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Oliver, 51, and Charlotte 50.TODD KOROL/THE GLOBE AND MAIL

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Oliver is 51, Charlotte 50. Together, they earn $253,000 a year, Charlotte as a consultant and Oliver in sales. They have two teenaged children they want to put through university and a mortgage-free home in Alberta.

Neither has a defined benefit pension plan, but both have group-registered retirement savings plans at work to which they and their employers contribute.

“Our biggest question is, will we have enough to retire with a spending target of $100,000 a year if I retire at the age of 61 and my husband retires at 64?” Charlotte asks in an e-mail. “We’d love to retire early enough so we can see the world and be active hiking and biking before we are too old to do the things we want to do,” she writes.

“We are fairly diligent savers (I think!), but didn’t get started early to the savings game and haven’t been fortunate enough to have pensions at our jobs,” Charlotte adds. Even so, “We have a wonderful life with lovely kids and good health – you can’t ask for much more.”

Short term, they want to do some work on their house, travel to Europe and buy a used car. Long term, “We don’t want to rely on income from the sale of our house for retirement purposes but rather leave it to our kids when we die,” she writes. “Is this possible?”

In the latest Financial Facelift, Barbara Knoblach, a certified financial planner at Money Coaches Canada in Edmonton, looks at Charlotte and Oliver’s situation.

Want a free financial facelift? E-mail finfacelift@gmail.com.

The long-term decline in people donating to charity is really starting to bite

A new report on charitable giving says that more than 30 per cent of charities are experiencing a significant drop in revenue, writes personal finance columnist Rob Carrick, while 40 per cent say demand for their services has increased in a lasting way since the start of the pandemic.

The report was issued by CanadaHelps.org, an online giving portal that Carrick uses himself and has mentioned in this newsletter a few times over the years. To find out more about what charities are up against, Carrick invited CanadaHelps CEO Duke Chang to do a Q&A.

Read the full article here.

Are Canadians saving enough for retirement? In fact, the number of RRSP contributors is very close to optimal

There is a general consensus that Canadians are not saving enough for retirement, writes retirement writer Frederick Vettese. On the face of it, the statistics on registered retirement savings plan (RRSP) contributors would seem to bear this out. Out of 27.9 million tax-filers in 2020, notes Vettese, just 6.2 million contributed to an RRSP – less than 25 per cent. But in fact, the number of RRSP contributors is very close to optimal because there are a number of very good reasons for not contributing to an RRSP.

According to Vettese, we can rule out some tax-filers on the basis of age alone. Contributing to an RRSP makes little or no sense in the case of the oldest and the youngest cohorts. In the case of the 6.7 million tax-filers who are aged 65 or older, their saving days are presumably behind them.

At the other end of the age spectrum, the 3.1 million people under age 25 should be in no hurry to start saving for retirement. For several more years at least, they will usually have higher priorities, such as paying off student loans, trying to save up to buy their first home or simply getting established in the labour force.

Read the full article here.

In case you missed it

Smart use of your tax refund can accomplish great things

“Last weekend I was watching the movie Cinderella with the family,” writes Tim Cestnick, in his latest Tax Matters column. “You know the story. Partway through, the fairy godmother turns a pumpkin into a beautiful coach fit for a princess. I know it’s been a long tax season when the first thing that comes to my mind is whether the value of the coach should be taxable as regular income or as a capital gain.”

Thankfully, says Cestnick, these thoughts will soon disappear from our psyche as we near the end of tax season. And after taxes are filed, many Canadians look forward to receiving their refunds. Here, Cestnick shares some facts and ideas for using your refund wisely.

Read the full article here.

Why snowbirds who spend significant time in the U.S. face major tax repercussions

A growing number of Canadians have been blindsided by unexpected tax bills, penalties, or worse from the U.S. Internal Revenue Service (IRS) since an information-sharing agreement between the two countries was implemented almost a decade ago.

In fact, the Canada-United States Enhanced Tax Information Exchange Agreement Implementation Act came into effect in 2014 with the aim of collecting untapped tax revenue from Canadians who spend a significant amount of time in the U.S.

“There are a lot of people who don’t understand the data transfer, the day count rules, and they don’t understand the immigration issues,” says Kim Moody, chief executive officer of Calgary-based Moodys Private Client Law LLP.

Mr. Moody, who specializes in cross-border tax issues, has been sounding the alarm since the Canada Revenue Agency (CRA) and IRS first cozied up. He says advisors and even some accountants are often not qualified to file properly on behalf of cross-border clients.

Read the full article here.

Retirement Q&A

Q: What exactly is probate, how does it differ from a will, and why do the banks insist on it, even with regard to pension plans?

We asked Neil Milton, a lawyer and registered trademark agent with Miltons Estate Law in Ottawa, to answer this one.

Probate is required to transfer assets. Probate, not a will, is what proves entitlement to be the transferor and who is entitled to inherit. So, to transfer a house, you usually need probate. Same for large unregistered savings. Banks usually require probate unless the amount is small and entitlement clear and definitely uncontested.

If the deceased had already retired, then whether there is a successor beneficiary and their entitlement is set out by the pension itself. Often there is a successor payment to a surviving spouse of the Canada Pension Plan (or QPP) member. Payments are made to the beneficiary usually and they can deposit how they wish.

In Ontario, this entitlement is governed in Ontario by the pension benefits act. Usually, if there is no spouse, no one gets a successor pension.

If the deceased died before retirement, then there may be a lump sum payment to a designated beneficiary or failing that, the estate of the deceased. Again, whether there is depends on the pension plan. Probate would be required if the payment is to the estate.

Interested in more stories about retirement? Sixty Five aims to inspire Canadians to live their best lives, confidently and securely. Read more here and sign up for our weekly Retirement newsletter.

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