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Sara is age 58 and basking in the glory of a job that pays more than $370,000 a year in total remuneration, including bonuses, salary and vested shares. “I haven’t always made that much,” she writes in an e-mail. “The last few years … have been very prosperous for me.”
Sara and her husband, Rob, want to retire in two years. Rob, who is 57, is self-employed and makes more than $60,000 a year. He also earns net rental income of about $50,000 a year.
They have one child, age 19, who is going to college and is home on weekends and during the summer.
Rob and Sara own their Toronto house outright. The rental property has a small mortgage that they plan to pay off while they are still working and have surplus cash flow.
“We want to have 10 years of good travel from age 60 to 70, with one big, three-month trip per year,” Sara writes. They also plan to buy a new electric vehicle.
Once they sell their house, they plan to buy two new properties: a condo in downtown Toronto and a townhouse north of Toronto on Georgian Bay near hiking trails and the Blue Mountain ski slopes. Their son would share the city condo and help cover the costs. “We would budget $900,000 to $1-million [cash] for each,” Sara adds.
They plan to sell the rented house in a decade or so “to support our retirement from age 70 onwards.” Their retirement spending target is $120,000 a year after tax.
In this Financial Facelift, Warren MacKenzie, a fee-only certified financial planner (CFP) and chartered professional accountant in Toronto, looks at Rob and Sara’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
What happened to all the 50-year-olds?
In this Charting Retirement article, Fred Vettese, former chief actuary at Morneau Shepell and author of Retirement Income for Life, looks at Canada’s changing demographics and the rise or fall in certain age-specific trends and how they might impact retirement here.
New series explores the decisions behind the timing of when to take CPP benefits
When the Canada Pension Plan (CPP) was introduced in 1966, it was in response to concerns that too many Canadians were retiring poor. Almost six decades later, and following a handful of reforms and updates, the CPP – or the Quebec Pension Plan (QPP) for those in Quebec – remains a cornerstone of most Canadians’ retirement portfolios.
A tough decision for many Canadians is when to start taking their CPP benefits to optimize the money they contributed during their working years. Research, including an informal Globe and Mail survey conducted in November, shows the most popular age is 60 – the earliest possible.
Of the 946 people who responded to the survey, 34 per cent took their CPP benefits at age 60, 19 per cent at age 65 and 16 per cent at age 70. The number of people who took it at ages other than 60, 65 and 70 ranged from 4 to 8 per cent. The early-taker results were roughly in line with Statistics Canada data provided to the Globe showing that, as of September 2023, almost 40 per cent of Canadians born between 1940 and 1950 started taking their CPP benefits at age 60. The early CPP take-up is happening despite traditional advice that Canadians wait longer – to age 70 if possible – to receive a higher payout.
Read the full story here.
The series will be ongoing. If you have any CPP story suggestions or feedback on the series, please leave a comment in the stories or e-mail us at: globecpp@gmail.com.
Calling all DINKS (dual income, no kids)
Globe reporter Salmaan Farooqui wants to know how living as a couple without kids has changed your financial planning, from how you spend your money to how much (or how little) you work. To share your story, e-mail sfarooqui@globeandmail.com.
‘Being an advisor is a lifestyle,’ says this financial planner, who uses inclusive experiences to connect with clients
In the Behind the Advice series, we ask advisors about their relationship with money from a young age, lessons learned over the years and how their experiences influence the advice they give clients today.
In this article, Ryan Chin, a certified financial planner (CFP) with Peridot Financial Solutions Corp. at Sun Life Financial Investment Services (Canada) Inc. in Hamilton, talks to Globe Advisor reporter Brenda Bouw about growing up in Barbados, being vision impaired and how investing in an MBA changed his career path:
Describe your first money lesson.
I was born in Guyana and grew up in Barbados with a single mother who worked two jobs to help keep me and my brother fed and clothed. It’s a developing country and can be a hard place to make ends meet. I learned early in life that you need to work really hard to get ahead, and there was little room for financial waste. We lived a very minimal lifestyle, often going without things we wanted and needed.
How did this influence your relationship with money?
I was always reticent to spend money. I still am. I’m a big bargain hunter. While attending university in Ontario, I ate a lot of peanut butter sandwiches and Kraft Dinner. About two or three days a week, my friends and I would study and eat at a Chinese buffet. I found ways like this to stretch my dollars.
What’s your biggest money mistake, and what did you learn from it?
About 20 years ago, I lent $3,500 to a friend. Unfortunately, he never paid me back, and we’re no longer friends. I chalked it up as a life lesson. I should’ve also put the transaction in writing.
Read the full article here.
For more from Globe Advisor, visit our homepage.
In case you missed it
The first four months of the year are a ‘danger zone’ for TFSA contributors
Every year, financial planner Travis Koivula has clients who look at their TFSA information on the Canada Revenue Agency website and conclude they have more contribution room than they thought.
“We have to stop them and say, no, actually the website is wrong,” he told personal finance columnist Rob Carrick.
Mr. Koivula, he adds, calls the first four months of the year a “danger zone” for making deposits to tax-free savings accounts. During this period, CRA shows TFSA contribution room for the current calendar year that can be based on incomplete information. Contributions you made to your account in the previous calendar year will likely not be reflected until March or April.
The importance of up-to-date information on contribution room cannot be overstated for busy people who are avid TFSA users. If you lose track of how much you’ve added to your TFSA in the past year and act on the amount displayed by CRA right now, you put yourself at risk of a penalty of 1 per cent of your excess TFSA contribution per month.
Read the full article here.
Use our TFSA Contribution Limit Calculator to quickly see how much room is available for you in 2024
Give your RRSP a big boost every year without needing more cash
Last week, Tax Matters columnist Tim Cestnick stopped to talk to his neighbour, Kevin, who told him that he’s starting to feel old as he gets closer to retirement.
“But Kevin, you’re only 48 years old – you’ve got a lot of years ahead of you,” Cestnick said.
“Tim, when I go for a jog pretty much everyone zips past and leaves me in the dust,” he complained. “Well, at least you’re keeping out in front with your retirement savings plan,” I replied, recalling Kevin’s annual exercise in RRSP-boosting.
With a pretty straightforward approach, Kevin manages to give a big bump to his RRSP contribution without having to set aside the extra cash. Here’s what he’s been doing.
The idea
For several years, Kevin had been contributing about $8,000 a year to his RRSP. The problem? Kevin, like a lot of Canadians, was eager to contribute more, but didn’t have the cash on hand to do so. So, Kevin promised himself that he would take his tax refund, resulting from his RRSP deduction each year, and contribute that as well.
While this improved Kevin’s retirement savings significantly, he then learned how to contribute even more to his RRSP without having to sacrifice his current cash flow. He’s been doing this for the past decade by using an idea known as the RRSP gross-up strategy.
Read more about this savings strategy here.
Retirement Q & A
Q: I have a margin account that’s worth a considerable sum. Can I make it a joint account with my two adult daughters? After my death, what are the tax implications of this? Or, should I just keep it only in my name and nominate them both as equal beneficiaries after my death? Will the holdings in the account be sold first and then passed on to them? What would be the most effective way of handling this?
We asked Tannis Dawson, vice-president, high net worth planner, TD Wealth
If you add your two daughters to your joint account, CRA will consider that you have sold two-thirds of your account and you will have to report two-thirds of any capital gains on your tax return and then all three of you would share any future investment income. Any one of the three owners would have access to the account and could make changes or access funds. By adding your daughters’ names, you may also be making the account subject to any creditors or future family asset claims that may come up. If this is a true joint account, then on your death, the account would transfer to the daughters’ names jointly. But any gains on your final one-third interest would be included on your final tax return.
If you want your daughters just to have ease of access if you are unable to handle the account, the use of a Power of Attorney might be a better option and then indicate in your will who you would like to inherit the account. The estate will have to pay any taxes owing but the executor can decide to cash the investment in or transfer in kind to your daughter. You can only indicate beneficiaries on registered accounts like RRSP/RRIF/TFSA, etc.
Just adding names to an account does not ensure the account goes to those people unless proper steps are taken, but you should ensure it fits in with your overall estate plan. Also, you will want to consider the new trust reporting rules, too, so consult with your accountant or financial advisor.
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.
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