There’s a big difference between depression and the blues. Paul can attest to the toll that ongoing feelings of despair take on every aspect of a person’s life. Now 60, Paul has been unable to work since he was 45 because of a major depressive disorder.

“I’ve had a long bout of depression and a couple of nervous breakdowns since 1999,” Paul says. “Fortunately, I can report that I’ve been off medication for about a year and hope to never have to return to that black hole. …There were some pretty scary moments. I’m trying to do the best I can each and every day.”

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It’s not just his career that has suffered. Paul says that because of the way mental illness completely consumed him, his finances have been affected as well. He has also lost faith in the financial-advisory field.

“Being heavily medicated, I simply allowed my financial adviser to steer the ship,” Paul says. “I’ve come to realize that high management-expense ratios [MERs] and trailer fees were the diet of my financial adviser. I had made some suggestions earlier this year toward funds with lower MERs and was met with resistance.”

A former investigator in the criminal justice field, Paul has no debt, a disability pension and full medical benefits, and he’ll soon be collecting early CPP and later a fully indexed defined benefit pension. His expenses vary, but he describes himself as frugal.

His goal is to create a tax-efficient income stream with minimal fees. For him, income preservation is more important than growth.

To help him reach those aims, we consulted Vancouver certified financial planner Laura Chanin of HollisWealth Inc., and Nancy Grouni, a certified financial planner at Toronto’s Objective Financial Partners.

The basics


  • House: $1-million
  • Cash: $160,000
  • Tax-free savings account (TFSA): $30,000
  • Self-directed RRSP: $244,000


  • $4,000 a month or less

Ms. Chanin’s tips

1. Restructure funds to be more tax-efficient and less aggressive.

Ms. Chanin notes that Paul is in a good place financially, but there’s room for improvement. “He has a fully indexed defined benefit government pension that covers over 80 per cent of his expenses. He is about to start CPP, which should provide another $350 per month for the rest of his life.”

However, Paul currently has his non-registered funds in cash and most of his tax-free savings and RRSP in equities. “It is more tax efficient to switch this, that is, to have equities and dividend-paying investments outside of RRSPs, and cash and investments that generate interest income – such as bonds and term deposits – inside an RRSP,” Ms. Chanin says. “This is because capital gains and dividends get preferential tax treatment outside of an RRSP or TFSA. Interest income is taxed fully outside of an RRSP, the same tax rate as RRSP withdrawals.”

All of his TFSA funds are invested in one equity fund that focuses on Asia only, Ms. Chanin notes, while his RRSPs consist of about 60 per cent equities and 40 per cent bonds and cash.

“This is fairly aggressive and leaves him subject to ups and downs in the market,” she says. “As his focus is to now provide a stable income, a better balance for Paul would be to split 50 per cent of his investments into dividend-paying blue-chip equities and 50 per cent into a portfolio of secured investments, such as laddered term deposits, possible annuities, etc. He could expect a steady, secure income.”

2. Reduce fees.

“Within his mutual funds, the MER is about 2.4 per cent, which is about average for Canadian mutual funds,” Ms. Chanin says. “Given his limited investment skills, ideally he would continue to work with an adviser. He could talk to different advisers to find the best fit and to talk about different fee options. He could work with an adviser who offers fee-based accounts. The fees are typically lower than MERs, and, for non-registered accounts, the fees are tax deductible.

3. Use resources more wisely.

Paul has been actively withdrawing $30,000 a year from his RRSP in anticipation of avoiding OAS clawback at age 65.

“At this rate of withdrawals, the RRSPs will be gone in the next eight years,” Ms. Chanin says. “This isn’t the most efficient way of utilizing his resources. His current income of about $66,000 puts him at a marginal tax rate of just under 30 per cent. For income withdrawals above $75,000, he is paying tax at a 32.5 per cent rate, and for income above $87,000, he is paying tax at a 38 per cent rate.

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