Duane Cole/The Globe and Mail
Scott Hartman, 59, of Oakville, Ont., retired in 2017 at 51 after working for more than 20 years in the print media advertising business. “I worked hard; I was a 50- to 60-hour week guy,” he says, in this Tales from the Golden Age article. “There were times when my wife worried I would have a heart attack at my desk.” He took a voluntary departure package from his company, which gave him an additional 16 months of income after his retirement date.
Hartman had always planned on retiring early. “In 2004, in my early 40s, I met with my adviser and told her I was thinking of ‘Freedom 55′ and asked if it was possible. She created a plan and said it wasn’t, based on my financial situation and career trajectory. I didn’t like hearing that, so I created a plan to get there.”
He started taking management courses, and his career and income advanced from there and also continued to save and invest a lot more. Hartman relied on the expertise of financial advisers to guide him, as well as his father, who was in the financial services industry.
“My wife and I built up a sizable nest egg through saving and investing, including paying off our mortgage quickly,” he adds. “I’ve also been reducing my market risk exposure and have diversified my investments as I get older. I plan to take my Canada Pension Plan and Old Age Security early because I’m not sure how long I will live. If I live to 90, I’ll be okay financially.”
Retirement was a bit of a shock at first, says Hartman. “I had 28 direct reports and the quiet was unusual compared with the hustle and bustle of my former work life. I sometimes miss the relevance of having a full-time career and being the go-to guy. It also took me a while to change my sleep patterns. I was still getting up at 7 a.m., raring to go. My wife told me I had to slow down.”
Hartman advises anyone approaching retirement to understand the tax implications when withdrawing your retirement savings for income. “Work with an adviser if you can. Having a plan to minimize your financial worries is important.”
Read the full article here.
Are you a Canadian retiree interested in discussing what life is like now that you’ve stopped working? The Globe is looking for people to participate in its Tales from the Golden Age feature, which examines the personal and financial realities of retirement. If you’re interested in being interviewed for this feature and agree to use your full name and have a photo taken, please e-mail us at: goldenageglobe@gmail.com. Please include a few details about how you saved and invested for retirement and what your life is like now.
For more from Globe Advisor, visit our homepage.
Mark earns $370,000 per year. Lois earns $30,000. How can they use that big income disparity to their financial advantage?
Mark is 55 years old and earns a base salary and bonus of $370,000 a year. Lois is 51 and earns $30,000 as a self-employed health care practitioner. The big disparity in their salaries presents Mark and Lois with some excellent opportunities to save on the family tax bill.
They have one child, 16, a mortgage-free house in Toronto and substantial savings. Mark has a defined-contribution (DC) pension plan at work to which both he and his employer contribute. He also has a locked-in retirement account (LIRA) from a previous employer.
Medium term, they plan to buy a car and upgrade their kitchen and bathroom. Their monthly budget will fall by $2,200 a month in three years when their son finishes his equestrian activities.
“Is our savings plan on track to retire when Mark is 62?” they ask in an e-mail. Their investments are mainly in stock exchange-traded funds. “What is the optimal asset mix for growth and capital preservation?” they ask. “What is the most tax-efficient process for after-tax decumulation?”
Their retirement spending target is $100,000 a year after tax.
In this Financial Facelift, Matthew Ardrey, a portfolio manager and senior financial planner at TriDelta Private Wealth in Toronto, looks at Mark and Lois’s situation.
Want to pass on your inheritance before you die? Don’t be afraid to put yourself first
Passing on your inheritance before you die is as much about how ready you are to give it up, writes staff reporter Pippa Norman in this Personal Finance article, as it is about how ready your next-of-kin is to receive it, experts say. And while taxes or other logistical factors may seem like a priority when it comes to finding the best approach, the simple act of communicating can be the most valuable step.
Cash gifts made to a child can be a joyful way for parents to see the positive impact their money can have on the next generation while they’re still alive. It can also be a more useful way to pass on wealth, by doling it out in smaller increments during the recipient’s life rather than leaving it as a lump sum in a will.
But without some frank discussions between the gift-giver, the recipient and a financial planner, experts warn the disadvantages can quickly outweigh the benefits for the older generation.
Read the full article here.
In case you missed it
Canada has a chance to change the Alzheimer’s experience – let’s not squander it
There are currently more than 450,000 Canadians living with dementia, writes behavioural neurologist and medical director of the Toronto Memory Program Dr. Sharon Cohen, in this Opinion article. These numbers, she notes, will double by 2030 and increase to 1.7 million by 2050, according to the Alzheimer Society of Canada. Alzheimer’s disease is the most common cause of dementia and is chronic, progressive, severely disabling and ultimately fatal. It is one of the most feared diseases of our time.
As a neurologist and medical director of the Toronto Memory Program, Cohen sees every day the heartbreak of individuals who dread the loss of independence that comes with Alzheimer’s, and the dismay of becoming a burden on their families. She also sees the despair of families witnessing their loved ones gradually slipping away.
However, Alzheimer’s disease affects more than the stereotyped patient, often seen as elderly, frail and confused, Cohen says. In early disease stages, with symptoms often conflated with “normal aging,” many individuals diagnosed with Alzheimer’s are still living independently in their own homes, contributing to society and being active members of their families. They may be working, driving, travelling, pursuing hobbies and having meaningful relationships with friends.
“It’s time to shake off the stigma and myths that have surrounded this disease and have held people back,” she says. “We need to acknowledge that there is hope and that new and emerging treatments are shaping the future of Alzheimer’s diagnosis and treatment.”
Read the full article here.
Following a ‘flavodiet’ protects brain health as you age, study finds
Mounting research suggests that what you eat plays an important role in preventing dementia, writes dietitian Leslie Beck in this Food For Thought article.
Greater adherence to a Mediterranean diet, for example, has been tied to a lower risk of cognitive disorders and Alzheimer’s disease, she says. Diets plentiful in whole plant foods have been shown to offer the strongest protection against dementia in middle-aged and older adults.
Higher intakes of flavonoids, bioactive compounds found in fruits, vegetables and other plant foods, have also been associated with lower risk of dementia.
Now, adds Beck, a new observational study – the largest to date – supports the cognitive benefits of a flavonoid-rich diet.
According to the researchers, eating a diet with a high “flavodiet” score offers significant protection against dementia, especially in people at high genetic risk and those with hypertension or symptoms of depression.
Here, Beck breaks down the latest research – and how you can add flavonoids to your diet.
Retirement Q & A
Q: My question regards bridge payments made by my defined benefit plans. I’m 62. I learned I am receiving a “bridge” payment that will stop when I turn 65. I’m not sure how it’s calculated and I’m not sure how much my pension will be reduced. Could you explain bridge payments and how to navigate their impact?
We asked Sandi Martin, CFP®, a fee-only financial planner at Sandi Martin Financial Planning in Ontario, to answer this one.
A: As a member of a defined benefit plan, your lifetime and bridge benefits are designed to reflect the fact that you’ve actually contributed to at least two pensions in your lifetime: your pension, and the Canada Pension Plan.
Canada Pension Plan contributions top out each year once your earnings exceed that year’s limit, and how much you contribute to your defined benefit plan typically accounts for this.
For example, if you were a member of the Ontario Teachers’ Pension Plan, you’d contribute 1.4 per cent of your annual salary up to the CPP limit to the plan, plus 12 per cent of any salary you earn above that limit.
Both your CPP and defined benefit pension offer the ability to retire earlier than your “normal” retirement date in exchange for a lower monthly payment, and your pension plan has built in a top-up amount to supplement your income (in other words, to bridge you) until you qualify for unreduced CPP benefits at age 65.
How your bridge benefit is calculated varies from plan to plan, but usually includes some combination of your years of service, highest earnings, and a CPP adjustment factor. Your pension plan might publish this on their website, share it in your annual statement, or you might need to ask your pension administrator directly. The amount you’ll receive will depend on when you stop working and how much your income has been, so you’ll need to ask for a personalized quote. Your pension will decrease by this amount at the age of 65.
That’s as far as the integration between your bridge benefit and the Canada Pension Plan goes. You can choose to take your CPP benefit earlier or later than 65, but that decision won’t change the amount of your bridge benefit or the date it ends.
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