Four years ago, Ellen was involved in a near-fatal car accident. "It caused us to reassess our priorities, and working for more material things wasn't one of them," says her husband, Howard. So they took early retirement in their mid-50s.

The couple have been "natural savers" most of their working lives – paying off their mortgage ahead of schedule, and accumulating retirement savings through automatic deductions from their incomes. Moreover, the sale of Howard's business will likely add to their capital, as will an inheritance of more than $200,000 expected from his parents.

For the first few years after leaving the work force, the couple lived off withdrawals from their registered retirement savings plans (RRSPs). When Ellen turned 60, her civil service pension plan and Canada Pension Plan (CPP) kicked in. Their objective then became to preserve capital and live off income.

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Ellen's pension income totals more than $34,000 per year (after tax) and the couple's dividend income exceeds $26,000 per year. Howard's CPP will be starting soon, and Old Age Security will begin for each when they turn 65.

The family have already celebrated some milestones this year. Their daughter married and the youngest child left home to study at an Ivy League university.

That leaves Ellen and Howard with more freedom to pursue their travel dreams. To this end, Howard is exploring house-swapping arrangements. And having recently enjoyed some success with freelance writing, he is looking forward to doing some travel writing that could bring in a bit of income and maybe even a free trip or two.

Just after retiring, Howard ditched his financial adviser and high-fee mutual funds to invest on his own in stocks. He is going without bonds, because he figures his wife's defined-benefit pension provides a counterbalance.

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Their registered education saving plan (RESP) is 75 per cent allocated to stocks with the remainder in cash, ready to pay for university tuition next term. Howard will be raising more cash for the RESP soon.

Stock holdings are made up of shares in dividend-paying blue-chip Canadian companies. Howard is a committed buy-and-hold investor, and he is less focused on price fluctuations than on stable and growing dividends.

As do-it-yourself investors, Howard and Ellen value a second opinion on how they are managing their nest egg. To that end, we sought guidance from two financial advisers: Warren MacKenzie, president and chief executive officer of Weigh House Investment Services, and Dan Hallett, vice-president and director of asset management at HighView Financial Group.

The Basics:

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Warren MacKenzie's tips:

Mr. MacKenzie applauds Howard's investing knowledge. The 100 per cent allocation to stocks in non-RESP accounts seems aggressive for a retiree "but considering his spouse has a substantial fully-indexed government pension, this asset mix makes perfect sense," he says. In addition, Howard is unconcerned about day-to-day fluctuations on the market and "sticks firmly to the buy-and-hold discipline," making about one trade each quarter.

However, there are a few concerns. "By focusing primarily on yield, he has created a portfolio that is overweight [in terms of]financials," notes Mr. MacKenzie. It will not keep pace if interest rates or markets go higher. What is important is total return – income and capital gains. "It is easy to convert capital gains into cash flow simply by selling some shares," he says.

Don't ignore price fluctuations too much, Mr. MacKenzie urges: "He is missing the opportunity to sell some positions that have risen in value and use these funds to buy more of the positions that have fallen in value." This kind of rebalancing can not only reduce the risk of overweight positions but will potentially increase income "by owning more shares that pay about the same dividend per share." Finally, he recommends that Howard should keep track of his total performance. He may find that he is lagging in the market like most investors, and thus would be better off simply owning an exchange-traded fund (ETF).

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Dan Hallett's tips:

Howard looks like he is the primary investor and "it's worth thinking about what would happen if he predeceased his wife," says Mr. Hallett. Can she maintain the portfolio? Phasing in a lower-maintenance structure may be appropriate. In addition, "the heavy concentration in financial and real estate – accounting for nearly two-thirds of non-RESP holdings – is a concern from a risk standpoint," he says. This emphasis is a by-product of a focus on dividend-paying Canadian stocks.

Ellen's pension notwithstanding, a 100 per cent allocation to stocks may be taking on unnecessary risk, given the fact that the couple's income needs are likely at a peak and a higher retirement income is expected down the road. Accordingly, Mr. Hallett suggests an asset mix of 75 per cent stocks and 25 per cent bonds, achieved by switching the stocks within the RRSPs into short-term and corporate bond ETFs.

To further move toward "a lower risk, more diversified portfolio that … still generates a healthy amount of cash flow," Mr. Hallett recommends reducing Canadian stocks within the RRSP and transferring the proceeds into foreign stocks. They can do this with ETFs and no-load mutual funds. Mr. Hallett thinks stocks "provide plenty of inflation protection potential." In addition, low-income years are opportunities to trigger some taxable income via RRSP withdrawals or selling stocks that have appreciated in price.