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Karen Sawyer, pictured with her rescue dog, Harper, in Mississauga, has plenty to do since leaving her bank job two years ago. 'I didn’t expect to be this happy in retirement,' she says.GALIT RODAN/THE GLOBE AND MAIL
Karen Sawyer, 61, of Mississauga, retired in May, 2022 – three months shy of her 60th birthday – after more than 20 years working in customer loyalty at one of Canada’s big banks. Her decision was driven in part by the aftermath of the pandemic, she says, in this Tales of the Golden Age article. “My husband has autoimmune conditions and was in the hospital for a while after getting COVID-19. It made us reassess our priorities and reminded us that life is short. My husband retired a month before I did.”
Before retiring, Sawyer worried about what she would do all day when she was no longer working. “I was concerned I would be bored and maybe even slip into depression,” she says. To try and avoid that, Sawyer researched retirement ahead of time, mostly for ideas and to learn from others’ experiences. “One thing that stuck with me was the question, ‘What do you want your legacy to be?’”
Sawyer has always been passionate about volunteering, so she started researching and writing to organizations where she thought she’d like to donate her time. “It almost backfired as I quickly became too busy in retirement, volunteering at various organizations and not taking enough downtime,” she adds. “So, I’ve adjusted to balance my life – although I still struggle with finding more ‘me time.’ My friends tell me I’m failing at retirement!”
Sawyer says she also likes to try new things in retirement to see if she will enjoy them. “I started working out with a personal trainer, which is something I still do.” She has also made a concerted effort to reach out to friends and family, including those still working, and organize social gatherings. It feels amazing to bring people together, she adds.
“I worry a bit about finances because there are many unknowns, including market volatility and inflation,” she says. “My husband and I were both previously married and have four kids between us.” Like many parents today, Sawyer and her husband support them with housing costs because it’s difficult for young adults to get into the housing market.
She’s always had an advisor to help her make money decisions. “I relied on him to help me determine when I could stop working and how much I could spend in retirement.”
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.
Can Clive and Clara, 65, meet their retirement goals after he was laid off?
“We had a Financial Facelift done just over 10 years ago and would like to do another as life doesn’t always go as planned,” Clara writes in an e-mail. “My husband was laid off late last year, and even though we are both 65 years old, he was hoping to work for another three to five years to finish paying off our mortgage and to build up our investment portfolio.”
Clara and her husband, Clive, have four grown children and a house in an Ontario city valued at $950,000. The mortgage outstanding is about $88,000. Clive had been working in tech sales.
Clara has retired from her job in health care and is getting a defined benefit pension of $27,600 a year indexed to inflation. Clive, who worked in tech sales, had a group registered retirement savings plan. He received a severance package, and they had some savings in their emergency fund, “but that has run out and we have had to pull from our RRSPs,” Clara writes.
Clive is finding it difficult to find work at his age. “If he is not able to get a job in the next few months, how should we proceed with our living expenses?” Clara asks.
They have held off taking Canada Pension Plan benefits, but to ease cash flow problems they have started to draw Old Age Security benefits. They wonder when would be the best time to start CPP. Should they pay off the balance of their mortgage when it comes due in two and a half years?
They’ll need a newer vehicle soon (about $50,000) and are planning some renovations to their house ($150,000) over the next few years, Clara writes. Their retirement spending goal is $100,000 a year, falling to $80,000 a year after the mortgage is paid off.
In this Financial Facelift, Warren MacKenzie, who prepared the previous Financial Facelift for Clara and Clive, looks at their situation. Mr. MacKenzie is an independent certified financial planner. He also holds the chartered professional accountant designation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
Thoughts for people who love managing their money, but worry about advancing age
There’s a tipping point where people who have managed their finances and investments over a lifetime question their ability to carry on as they age, writes Rob Carrick, personal finance columnist, in this Carrick on Money article. “I know this from the flow of e-mails from readers in this situation,” he says. The question they all ask: What options are there for getting help? For answers, Carrick checked in with Marc Seguin, author of Advocacy in Aging: Building your team for the seamless transition of personal care and estate management.
Read Carrick’s Q&A with Seguin here.
In case you missed it
Overtaxing the rich can lead to problems
There’s no shortage of government rhetoric claiming the rich aren’t paying their fair share of taxes, writes Tim Cestnick in this Tax Matters article. He notes that, according to the 2024 federal budget: “The wealthy are currently able to benefit from tax advantages that middle-class Canadians and, especially, younger Canadians are rarely able to benefit from.”
The types of “tax advantages” the government is referring to includes, most recently and notably, capital-gains tax rates, he adds. Taxes on capital gains have been lower than on regular income since income taxes were introduced in Canada in 1917. According to Cestnick, our current government would have you believe this is ludicrous.
He also notes that the government doesn’t mention the risks one assumes, or the jobs one creates, when investing in businesses, equities, real estate and other assets that have the opportunity for capital growth – and also the potential for loss.
The problem is, if you overtax the rich, they may simply stop hanging around.
Read the full article here.
Early retirees, here’s how to get at least 39% more CPP
Two powerful forces collide in the decision about when to start Canada Pension Plan benefits as an early retiree, says personal finance columnist Rob Carrick, in this Opinion article. To start, there’s the 36-per-cent reduction in benefits at 60 compared with 65. Can you fix this by retiring at 60 and waiting until 65 to start CPP?
This brings us to the second powerful influence on CPP retirement benefits for early retirees. The calculation used to determine your actual benefit reduces your payout if you have a certain number of years with zero earnings during your working life. If you retire at 60 and delay the start of CPP until 65, you add five zero-earning years to your CPP calculation. This in turn could work against your payout.
Pension consultant Doug Runchey recently dug into these numbers and came up with conclusions that support the idea of waiting until 65 to start CPP, even if you retire at 60.
“I can now say with confidence, that if you defer taking your CPP from age 60 to 65 and have no employment earnings during that period, your CPP will always increase by somewhere between approximately 39 per cent and 56 per cent,” Mr. Runchey wrote in a post on the RedFlagDeals financial forum.
Carrick takes a look at an example Runchey created for people who retire at 60 here.
Retirement Q & A
Q: Is it a good idea to draw down registered and non-registered assets before collecting the CPP and OAS, especially if you can wait to collect them until age 70? What are the factors to consider in this type of scenario? Would buying life insurance to cover the risk of postponing the CPP and OAS be a good idea? Does this scenario change if someone has a spouse?
We asked Rona Birenbaum, a certified financial planner (CFP®) and founder of Toronto-based Caring for Clients, to answer this one.
A: As with most financial conundrums, it depends on many factors. Broadly speaking, it can make sense to use savings for living expenses and defer CPP and OAS to 70, providing:
- You will continue to have liquid investments once the CPP and/or OAS start. I’m not keen on fully depleting savings to delay to 70. Maintaining some liquidity for expenses not covered by pensions and registered retirement income fund (RRIF) minimums helps prevent debt accumulation.
- There is at least a 25-per-cent chance that you will live beyond 82, and your CPP/OAS is an important component of your retirement income. Here’s a link to a table (page 4) that can help you assess longevity probability, assuming you’re of average health.
- You prioritize inflation-indexed income security over estate maximization.
You can purchase life insurance to top up your estate for any reason, not just to cover the risk of your spouse and/or estate beneficiaries losing out due to your premature death. It’s a costly way to mitigate this risk, but an analysis can provide a cost/value perspective on the concept.
For married couples who both contributed to CPP, election timing can, and often should, differ. The overall financial picture and age difference of the couple matter here. For example, imagine someone who would earn the maximum CPP benefit and their non-income earning spouse [the only marriage for both] is 15 years younger. Delaying to 70 would maximize the pension for as long as one of them is alive. If the younger spouse lives to 90, that would be 35 years of indexed pension income at the maximum level possible. If CPP is an important component of retirement cash flow, maximizing it in this situation makes sense.
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.
