Portfolio Line of Credit (PLOC/SBLOC) in Retirement

A portfolio line of credit — also called a securities-backed line of credit (SBLOC) — lets you borrow against your non-registered investment portfolio without triggering a single dollar of taxable income. Instead of selling ETFs or stocks to fund a large expense, you pledge the portfolio as collateral and draw cash from a revolving credit line. The investments stay invested, the unrealized gains stay deferred, and you pay only interest on what you borrow. Done carefully, this strategy lets you time your withdrawals for years when your tax bracket is lower, avoid the OAS clawback, and keep compounding working on assets you’d otherwise have to liquidate.

How a PLOC Works Mechanically

The lender — typically a bank, brokerage, or private wealth firm — appraises your eligible investment holdings and extends a credit line worth a percentage of that value. You draw from the line as needed, paying interest on the outstanding balance. The portfolio continues to grow (or shrink) while pledged. There is no mandatory repayment schedule; the loan is typically repaid when you sell investments, sell a property, or pass away.

Eligible collateral is usually publicly traded securities: stocks, ETFs, mutual funds, and bonds. Registered accounts (RRSP, RRIF, TFSA, 401(k), IRA) are generally not eligible because the government already has a claim on them. The lender applies a “loan-to-value” (LTV) ratio to each asset class — broadly diversified equity ETFs might qualify for 70% LTV, while concentrated single-stock positions or volatile assets might qualify for far less.

Interest rates on PLOCs are variable and typically float at prime plus a small spread. Rates are generally lower than personal lines of credit or HELOCs because the collateral is liquid and easy for the lender to liquidate. In Canada, rates have typically ranged from prime to prime + 1–1.5%. In the US, rates are often tied to SOFR or the broker call rate.

Canada vs. the United States

In Canada: PLOCs are available through bank wealth management divisions (RBC Dominion Securities, TD Wealth, Scotia McLeod, and others) and some independent investment dealers. The product is sometimes marketed as a “Lombard loan” or “investment-backed loan.” Interest is not deductible for personal spending purposes — only when proceeds are used to generate investment income. There is no regulated maximum LTV, but most lenders cap at 50–70% of eligible portfolio value.

In the US: SBLOCs are offered by most major brokerages — Schwab, Fidelity, Merrill, Morgan Stanley, and others — under names like “Pledged Asset Line” or “Portfolio Loan.” Interest is generally not tax-deductible for personal spending. The IRS “investment interest expense” deduction applies only to interest on funds invested to earn taxable investment income, which is a narrow category. The Securities and Exchange Commission has issued investor guidance on SBLOCs given the risks. FINRA rules require suitability review before offering these products.

The Tax Deferral Benefit: A Concrete Example

Consider a retiree with $800,000 in a non-registered account, $400,000 of which is unrealized capital gains. They are 65, have CPP of $10,000/year and OAS of $9,000/year, and need $50,000/year to cover living expenses.

Option A — Sell investments:

• Selling $50,000 of investments where half is cost base and half is gain triggers $25,000 in capital gains
• In Canada, 50% of capital gains are included in income (inclusion rate), so $12,500 added to income
• Combined income: $31,500 (CPP + OAS + capital gains inclusion)
• Federal + provincial tax (Ontario): roughly $5,500
• Net after tax: $44,500 — they need to sell more

Option B — Draw from a PLOC:

• Borrow $50,000 against the portfolio at prime + 0.5% (assume 6% total)
• Interest cost for the year: $3,000
• Taxable income: $19,000 (CPP + OAS only)
• Federal + provincial tax: roughly $2,800
• Net tax saving vs. Option A: approximately $2,700
• Net after interest: $47,000 — no additional selling required

The saving in year one looks modest. But the real gain is what the deferred $800,000 portfolio continues to compound versus a shrinking one, and the ability to sell investments in a later year when income is lower — or after returning to a lower bracket following RRSP/RRIF drawdowns. Over a decade of selective PLOC use, the compounding advantage can reach six figures.

In a year where selling would push income above the OAS clawback threshold of roughly $91,000, the PLOC benefit is even sharper: every dollar of income avoided below that threshold saves 15 cents of clawback on top of the marginal rate.

When a PLOC Makes Sense

A PLOC earns its place in a retirement plan when one or more of the following apply:

• Selling would push you into a materially higher tax bracket that year
• You’re close to the OAS clawback threshold and one transaction would cross it
• You have a concentrated position with very low cost base and no better diversification path that year
• You need cash for a large one-time expense (renovation, helping a child with a down payment) and expect to repay within 12–24 months
• Markets have just declined significantly and you want to avoid crystallizing losses — the same logic as using a HELOC as a drawdown buffer

A PLOC is not a substitute for a sound withdrawal order strategy. It doesn’t eliminate tax — it defers it, with interest. The math works in your favour when the deferral benefit plus compounding on unpulled assets outweighs the borrowing cost.

Risks You Cannot Ignore

A PLOC sits on top of the same portfolio that funds your retirement. That creates a leverage risk loop that can compound quickly in a bad market:

• Margin calls: If your portfolio value drops sharply, the lender’s LTV ceiling may be breached. The lender can demand immediate repayment or liquidate securities to restore the ratio — potentially at the worst possible time. Most PLOC agreements give lenders discretion to call the loan with little notice.

• Interest rate exposure: PLOCs carry variable rates. When rates rise, the carry cost of the loan rises with them. A loan that cost 4% in 2021 cost 7–8% in 2023 on the same balance.

• Behavioral drift: Easy access to credit against a large portfolio can encourage overborrowing. Retirees who treat a PLOC as an ongoing income supplement rather than a tactical tool can accumulate balances that are difficult to unwind without large taxable events.

• Estate complexity: An outstanding PLOC balance at death reduces the estate. If heirs need to sell the portfolio to repay the loan during a market downturn, the sequence-of-liquidation risk falls on the estate.

Most advisors recommend keeping PLOC borrowing below 25–30% of eligible portfolio value — well inside the lender’s ceiling — to preserve a meaningful buffer against market declines.

Common Mistakes

Treating the PLOC as income, not a tool. Borrowing $60,000 every year to fund spending while the loan balance grows unchecked is not a tax strategy — it’s debt accumulation. The interest compounds too.

Ignoring the net cost. If the after-tax borrowing rate is 4% and your portfolio’s expected return is 5%, the spread is thin. Factor in that the loan must be repaid from taxable sales eventually.

Borrowing from the wrong account. PLOCs are only effective against non-registered assets. Never pledge TFSA, RRSP, or RRIF assets — those accounts don’t qualify and you’d lose tax-sheltered room if forced to withdraw.

Not having a repayment plan. Every PLOC draw should have a planned exit: “I’ll sell $X in January when my income is lower” or “I’ll repay this from the RRSP withdrawal I’m doing next year.” A draw without a plan becomes a permanent liability.

Setting up too late. Lenders prefer to establish PLOCs when the borrower has a larger, more stable portfolio and healthy income. Waiting until deep into retirement — when the portfolio has been partially drawn down and there is no employment income — makes qualification harder and terms worse.

How Cinderfi Helps

Cinderfi models your non-registered portfolio separately from registered accounts, letting you project capital gains events, track your cost base over time, and see how different selling schedules interact with your marginal rate, OAS clawback threshold, and lifetime tax bill. The withdrawal order optimizer shows you which accounts to draw from each year to minimize taxes — and flags years where a PLOC bridge would reduce your taxable income spike. Use the scenario comparison tool to model “sell investments” versus “use PLOC and sell in a later year” across a 10-year projection window, with interest costs factored in.

Model PLOC strategies — try Cinderfi free.