Chloe Ellingson/The Globe and Mail
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At age 55, with her consulting business growing, Mitra wonders if it makes sense for her to incorporate. Her revenue is $174,000 a year “trending toward $200,000,” she writes in an e-mail. After business expenses and income tax, she nets about $122,200 a year.
“The thought is that if I incorporate and keep earnings in the business, I can pay it to myself later – from age 65 to 70 – as dividends and defer Canada Pension Plan benefits and RRSP withdrawals to stretch out retirement income,” Mitra writes. “It would also allow me to better manage my personal income levels and subsequent taxation.”
Mitra has a mortgage-free condo in the Toronto area, cash set aside for renovations, a new vehicle and an emergency fund, as well as registered savings.
“I love what I do so it is not a hardship to continue working to 65,” Mitra adds. If she incorporates, should she pay herself dividends or a combination of dividends and income, she asks. Money retained in a corporation can be paid out entirely either as a dividend or income.
Another question is whether she should put off drawing from her registered retirement savings plan (RRSP) until she turns 71, the age limit for converting it to a registered retirement income fund (RRIF), and begin making minimum mandatory withdrawals at 72. “Or maybe I should draw down the RRSP sooner to minimize tax.” Her retirement spending goal is $80,000 a year after tax.
“Is it really worthwhile to incorporate given my circumstances, or is it just six of one and half a dozen of another?”
In this Financial Facelift, Ian Calvert, a certified financial planner and principal at HighView Financial Group in Toronto, looks at Mitra’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
I’m a naturopath specializing in women’s health. Here’s how I grocery shop for menopause-friendly meals
Welcome to The Globe’s new series, What’s In My Cart?, where we’re asking Canadians how they stock their kitchens.
“You are what you eat” may be a cliché to some people. But, writes Daniel Reale-Chin in this article, for naturopathic doctor Priyanka Gupta, that is exactly the advice she gives to patients at her women’s health clinic in Toronto’s west end.
Nutrition is also particularly important to the 47-year-old practitioner, who is among millions of women in Canada experiencing menopause.
Gupta says menopause is one of her biggest concerns – a sentiment shared by many women going through this transition. But a healthy diet can help reduce symptoms.
When it comes to nutrition, Gupta says “the biggest thing women should be focusing on is protein.” A high-protein diet can help women maintain a healthy insulin level and reduce menopausal belly fat, which is associated with increased hormone-related malignancies such as endometrial and breast cancers.
Her own diet prioritizes protein sources such as fish and legumes, antioxidant-rich fruits such as berries, and whole grain carbohydrates such as brown rice, which she says is less likely to cause blood-sugar spikes.
Here’s how Gupta shops for healthy, menopause-friendly meals.
Ottawa’s disability benefit risks helping provincial coffers more than low-income Canadians, critics say
Ottawa’s new benefit for people with disabilities risks becoming an indirect financial transfer to many of the country’s provinces and territories if more jurisdictions don’t take steps to avoid automatic clawbacks of social-assistance payments that will be triggered by the federal income support, experts warn.
The Canada Disability Benefit, or CDB, will provide up to $2,400 a year – or $200 a month – to eligible low-income beneficiaries, the federal government announced in its April budget, says personal finance reporter Erica Alini in this Investing article. The amount was far below what many people with disabilities and their advocates had expected from a program the Trudeau government had promised would lift hundreds of thousands of vulnerable Canadians out of poverty.
But recipients of the new income support who live on social assistance will stand to see little or no financial benefit at all without amendments to provincial and territorial regulations that currently would trigger a reduction of their welfare incomes for every dollar they receive from Ottawa, experts say. Without those changes, the federal funds would simply translate into lower spending on social assistance, padding regional government coffers rather than helping those with disabilities.
Read the full article here.
In case you missed it
Letters of wishes, videos help clarify estate planning decisions
To reduce family infighting over inheritances, more clients are writing letters of wishes as part of their estate plans to clarify their intentions, writes reporter Deanne Gage in this Globe Advisor article. These letters explain how and why the client divided their assets the way they did, which may look inequitable to the heirs.
David Burnie, certified financial planner at Ryan Lamontagne Inc. in Ottawa, has seen more appetite for these letters in his practice. He attributes this to clients who need to address surviving family members left out of their will or receiving a smaller inheritance than anticipated.
He even has clients who have moved beyond letters to record video statements. While letters of wishes and videos are not legally binding, they may help the person drive home their intentions and decision-making process, he says.
Like a will, the letters and videos are traditionally read or viewed by heirs after the family member’s death. Unlike a will, which becomes a public document once probated, letters of wishes and videos can be kept private and confidential, which is appealing to some families.
“But the fact that it’s not legally binding needs to be expressed to the client,” Mr. Burnie says.
One benefit to letters and videos is that, unlike a will, they can be updated without any cost or formalities.
Mr. Burnie recalls one client with three adult children who all have different outlooks on life.
“She wanted to put together a ‘don’t even try to challenge the will after I die’ type of video,” he says. “She’s clear in what she wants done, no one’s manipulating her. I think the video will offer that extra benefit. It offers clarity.”
Read the full article here.
For more from Globe Advisor, visit our home page.
Two risks of taking too many risks with your TFSA
For those unfamiliar with the TFSA, it’s like the inverse of an RRSP, writes Mark McGrath in this Personal Finance article. With an RRSP, you are using pre-tax dollars, which means you can deduct your contributions from your income for tax purposes. When you withdraw from your RRSP – ideally in retirement – the withdrawals are taxable.
With a TFSA, you use after-tax dollars to contribute.
It’s a choice between paying tax on your income now (with a TFSA) or later (with an RRSP).
Your TFSA money can be invested in a variety of ways, including stocks, bonds, mutual funds and exchange-traded funds. The growth in your TFSA investments is then tax-free, forever.
But that tax-free growth is exactly where some go astray. The allure of massive, tax-free investment returns makes many investors salivate at the potential upside. They buy high-risk investments such as individual growth stocks, dreaming of hitting a tax-free home run.
And they rarely consider that they might strike out. But historically, most individual stocks perform pretty poorly – the growth in global stock markets has been driven by a small handful of companies with exceptional performance over time.
Given how rare it is that a stock produces outsized returns, investors should be careful in taking on too much risk to grow their TFSAs. Besides the obviously painful outcome of earning poor returns, there are two other less obvious issues with swinging and missing.
Read the full article here.
Retirement Q & A
Q: I am in the home stretch at work, but I’m feeling a little hesitant about leaving the work force; it’s not so much the money, more what I am going to do with myself. I know I should be enjoying this time, but I need a bit of help switching gears. Any suggestions?
We asked Barbara McGibbon, facilitator of the “Transition to Retirement” course through the Toronto District School Board’s Learn4Life program, to answer this one.
A: When you say you’re in the home stretch at work, you don’t mention how long it will be until you retire. Regardless, you are wise to think about your future before you’re in it.
Ideally avoid an abrupt change – working full-time one day, relaxing at home the next. If possible, bridge yourself to retirement. Some choose to work part-time in their last months, others choose to take a long vacation, return to work briefly, then retire – this depends on how flexible your job is.
Set things up for yourself before retirement: A friend who recently went into retirement advised “join three things before you leave employment.” Humans need to belong to something, and to have a purpose. Join a club, sign up to volunteer at something that interests you, take up a sport or creative endeavour. This is when you can do the things you always wanted to but didn’t have time for.
If possible, try things out: One couple rented a downtown condo for a few months to see how they liked it before selling their suburban home and moving. Retirement is different for everyone, what works for your neighbour or co-worker might not work for you. You are wise to think about retirement before you get there, read, talk to others, try things out.
Taking a course or talking to a counsellor can help you narrow down what kind of life you’d like in retirement and determine how to put it in place.
The next ‘Transition to Retirement’ course starts in the fall tdsb.on.ca/Adult-Learners/Learn4Life. McGibbon also teaches ‘Aging in Place’ through the Toronto Hostels Training Centre, thtcentre.com/
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.
