Margaret and Jack both own their own homes and plan to marry next year. Margaret plans to work for another four years, when Jack plans to retire at the same time.Jimmy Jeong/The Globe and Mail
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When Margaret and Jack tie the knot next summer, it will be the second time around for both of them. She is 66 years old with two children, 29 and 32. He will be 71 next month and has no kids. Each has a house of their own that they plan to sell or rent out.
“I have struggled as a single mother but am now emerging into a much better situation, with independent children, a good salary with a pension and a wonderful partner,” Margaret writes in an e-mail. She recently got a raise in salary to $155,000 a year. She also gets $20,000 a year in net rental income from a suite in her home. Jack is self-employed, earning an average of $60,000 a year.
Although Margaret lives and works in British Columbia, she is a U.S. citizen.
“What might be the earliest age I could retire?” Margaret asks. Ideally, she and Jack would like to buy their “dream home” on B.C.’s Sunshine Coast. Margaret wonders if she should rent out her house for a few years. “I expect we would sell my current house when I retire, pay off the mortgage on the new house and have much more cash for our lifestyle and maybe some money for my children,” Margaret writes.
Margaret plans to work for another four years, to the age of 70. Jack would retire at the same time. Their tentative retirement spending target is $80,000 a year after tax excluding whatever mortgage payments they may have.
In this Financial Facelift, Jeff Ryall, a chartered financial analyst and certified financial planner at Cardinal Capital Management Inc. in Winnipeg, looks at Jack and Margaret’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
Expecting to receive an inheritance? Here are some common pitfalls to watch out for
An inheritance is not often received in the happiest of times, writes staff reporter Pippa Norman in this Personal Finance article. While mourning the loss of a loved one or dealing with family politics, it can be challenging to think clearly when faced with an influx of money.
One of the biggest mistakes that people make, say experts who deal with family inheritances, is acting abruptly, leaving themselves in a position they come to regret later. Patience and a well thought-out plan can help ensure any newfound wealth is used wisely.
With the great wealth transfer under way in Canada, Chartered Professional Accountants (CPA) estimates about $1-trillion will pass from baby boomers and their preceding cohort, the Silent Generation, to Gen X and millennials between now and 2026. CPA estimates it will be the largest generational wealth transfer in Canadian history and could have considerable downstream impacts on the country’s economic landscape.
For those on the receiving end of this transfer, Parveen Karsan, a tax, trusts and estate planning lawyer at McQuarrie Hunter LLP in Vancouver, said before spending any of their inheritance they should double-check that the estate they received it from is in the clear with the Canada Revenue Agency (CRA).
Beneficiaries can check this with the executor, who should receive a clearance certificate from the CRA before distributions are made, Ms. Karsan said. Generally speaking, this certificate is a good indicator to beneficiaries that they can be confident any debt owed by the estate to the CRA has been cleared.
However, she added there’s always a slight chance something comes up later, in which case the CRA may track down a beneficiary to help settle the matter. “Generally speaking, the more time put between the passing of the deceased and the time the beneficiary starts spending the money, the safer the beneficiary is going to be.”
Read the full article here.
Are we trending toward an average life expectancy of 100? Why we might not be
The life expectancy of Canadians has been increasing for decades, but some aspects of this phenomenon are not well-known. In this Charting Retirement article, Frederick Vettese, former chief actuary of Morneau Shepell and author of the PERC retirement calculator (perc-pro.ca), looks at the longevity of those from age 65 and beyond.
In case you missed it
The age of breakthroughs: The art and science of aging well
There is widespread apprehension that as we age, we lose our hearing, sight and balance, says Thomas Verny, in this Health and Fitness article. We lose our independence and are confined to spend our “golden years” in a long-term care facility. Not an enticing prospect.
There is no denying that like the soles of the shoes we wear daily, the cells in our bodies gradually wear out, he adds. At the same time the body’s garbage collection mechanism – the immune system – deteriorates. As a result, dysfunctional cells and proteins start to accumulate in the body and affect negatively many tissues and organs.
While there are no surefire ways to avoid these processes and the afflictions they may cause, says Verny, there are scientifically supported lifestyle choices and measures that have been found to increase your (and my, we are in this together) chances to stay fit, healthy and happy to a ripe old age.
Healthy aging and longevity are modulated by a lucky combination of genetic and non-genetic factors. Studies have demonstrated that about 25 per cent of the variation in human longevity is due to genetic factors. And, of course, luck also plays a role.
Keeping that in mind, Verny takes a look at factors – from sleep to stress to social connections and more – we can control.
Adopting these strategies will significantly improve your chances of staying active, healthy and living independently to a ripe old age.
Launch of ALDAs, return of GMWBs provide more decumulation options
In the mid-2000s, writes Jason Pereira, a senior partner and financial planner at Woodgate Financial in Toronto, a new longevity product hit the Canadian market: a segregated fund that came with the standard maturity and death benefits of 75 per cent or 100 per cent, plus an additional benefit – guaranteed income for life.
These were called guaranteed minimum withdrawal benefits (GMWBs). While these products have mostly fallen out of favour, advisors should know how they work for clients who still hold them.
More recently, a new twist on old-fashioned annuities known as advanced life deferred annuities (ALDAs) has hit the market, albeit slowly.
Here’s a breakdown of how these two options fit into the decumulation toolkit.
This is the second in a four-part series examining the decumulation product landscape in Canada and how advisors can explain the options to clients. Read Part 1 here.
See The Globe’s suite of calculators and planning tools to help you manage your retirement here.
Retirement Q & A
Q: Regarding the pension calculator on the CPP website. Does it calculate the projected pension payments for ages 60, 65 and 70 assuming zero earnings for the future years until you reach these dates? In my case, would the CPP website formula assume max contributions until I’m 60, 65 and 70, as I have been at the maximum for the past 32 years? For reference, I am 56 and my spouse is 62, who was at the maximum contribution for 27 years.
We asked David Field, a certified financial planner who runs Papyrus Planning in Mississauga, to answer this one.
A: The CPP retirement benefit estimates provided by Service Canada assume that individuals will continue contributing their average lifetime contributions (based on income) until starting the retirement benefit at 60, 65 or 70. This method is understandable as there’s no way to input any changes if you stop earning an income earlier or if your income exceeds your average lifetime earnings.
For you and your spouse, the result will be that your actual CPP retirement benefit will be lower than the estimates provided. Your result will be further off because you are nine years from 65 instead of three years for your spouse.
For this reason, Doug Runchey, owner and operator of DR Pensions Consulting in the Comox Valley, B.C., and I created the CPP Calculator website for a more accurate retirement benefit calculation based on your future contributions – or lack thereof.
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.
