Kate’s existing estate plan makes it likely that her children will quarrel over her estate, Mr. MacKenzie says.Sarah Palmer/The Globe and Mail
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Kate has a house in small-town Ontario, a cottage and substantial investments, so she is well fixed financially. Now, at age 76, estate planning is her most pressing challenge.
Kate and her partner share their home equally under a co-habitation agreement. While her partner helps with living expenses, they keep their investments separate.
Kate has two children, both in their early 40s, who will inherit her estate. “One is very good with finances and the other is not,” Kate writes in an e-mail. “One child could inherit outright, but I have to make alternate arrangements for the other,” – something that is not a cash payment, she adds.
Another key concern “is how to best protect my estate from being consumed by probate fees and income tax.”
Kate plans to continue travelling as long as she is able. While she plans to leave a substantial estate, she wants to ensure she has more than enough resources to pay for home care or a nursing home if she eventually needs it.
How can she arrange her financial affairs to put her mind at ease?
In this Financial Facelift, Warren MacKenzie, a Toronto-based certified financial planner, looks at Kate’s situation. Mr. MacKenzie also holds the chartered professional accountant designation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
Health and faith are the most valuable assets for this widowed retiree
Linda Bernier, 76, of Otterburn Park, Que., retired in 2012 when she was 64 years old, after spending 40 years working as an English teacher in French-language schools in Quebec and two years teaching French in England. “I retired because my husband became very ill. He died of cancer in 2015 at 63. Unfortunately, he never got to experience retirement.”
Bernier’s older brother also passed away in 2015, and she ended up spending a lot of time with her mother and her younger brother, both of whom lived in Montreal. They both died in 2017. “So,” she adds, “the first five years of my retirement were mostly spent looking after and spending time with loved ones, trying to bring happiness and joy into their lives that were winding down.”
Once Bernier was alone, she started travelling with friends. And she started spending money freely on housecleaning and weekly visits to the hairdresser, she says. “I also helped my only son buy his first house and contributed to his honeymoon in Japan. I don’t regret the expenses. I wanted to enjoy life more and to help others do the same.”
After eight years, up until the pandemic in 2020, Bernier spent the money left to her from her husband’s assets, including some life insurance and her savings. Today, she lives off pensions, which amount to about $51,000 a year after tax. “I’ve always been fairly frugal except for the extra spending I did after my husband passed away.” In her 50s, she took a financial planning course instead of listening to others.
“When I’m not travelling, I attend mass and volunteer at my local church,” says Bernier. “I also take daily walks, tracking my steps with the Apple Watch my son gave me. My health and faith are my most valuable assets.
“My advice for others is to stay healthy and not be afraid to visit the doctor regularly to ensure you stay that way,” Bernier says. And, she adds, “while many bad things are happening in the world around us, try to stay positive. It could help you live longer.
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.
I want to retire early, ideally a few years before I turn 60. Should I start RRIF withdrawals sooner, or later?
You are free to convert your RRSP into a RRIF at any age, writes John Heinzl in this Investor Clinic article. You will then be required to make minimum withdrawals starting in the year after you open your RRIF account, he adds. These withdrawals start small and generally get larger as you get older.
For someone aged 70 or younger, the minimum annual withdrawal is calculated according to the following formula: the RRIF’s market value, as of Jan. 1, divided by the difference between 90 and the person’s age, also as of Jan. 1.
For example, say you convert your RRSP into a RRIF in 2025 and that, as of Jan. 1, 2026, you are 59 and your RRIF is worth $500,000. You would be required to make a minimum withdrawal in 2026 of about $16,129, calculated as $500,000 divided by 31 (90 minus 59). That works out to about 3.2 per cent of your RRIF’s value that you would be required to withdraw.
Because the denominator in the formula gets smaller as you get older, the percentage of your RRIF that you are required to withdraw gets larger.
Read the full article here.
In case you missed it
Why women approaching retirement are worried about their finances
More Canadians are ho-hum about their retirement prospects, according to the 2024 Fidelity Retirement Report, the annual retirement study from Fidelity Investments Canada ULC. In this Globe Advisor newsletter, reporter Deanne Gage asks an expert to weigh in on the study’s findings.
Michelle Munro, the asset manager’s director of tax and retirement research in Toronto, says the firm started measuring Canadians’ retirement outlook in 2018. At that time, 80 per cent of those surveyed had a positive outlook, but this year only 69 per cent do.
Globe Advisor spoke with Ms. Munro recently about retirement in the face of affordability issues.
Were there any surprises for you about Canadians’ gloomy retirement outlook?
“We did a deeper dive into what’s driving the decline,” says Ms. Munro. And it’s the pre-retirees, those who are age 45 or older, as opposed to the Millennial generation, she adds. “We also found it’s women who are feeling the pinch more and feeling more negatively. Women who are pre-retirees were more likely to say, ‘I’m never going to retire, I’m going to delay retirement.’ They’re concerned about the rising cost of living. They’re also concerned about caring for other family members – more specifically, helping the next generation.”
Read the full article here.
For more from Globe Advisor, visit our homepage.
The question people planning their retirement keep asking: How much of my savings can I afford to give my kids?
There is literally no end to the financial cost of parenting, writes personal finance columnist Rob Carrick in this Opinion column.
It starts with gear for newborns and daycare bills and goes on. And on.
In a recent report from Fidelity Investments, 59 per cent of retirees surveyed said they were helping adult children financially, notes Carrick. One-quarter helped with day-to-day finances, and one in five helped with big purchases like a car or weddings. Sixteen per cent helped with money to buy a home.
Welcome to retirement in the 2020s, where one of the biggest planning questions is whether you can carve out some of your retirement savings for your kids.
Lance Howard, a certified financial planner in London, Ont., said conversations with parents prior to 2019 used to be about helping out their adult kids with a gift of $10,000 or $15,000. Today, his clients are looking at much larger amounts, particularly to help with a home down payment.
“Parents are now saying, we’ve done okay and we want to give our child $50,000 or $100,000 – what does that look like?” Mr. Howard said.
Read the full article here.
Retirement Q & A
Q: I’m turning 70 in October. When should I file the application for the CPP and Old Age Security (OAS)? Can I designate the month I want the payments to start?
We asked Chris Warner, wealth advisor at Nicola Wealth Management Ltd. in Victoria, to tackle this one.
A: Congratulations on the milestone birthday coming up. I suggest giving yourself an early birthday present and filing whenever is most convenient for you. After 70, there is no more deferral benefit for either the CPP or OAS. You’re effectively topped up in October.
You can choose which month you want the payments to start, which allows you to be tactical. You can file sooner than your 70th birthday and still get full deferral benefits so long as you elect to have the payments begin sometime after your 70th birthday.
You can file online through your My Service Canada Account, or using a paper application. I recommend filing online if possible, as it makes checking the status easier. The application process can take up to 120 days.
If you did file a bit late, there’s no cause for concern. You can claim CPP/OAS payments retroactively for up to 12 months prior.
Read more strategies in the Globe series, Planning for the CPP.
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.
