My husband and I are both 75 with $1.5 million invested and $500k in cash — is that too much liquid capital to hold?

On the income side, Canadian retirees at 75 are likely already receiving Canada Pension Plan (CPP) and Old Age Security (OAS) payments, both of which provide a reliable baseline of guaranteed income. With those government sources and potentially a pension, a large cash reserve becomes even less critical as a day-to-day safety net.

What to do instead: put the cash to work, strategically

For older retirees sitting on large cash reserves, you may want to consider allocating a portion to a long-term care insurance policy. In Canada, long-term care insurance (LTCI) helps pay for care services that provincial health care doesn’t cover — things like home support workers, assisted living or nursing home stays. In 2021, the Canadian Medical Association estimated that the combined annual cost of long-term care and home care in Canada would reach $58.5 billion by 2031, and yet most Canadians have no financial plan to cover it.

Long-term care insurance premiums are not tax-deductible for individuals in Canada — they cannot be used to reduce your taxable income. However, premiums paid for qualifying plans may be claimable under the Medical Expense Tax Credit (METC), which reduces the tax you owe rather than your income directly. As for the benefits paid out: if you purchased the policy personally and paid premiums with after-tax dollars, the benefits are generally received tax-free. If an employer paid the premiums on your behalf, the benefits would typically be taxable income. Always consult a tax professional, as your specific policy and situation will determine the tax treatment.

For Canadian retirees who want predictable income without worrying about market performance, a joint life annuity — one that continues paying as long as either spouse is alive — can be a powerful complement to CPP and OAS. The remainder could be kept liquid for unexpected expenses.

For cash that isn’t earmarked for a specific purpose, Canadian retirees might consider alternatives that offer better returns without requiring a long investment horizon: GIC ladders (spreading cash across GICs with different maturities, typically 1 to 5 years, to maintain rolling liquidity), conservative dividend-paying Canadian equity exchange-traded funds (ETFs), or Canadian corporate bonds held inside a TFSA, where interest income is sheltered from tax.

What Canadians can do: 5 steps to make retirement cash work harder

If you’re holding more cash than you need in retirement, consider these steps:

• Know your RRIF floor. If your investment accounts are held in a RRIF, calculate your annual minimum withdrawal obligation using the CRA prescribed factor for your age. This is money you must take out each year regardless — so plan around it.
• Map your income against your needs. Add up your guaranteed income sources: CPP, OAS, any workplace pension and RRIF minimums. If your basic expenses are covered, the argument for holding $500,000 in cash weakens significantly.
• Consider a GIC ladder. Instead of leaving large sums in a savings account, spread cash across GICs with staggered maturities (1, 2, 3, 4 and 5 years). This gives you predictable returns and rolling access to funds without locking everything in at once.
• Explore long-term care insurance. Canada’s public health system covers basic medical care, but not the full cost of personal care, home support or a private nursing home room. An LTCI policy can protect your retirement savings from being depleted by care costs — and your heirs from inheriting a reduced estate.
• Talk to a fee-only financial advisor. If emotional factors are driving your cash position, a fee-only planner (one who doesn’t earn commissions on products they recommend) can help you develop a withdrawal and allocation strategy that feels safe while also working smarter.