Risk roulette

He came to Canada from the States as a toddler. Met his throb while working in tech on the US west coast, then returned to Canada to make a life.

They’re both duallies, but when it comes to family finances the Yankee-cowboy side prevails. Of the three million they’ve saved and gained in stock options, 90% is in equities, eighty per cent in US$ and most of it sits in American accounts, including some 401k and Roth IRA stuff.

We talked. Aging out of the industry now, they’re thinking about the rest of their lives. No pensions. Kids to push through uni. Big income of half a mill a year will end before long. So, what then? Will they have enough?

Just another story of navel-gazing 1%ers?

Maybe. But Tom and Cindy face a unique challenge now, based on the decisions they made.

Why are you so heavy into equities, I asked? Because the goal was always maximum growth, not stability, he said. “And we did okay.”

Why so much in American dollars, in America? Mostly to escape, or delay, taxes. Moving it would trigger capital gains and the IRS taxes Canadian index funds while disallowing TFSAs. “Besides, US dollars always looked best,” Tom says. “Until now.”

The couple has done just peachy by everyone’s standards. But in retirement they’ll need income – a lot of it – because they now save little on a monthly net of over fifteen grand, plus they crave a second house (besides Ontario) to escape winter. So the goal is to preserve what they have in liquid assets and chunk in at least another million over the next decade.

Tom and Cindy face multiple risks. There is concentration risk – because 90% in stocks is a recipe for volatility and whipsawing values. Besides, pick a few wrong horses (like Tesla, maybe) and things can go south fast.

Then there’s currency risk. The US$ has been a winner over the past few years, but not so long ago it sank to the point where the C$ was worth more (and American real estate values cratered). Now we’re told the loonie could push 75 cents within the next few months, as the greenback continues its descent against global currencies.

There’s Trump risk. The capricious, quixotic, unpredictable American monarch has no love for US citizens who live outside the country’s borders and no fear of changing the tax code to suit short-term political goals. Besides, his failed 18th-Century tariff strategy which has ignited global trading chaos and squished relations with places like Canada has devalued the American currency, made it more expensive to finance $36 trillion in debt and worried markets. He should worry T&C, too.

There’s tax risk, of course. Money in a 401k or a Roth account is taxable when withdrawn, which is inescapable. So are capital gains taxes on assets sold within a brokerage account. So delaying tax until income is lower might help, but these guys cannot afford to be in a lesser tax bracket and live the life they want. So meanwhile they face the risks above – while leaving RRSP room on the table in Canada. As for TFSAs, well, lots of duallies maintain them without reporting. After all, they reason, surely the IRS has better things to do than hunt down ex-pats in Canada.

So, what do these folks need?

Simple. A plan. A strategy. Determine the ultimate goal – in this case a comfortable retirement that includes a winter home in the sun despite having no pension income except the CPP pittance – and work towards it. Containing risk is a key element. Sandbagging Trump is prudent. Diversifying out of a currency they won’t live every day in wise. Slashing their dependence on the stock market is essential. Harvesting the fruit of generous Canadian tax shelters just makes sense. And they should rent in Arizona or Florida, of course. That would save capital and avoid what might be coming for non-resident owners. After all, Canada whacks Americans with cottages here. Tit for tat.

The moral: you can be a cowboy for part of your life. But not your whole life. Don’t underestimate how much money you’ll need after you stop working. Never bet against America. But never go all-in, either.  And do not think that this may end in 2028.

About the picture: “In response to your call to arms, here’s Stella,” writes John. “She’s a rescue dog we got in California 3 years ago and isn’t stressed about anything, including tariffs.  When it’s snack time, she taps on the lid of her animal cookie jar and if she wants outside, she pulls my finger (my wife won’t pull it under any circumstances).  Ahh, to be that unconcerned about what the future will bring – it’s a gift.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2025/05/27/risk-roulette/