Neil and Lorraine Gregory in their garden at their Fort Erie, Ont. home on Oct 22.Fred Lum/The Globe and Mail
“I retired in 2017 after a career that included working as an Anglican priest, a hospital chaplain and an addictions counsellor,” says Neil Gregory, 79, in this Tales from the Golden Age article. “For the last 14 years of my career, I was a part-time teacher at Lake Superior State University in Sault Ste. Marie, Mich. My wife Lorraine was a math teacher at the same university and retired a year after me.”
The couple moved to the U.S. in 1991 – first to Maryland, then Pittsburgh, then Michigan – and knew they wanted to retire in Canada, he says. “My wife and I were both born and raised in Saskatchewan and, in our view, the U.S. is not a place to be old, sick or poor. We have a daughter who lives nearby in Niagara Falls, Ont. and a son in Pennsylvania.”
As part of their retirement plan, the couple bought a small home in Fort Erie, Ont. “We did a lot of renovations on the place before we moved there in 2020, including replacing a hazardous walkway, and tearing out a weed patch to plant a flower and herb garden,” says Gregory. They enjoy gardening, and grow fruits and vegetables to eat fresh and preserve over winter – and it helps them control the cost of food, he adds.
The couple saved for retirement for many years and live quite comfortably, says Gregory, with their various pensions. “Our Canada Pension Plan and Old Age Security cheques can meet almost all of our monthly living expenses.” Their American pensions, which are worth about 30 per cent more when converted into Canadian dollars, are just icing on the cake, he adds.
“I keep busy in retirement. I enjoy gardening and cooking from scratch with my wife, and I’ve found an oil painting group and will be doing more of that this winter. I’m also writing about the history of my hometown, Theodore, Sask.”
Retirement has been pretty much what they expected it to be, says Gregory. “My advice for others heading into retirement is to downsize if you can. Not only will you save money, but there will be less space for you to clean and maintain 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.
When should Colin, 64, and Jacki, 62, sell their rental property to help fund retirement?
As they contemplate retirement in a few years, Colin and Jackie have some questions. He is 64, she is 62. They have two self-sufficient adult children.
Colin makes $250,000 a year and Jackie $75,000 a year, both in financial services. They have a profitable rental property in addition to the family home in Toronto. Neither has a defined benefit pension.
“How should we manage future monthly expenses once we retire?” Jackie writes in an e-mail. “What are the best options available regarding liquidating various investments?” she asks. “Is there any need to sell the second property? Or is it a good option to sell the primary residence so that no capital gain is involved and live in the second property?”
They also wonder when to start collecting Canada Pension Plan and Old Age Security benefits. Their goals include “slowing down and achieving a better balance in life” and travelling as much as possible. Their retirement spending target is $132,000 a year, including mortgage payments.
In this Financial Facelift, Ian Calvert, a principal and certified financial planner at HighView Financial Group in Toronto, looks at Colin and Jackie’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
New tontines refresh an old decumulation solution
Tontines date back to 1653, when they were invented by their namesake, Lorenzo de Tonti, writes Jason Pereira, a senior partner and financial planner at Woodgate Financial in Toronto. But until recently, they hadn’t been seen for more than a century.
A tontine is a mortality risk-pooling arrangement. People enter into an agreement in which they forfeit all or part of the investment pool when they die. The survivors benefit by receiving a share at the end of a period or as part of an ongoing payment. This additional benefit beyond their return is known as mortality credits.
While many may take issue with the concept of benefiting financially from the death of others, this concept is at the core of what makes annuities and defined-benefit pension plans more affordable for members.
Anyone can access mortality credits through an annuity, but what makes a tontine different is that it doesn’t pay guaranteed amounts; instead, the payments are based on the performance of the underlying assets and the mortality results of the pool. And whereas with annuities the insurance company assumes that risk and charges for it, the risk is shared by the members of the tontine. That means there’s less certainty in payments, but there’s also more potential upside for the members because they retain the profit the insurance company would otherwise take.
Tontines became a reality in Canada in the spring of 2021 when Purpose Investments Inc. launched Purpose Longevity Fund. The following year Guardian Capital Group Ltd., with the aid of longtime tontine advocate Moshe Milevsky of York University, launched its Modern Tontine Trust.
While both products are tontines, they take very different approaches to using mortality credits.
Read the full article here.
This is the third article 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 and Part 2 here.
In case you missed it
The importance of setting money aside to pay final taxes and debts in an estate
When clients create estate plans, the focus is often on who gets which assets. But, writes Globe Advisor Deanne Gage, clients also need to consider an estate fund and how to pay liabilities, expenses and final taxes due upon death.
“They don’t anticipate the magnitude of the tax bill,” says Tanya Butler, a trust and estate practitioner at Touchstone Legal Inc. in Dartmouth, N.S. “They don’t think about the expenses, such as preparing a property to sell.”
Kevin Wark, managing partner of Integrated Estate Solutions in Collingwood, Ont., says an estate lawyer will typically highlight the probate fees and other tax liabilities that can arise in the estate. But he cautions that these lawyers may not run projections or recommend life insurance or other strategies to fund these estate taxes. “That should be a trigger for the client to look to their other advisors for assistance,” he says.
Kelly Ho, certified financial planner at DLD Financial Group Ltd. in Vancouver, says she builds estate funds within the client’s financial plan. She goes over all the client’s assets, a projection of their value, and then, with the help of financial planning software, she calculates the approximate taxes that will be owed on death.
“Even before I talk about funding the estate, I need to understand where the assets are intended to be going,” she says. “Then we come up with a strategy of how to pay for those taxes and other things.”
She says permanent life insurance policies are her main strategy to fund estate liabilities and taxes. A beneficiary for the policy is always listed so the insurance bypasses probate assuming the policy is personally owned. The beneficiary can expect the funds within a few weeks once a death certificate is produced, she adds.
Unfortunately, some clients don’t think about estate planning until they’re in their 50s or 60s – when permanent insurance to fund the estate becomes too costly, she says. Another option is selling assets such as non-registered investments and real estate to pay liabilities, expenses and taxes.
Read the full article here.
How to pick an executor – and why you should have a backup
The right executor can determine how smoothly, or disastrously, an estate is distributed. It’s a responsibility-rich role and akin to other hiring processes, experts say it’s worth taking the time to make sure the right person has the job.
From consent to character to family dynamics, there are a number of factors to consider before appointing an executor. While some simply require ticking the box of a legal qualification, others require a more in-depth analysis of interpersonal relationships. In some cases, experts say a neutral third party can prevail as the safest option.
Executors will play a key role in distributing what’s predicted to be the largest generational wealth transfer in Canadian history, according to Chartered Professional Accountants of Canada. An estimated $1-trillion of wealth will pass between baby boomers and their Gen X and millennial heirs between now and 2026, the umbrella organization for accountants says.
There are a few practical considerations that can help narrow down candidates for executor, said Aaron Pearl, a partner at Clark Wilson LLP. For example, they should be over the age of majority (which is 18 or 19, depending on the province or territory), likely to be alive and capable when the will maker dies and, preferably, live somewhat close so they can appear in-person for certain tasks such as clearing out a property. Also, if they live outside of Canada, they may be subject to additional tax-reporting obligations.
Just as important as these practical qualifications, if not more, is how trustworthy they are.
“You want to be able to trust that person or those people with stepping into your shoes, financially, to deal with your financial and legal affairs,” he said.
The most common mistake Mr. Pearl sees people make when picking an executor is not closely considering existing conflicts, especially if there’s more than one executor, and being optimistic that existing tension won’t continue or be exacerbated after death.
Read the full article here.
Retirement Q & A
Q: My husband and I are first-time snowbirds and exploring travel medical insurance options for the coming winter. Most of the policies we’re considering keep referring to “stability” periods, but we’re not sure what this means or how it could affect our coverage. Can you please clarify this?
We asked Stephen Fine, president, Snowbird Advisor, to answer this one.
A: Most – but not all – travel medical insurance policies available in Canada contain what is commonly referred to as a “stability” clause.
Policies that contain a stability clause require your “pre-existing medical conditions” to be “stable” for a defined period of time prior to the date you leave on your trip. The stability period varies from policy to policy, but is often 90, 180 or even 365 days leading up to your departure date (or trip “booking date” in the case of Trip Cancellation/Interruption Insurance). You can learn more about Pre-Existing Medical Conditions here.
The definition of “stable” can vary from policy to policy, so be sure to check your policy’s wording, but it generally means that the condition has not changed or worsened in any way.
If there are any changes to one of your pre-existing medical conditions during the stability period, that condition will be excluded from coverage, meaning your policy will not cover any expenses you incur that are related to that condition while travelling.
Keep in mind that depending on your policy wording, any changes really can mean any changes, including:
- starting or stopping a medication,
- increasing or decreasing the dose of a medication,
- seeing a doctor or receiving diagnostic testing about a potentially new medical condition, even if that condition has not yet been diagnosed.
Not meeting stability requirements is the number two reason why travel medical insurance claims are denied, so it’s essential that if your policy has a stability requirement, you understand and meet those requirements.
It’s also important to be aware that under a stability clause, any medical treatment for a condition related to an excluded condition would also be excluded from coverage.
To better illustrate this point, take the following example: Let’s say Mary has diabetes and her condition doesn’t meet her policy’s stability terms. In this case, it’s quite clear that Mary would not be covered for any treatment related to her diabetes while travelling.
What you may be surprised to learn is that Mary would also not be covered for any condition related to her diabetes. For example, if Mary was to have a heart attack while travelling, and the heart attack could be linked to having been caused by her diabetes, it is quite possible that treatment for her heart attack would also not be covered by her insurance, even though most people would consider diabetes and a heart attack to be two different and unrelated medical conditions.
There are options if you want to avoid potential issues with stability requirements. If you have pre-existing medical conditions, you should consider opting for a Personalized policy with NO stability requirement for pre-existing medical conditions.
While these personalized policies are not as well known or widely available as “standard” travel insurance policies, they can be a real lifesaver and are often the best option for many Canadian snowbirds, seniors, boomers and other travellers with pre-existing medical conditions, regardless of whether those conditions are stable or not.
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.
