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Every advisor with retired clients knows that having their finances in order is only the first hurdle to having a meaningful post-work life, writes Globe Advisor assistant editor Mark Burgess. Some clients may have health-care questions or want help with downsizing, while others may have a hard time adapting psychologically to all the free time.
That’s what Ryan Donovan noticed during his time as a product manager with the McClelland Financial Group at Assante Capital Management Ltd. in Thornhill, Ont. Now the co-founder and chief executive officer of RetireMint, a free retirement planning platform, his hub helps retirees find resources and professional help. Users can take a retirement assessment covering various aspects of retired life – from estates to volunteering – and find content on those topics.
Recognizing that certain elements of retirement planning are best left to professionals, RetireMint also has a section in which advisors and others (from golf instructors to travel agents) can pay a monthly fee to be listed – and be reviewed by users.
RetireMint came about when Mr. Donovan noticed a trend. “Once people have their finances at a base level they’re confident in, you realize that clients come in and talk solely about retirement plans beyond finances – travel, what they’re going to do with the grandkids. … And the gap fell on financial advisors. What we’re realizing is that people view them as retirement advisors.”
Read the full interview here.
For more from Globe Advisor, visit our homepage.
Can John, 62, overcome his fear of ‘harvesting’ his wealth?
John retired early from his well-paying executive position last fall. “I earned a very good salary over the years and now enjoy a defined benefit pension plan as my primary source of income,” John writes in an e-mail. He is entitled to $98,000 a year, indexed to inflation. His wife, Lindsay, still works part-time in health care a couple days a week, earning about $30,000 a year.
John is 62, Lindsay is 61. They have two children, 26 and 20, and a mortgage-free home and cottage in Atlantic Canada. They also have some land.
While they are comfortable financially, John is finding it “psychologically challenging” to be harvesting their wealth rather than building it, he writes. With that in mind, he is planning to “build a modest consulting practice that will generate gross income of over $50,000 a year,” he writes.
After their younger child moves out, they are thinking of downsizing the family home and spending half the year at the cottage. They would either buy a condo with part of the proceeds or rent in the city. They also want to take two big trips a year.
John asks whether they will be able to achieve their financial goals without having to generate additional income. Their retirement spending goal is $100,000 a year after tax.
In this Financial Facelift, we asked Ian Calvert, a certified financial planner and principal of HighView Financial Group in Toronto, a portfolio management firm, to look at John and Lindsay’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
Should my emergency fund go in a high-interest savings account or a TFSA?
According to personal finance columnist Rob Carrick, in an ideal state of personal finance, you have a tax-free savings account filled with investments and a separate savings account for your emergency fund.
TFSAs allow for tax-free growth and withdrawals of your money, a feature that provides the most benefit when you hold stocks and bonds as opposed to savings. A diversified portfolio of investments might generate returns of 6 per cent on an average annual basis after fees, while savings accounts paid as much as 4.2 per cent as of late this week and frequently less than 2 per cent.
This background is offered as a preamble to answering a question from a reader about whether to put her emergency fund in a regular high interest savings account or a savings account held in a TFSA. Leave the TFSA for investments, right?
Read the full article here.
In case you missed it
It’s not evil to question boomers’ legacy
A steep drop in housing prices is not politically feasible for governments because too many voters worry that it would compromise their retirement plans, writes Paul Kershaw in this personal finance article. The Prime Minister rightly made this point in a recent interview, he notes, signalling that Canadian politics expects younger people to endure higher housing costs to protect older people’s finances. Younger people deserve compensation for providing this protection, Kershaw argued in his last column, because it requires them to sacrifice their standard of living.
Not everyone agreed. One letter to the editor even suggested Kershaw’s “portrayal of baby boomers borders on evil” because my views “can put a tear in our delicate social fabric.”
This inflammatory charge needs careful scrutiny. Far beyond stock tips and investment trends, our personal finances are shaped by harmful systems of oppression, including ageism toward younger and future generations, observes Kershaw. We need to guard against making it taboo to discuss the intergenerational tensions that flow from this ageism, because shutting down dialogue diverts attention from the societal adaptions required to restore intergenerational solidarity.
We badly need to renew this solidarity, he adds, because social, economic and climactic changes have already torn open Canada’s social fabric by leaving younger folks to live amid unaffordable housing and extreme weather while inheriting large unpaid bills from the government.
Read the full article here.
Is it better to have joint accounts with adult kids, or give them power of attorney?
If any good came out of the bare trust tax-filing mess of earlier this year, it’s the realization for many people that they have to up their game in estate planning, says personal finance columnist Rob Carrick in this Carrick on Money article. Choices like adding an adult child to a bank or investment account are a practical way to help seniors manage their finances, he adds, but there may be unintended consequences.
Barbara Amsden, a financial industry veteran, will launch a new book on July 15 to help people with estate planning called How to Laugh at Death and Taxes: What Willmakers, Executors, Heirs, and Beneficiaries Need to Know. In the Q&A that follows, Ms. Amsden talks to Carrick about bare trusts, powers of attorney and more. Here’s part of an edited version of exchange by e-mail:
Q: Barbara, can you tell us a little about your background and how you came to write your book?
A: I’m the product of a bank economist and an insurance actuary, so I couldn’t escape my fate of 35 years’ servitude in the financial services industry …. I foolishly thought I knew a lot about what it would take to be an executor for a ‘simple’ estate that was pretty much all-cash and had no fighting beneficiaries. But I didn’t – there were bank, legal, accounting and tax issues to grapple with. With my role as executor once again looming, I wanted to find and offer an easier way for executors to survive.
Q: What do you make of the Canada Revenue Agency’s requirement that you must file a T3 form if you’re the trustee of a bare trust, an arrangement that as of earlier this year could be as simple as joint owner of a bank account with an elderly parent? The shock and anger over this new reporting rule suggests people made estate planning choices without fully understanding the implications.
A: Why the CRA expanded the requirement to file T3 trust forms to include bare trusts was understandable – some people don’t pay their taxes. How it was introduced – poorly timed, unclear, overcomplicated – was not. The shock and anger also are understandable. Few know what bare trusts are, or have an inkling they could include an account held jointly by an adult child and elderly parent to help make routine payments.
Q: What do you consider the better option for seniors who want help managing their financial affairs – asking adult children to be joint account holders or giving them power of attorney for property-related decisions?
A: Both can be good options and both can come with downsides….
Read about the pros and cons, according to Amsden, here.
Sign up for the Carrick on Money newsletter here.
Retirement Q & A
Q: I’m a 71-year-old woman and a few years into retirement – I find that I miss some aspects of work but I’m not quite sure what to do or how it will impact my retirement finances.
We asked Yael Dirnfeld, director, Private Banking, Scotia Wealth Management to answer this one. Dirnfeld has received training as part of The Scotiabank Women Initiative to help women clients manage their wealth.
A: Retirement is a major life transition and it’s quite common to miss some aspects of work, particularly if you have had a rewarding career and enjoyed building relationships with your coworkers and others with whom you interacted. It is important to plan for the pieces of your full time role that you will want to replicate in retirement (including travel, etc.) and the financial requirements of doing so. You may discover that you want to work part-time or could find fulfilment through volunteering, or a new hobby. Whatever it may be, understanding what is important to you will enable you to evaluate the impact on your finances.
Building your social network, maintaining physical activity, exploring creative discoveries and enrolling in ongoing learning are wonderful ways that can help you transition to retirement. However, these endeavours may not be available to you in retirement if you are not in good health. Women face unique challenges as they age, with women seniors typically requiring more resources over retirement as they are likely to live longer – leading to higher health care costs. Building a financial plan to accommodate any health care and comfort measures you may need down the road can help reduce stress and enable you to enjoy your retirement today.
A well-planned retirement takes into account your lifestyle and health care needs over time and can help you enjoy what can be the most rewarding time of your life. This is an ideal time to sit down with a financial advisor to build or change a plan around what’s important to you, how you want to live in retirement and determine what your financial journey could look like. If you don’t currently have a financial advisor or planner, consider someone who takes a holistic approach, beyond only retirement. Wills, estate and taxation considerations are all important factors in a financial plan and can have a significant impact on your financial future. Having a road map that addresses how you want to live in retirement, and beyond, will help bring clarity to your decisions and provide peace of mind.
Have a question about money or lifestyle topics for seniors? E-mail us at sixtyfive@globeandmail.com and we will find experts and answer your questions in future newsletters. Interested in more stories about retirement? Sixty Five aims to inspire Canadians to live their best lives, confidently and securely. Sign up for our weekly Retirement Newsletter.
