle.com

By Billy and Akaisha Kaderli

RetireEarlyLifestyle.com

Special to Financial Independence Hub

I read an article by Mark Hulbert titled Why retirees are better off safe than sorry.

This article was about retirement satisfaction and asked if having little money, a reasonable amount of money or lots of money made a difference.

I have followed Mark’s writings for years and was surprised that Mark, to make his point, was hawking annuities.

Mark explains that you could put $100,000 into an annuity and receive $501 per month guaranteed for your lifetime. This equates to $6,012 per year or a 6% return.

My perspective and why

Here’s the problem that I have with this.

Inflation. As inflation has heated up after years being quiet, your $501 monthly check is going to buy you less and less over time. The erosion of buying power will not be noticed at first but over the years it certainly will. This is a huge negative for me.

Once you turn your money over to the annuity company, you no longer have control of it and possibly it is no longer part of your estate. This means you cannot leave it to your spouse, a child, grandchild or your favorite cause. And remember, your annuity is only as good as the company that backs it. If they have dereliction in management or other calamities you could be getting back pennies on the dollar. It happens.

In the example with this annuity It will take you about 16.5 years to break even with your investment.

What if you die before that?

My suggestion

There are other options if you have $100K and want a 6% yield for income and still keep control of the asset.

For instance, you could purchase any or all of these high yielding dividend-paying stocks.

AT&T (T) yield 4.04%

Plains All American Pipeline (PAA) yield 9.10%%

Energy Transfer (ET), yield 7.32%

Exxon Mobil (XOM), yield 3.84%

Main Street Capital (MAIN) yield 5.51%

In this example, you could put $20,000 into each of the above for a 5.96% average yield or $5,962 per year income. Also, there is potential for these equities to increase in value as well as raise their dividends. So, in this case, you have the possibility of being able to reinvest any amount over the 6% giving you the opportunity to increase your holdings while still covering the $6,000 annual income.

Other options

However, if you are not comfortable owning three out of the five stocks in the energy field, for more diversification, you could purchase DVY, IShares Select Dividend ETF with a portfolio of 100 different companies and with a 3.72% yield.

The idea here is to receive the 3.72% dividend distributions and sell off $2,280 worth of shares annually to make the 6% yield.

How is that done? You invest 100K into DVY taking the quarterly dividends which amount to a 3.72% yield. After one year-and-a-day (so that you meet the long-term capital gains requirement), you sell off $2,280 worth of shares.

DVY 10 Year Total Return = +9.40%

In this example based on the past 10-year performance of DVY, your principal would have grown to approximately $109,400, year one, which is a 9.4% annual total return. You receive $3720.00 in dividend income and $2280.00 in capital gains = $6000.00, leaving approximately $103,400 invested.

We all know that past performance is no indication of future results, but there are no guarantees in retirement, investments, nor annuities.

See the performance chart below. Continue Reading…

Canadians keeping their Florida properties (Podcast transcript)

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Image via Pixels/Brendon Spring

Kevin Depocas Dumas says even with current U.S.-Canada tensions he’s not seeing a lot of Canadians who want to sell their Florida properties.

In the latest episode of Two Way Traffic, he and host Darren Coleman discussed issues affecting Canadians who own property in the state. About half a million Canadians are in that boat.

Dumas is Associate Vice President of Business Development of NatBank, a wholly owned subsidiary of the National Bank of Canada that’s operated in Florida for over 30 years.

Topics he and Coleman discussed include:

  • Difficulties Canadians in the U.S. have in getting a mortgage from an American bank and what to do about it.
  • Problems Canadians in the U.S. – even wealthy ones – have in obtaining credit or getting a loan.
  • Why it’s cheaper to deal with an American financial institution than a Canadian one when in the U.S., but there could be issues you may not anticipate.

Link to podcast …

https://twowaytraffic.transistor.fm/episodes/canadians-say-they-will-stay-in-fla

Darren Coleman

Today I’m joined by Kevin Dupocas Dumas, AVP of NAT Bank in Florida. So you guys have offices in Naples. Where else?

Kevin Depocas Dumas

We have three other branches on the east coast of Florida. One in Hollywood. One in Pompano Beach. And one in Boynton Beach.

Darren Coleman

This conversation is going to be helpful for Canadians who have or want to have property in Florida. So let’s guide people through this. Who is NAT Bank?

Kevin Depocas Dumas

Kevin Depocas Dumas

NAT Bank was created 30 years ago and we are a wholly owned subsidiary of National Bank of Canada. We’ve been operating here for 30 years offering financing solutions or banking solutions primarily for Canadians. A lot of Canadians may not have access to the financing market or the banking market here. We take care of those needs for them, especially for those who spend half their year in Florida.

Darren Coleman

You and I just happened to meet each other. I was in Naples and you guys were doing a presentation in your branch for your clients. You had a cross-border attorney doing the presentation and it just happened to be my friend Shlomi Levy who’s been on this podcast. I should give full disclosure since I was a vice president at National Bank Financial for five months after they acquired HSBC. So what are some of the challenges if Canadians have property or wish to buy property in the U.S.? How easy is it to go into a U.S. bank and say I’d like a mortgage on my condo? Or a mortgage on my property? How easy is it to get a U.S.-domiciled mortgage?

Kevin Depocas Dumas

This is actually the biggest problem for Canadians coming down here. They cannot use their Canadian credit history or their Canadian assets. They’re not going to be using any documents that come from Canada. So they don’t qualify for a loan, or if they do, they have to go to the private lenders: which usually won’t do a loan at more than 50% LTV. So Canadians are not only faced with the currency exchange, but where are they going to get funds from investments they’re holding and putting it into buying the property? This is the biggest thing they’ll face here. Continue Reading…