What to do with a stock option windfall
Q – I will be having my stock options vest in the very near future. The gross amount of payout should be in the order of $200,000. I currently hold a $75,000 mortgage, have unused RRSP contribution room of $40,000 and no other significant debt. I am looking for strategies for investing the funds to maximum efficiency, yet keeping my disposable income high. – D.G.
A – Nice to hear you have done so well with your options. Without knowing much about your personal situation, my initial reaction would be the following:
1) Determine what your tax liability is going to be. Since you have significant RRSP room available, make a contribution that will offset the tax payable on the options.
2) Pay off the mortgage since the interest is not tax-deductible.
3) Invest the balance in a portfolio of high-quality securities that is designed to generate capital gains.
These are broad strategy suggestions. You should consult a professional financial advisor for specifics. – G.P.