Brandy and Larry are concerned about leaving an estate for their children.Blair Gable/The Globe and Mail
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At age 64, Larry and Brandy want to “slow down and achieve a better balance in life” by working a little less at their successful consulting company, Larry writes in an e-mail. But with no pension plans, they worry whether they and their three adult children will be secure financially.
The children range in age from 24 to 33 and two still live at home. Combined, the couple are drawing a salary of $134,000 a year. They have a mortgage-free house in a major Ontario city as well as a cottage.
Like many parents, Brandy and Larry are concerned about leaving an estate for their children. “We want to help lift them up and leave a financial legacy,” Larry writes. Or gift it to them earlier, “at least enough money for weddings, additional education or house down payment and support.”
They have received conflicting advice which has left them feeling confused. “Our accountant says we will have to sell our house when we are 80 after drawing down all our investments,” Larry writes. “That was a shocking thought since we want to live in the house until we die.”
The opposing view from an estate planner: “You have no issue at all,” although they did recommend life insurance to cover estate taxes.
Their questions: “What is the most likely retirement scenario for achieving our goals? Is the family secure financially with no pension to draw on? Can we leave an inheritance to our children without having to sell the cottage?”
Their retirement spending target is $9,000 a month after tax, roughly what they are spending now, excluding savings.
In this Financial Facelift, we asked Matthew Ardrey, a portfolio manager and senior financial planner at TriDelta Private Wealth in Toronto, to look at Larry and Brandy’s situation. Mr. Ardrey holds the certified financial planner (CFP) and the advanced registered financial planner (RFP) designations.
Want a free financial facelift? E-mail finfacelift@gmail.com.
There’s a lot to talk about with aging parents. Here’s how advisors can help
By 2030, the oldest boomers will turn 85, while the oldest members of the Generation X and millennial cohorts will be 65 and 50, respectively. These older demographics mean more caregivers to aging parents will be needed, says Laura Tamblyn Watts, president and chief executive officer of CanAge, a national advocacy organization for seniors. But as people get older, it can be difficult for families to discuss strategies for seniors to age in place and manage estates.
Ms. Tamblyn Watts, the author of Let’s Talk About Aging Parents, spoke with Globe Advisor reporter Deanne Gage in a LinkedIn Live webinar about icebreakers for these important discussions and how advisors can help.
For more from Globe Advisor, visit our homepage.
An eight-step plan to help you stop feeling bad about your retirement outlook in these tough times
We have the makings of a retirement doom loop in the economic disruption caused by inflation and high interest rates, writes personal finance columnist Rob Carrick in this opinion article. Inflation stretched household budgets, and then high interest rates piled on. People know they should save for retirement but can’t. They feel hopeless and either disengage or make sketchy plans, he adds, such as relying on their home equity or working longer.
An inside view of this is found in the results of the latest annual retirement poll commissioned by the Healthcare of Ontario Pension Plan, or HOOPP, and conducted by Abacus Data. “Amidst a rising cost of living and persistent interest rates, Canadians’ retirement outlook is particularly bleak,” a news release about the poll says.
Asked if they had put money aside last year for retirement, 49 per cent of non-retired respondents said no, Carrick notes. The comparable number in the 2023 survey was 51 per cent, but there’s minimal optimism on view in the poll results. Almost six in 10 non-retired participants said they felt unprepared for retirement. Also, whatever stress men are experiencing, women are feeling it more.
HOOPP’s poll is about advocating for more pension coverage in the workplace, a topic Carrick will cover in an upcoming column. There’s some good news here. For now, we need to address the anxiety being felt today about retirement.
In this article, Carrick poses some questions to work through in assessing your retirement prospects, with thoughts on how to move things forward even in challenging times.
In case you missed it
On the occasion of its birthday, here are some not-terrible things about Canada
Negativity is in the air, writes Marsha Lederman, and it’s easy to get down on this country. We are constantly being force-fed a narrative about how broken Canada is – and this message, a Toronto by-election result this week suggests, can be rather effective in the vote-attracting department.
So, this Canada Day week, Lederman asks to please consider a few things that might make you feel slightly less hopeless about this country. “I won’t go into the obvious – the things that all Canadians unanimously agree are just wonderful and in absolute-zero need of fixing: the CBC, Air Canada, the TTC, the health care system, the Toronto Maple Leafs,” she says. “I could go on. But seriously, folks, there is much to celebrate here. I have plucked a few examples from these very (web) pages in an effort to offer some good, clean Canadian solace to Globe and Mail readers.”
Lederman admits the Ontario Science Centre is perhaps a tricky place to start. The Doug Ford government’s snap decision last week to permanently close what Globe architecture critic Alex Bozikovic calls Toronto’s “great Brutalist temple of childhood wonder” was not only devastating but so abrupt, leaving no chance to say goodbye. But the Conservative government, already eager to move the institution down to the lakefront, isn’t even going to try fixing the problem; instead announcing, just before a long summer, that the place was closed, forever.
So if you want to talk about broken things – roofs, governments etc. – this would be a fine example.
And then something amazing happened.
Read the full article here.
What happens when a Boomer tries Uber for the first time
Marcel Strigberger doesn’t adapt to change easily. He still has a land line, a Rolodex and a functional fountain pen. “I even write in cursive,” he says, in this First Person article. “I thought we had it all with the invention of the sticky note.” Strigberger adds that he’s especially uncomfortable with technology. “Unlike my kids, I do not constantly look at my cellphone. And I did not undergo my recent inaugural Uber ride lightly. I needed to get to the subway station. I was going to take a taxi but my son Daniel subtly suggested I try Uber. He said, ‘Go Uber, Dad. Enter the 21st century.’”
Strigberger had his concerns about using what he considered to be a non-taxi taxi. “To me, if I were to pay for a ride in a car, the car had to have a beacon on the roof. As well there should be a meter inside. I was somewhat flexible in that I would not worry about the cab’s colour though it would add reassurance if it were yellow.”
After some hemming and hawing, Strigberger asked his son to order one for him. “He told me I had to download an app on my mobile. Unlike a taxi, you cannot just call a simple phone number.”
It did not take long for Strigberger to get stumped in the downloading process, he says. “Fortunately, my 10-year-old granddaughter Laya came to the rescue.”
Read the full article here.
First Person is a daily personal piece submitted by readers. Have a story to tell? See our guidelines at tgam.ca/essayguide.
Retirement Q & A
Q: I’m 70 and retired. The last few years of inflationary increases on the cost of living have really affected my monthly income and I’m wondering if there’s a way to tap in to the equity in my home without having to sell?
We asked Mary Sialtsis, mortgage broker at Concierge Mortgage Group, serving the GTA, to answer this one.
A: Accessing the equity in your home without selling can be achieved in a few ways: take out a mortgage, home equity line of credit (HELOC) or take out a reverse mortgage.
With a mortgage and HELOC, you will have to apply through a financial institution and have to qualify based on your income. If your only source of Income is CPP and OAS, your overall limit on the mortgage or HELOC will be affected regardless of how much equity you have in your home. The main difference is that a mortgage will have a set payment each month for a specific amount of time (three-year or five-year term). Whereas, the HELOC will require a minimum monthly payment to cover the interest charge. Both of these will end up impacting your monthly cash flow and counter your goal of easing your cash crunch.
A reverse mortgage will allow you to access the equity in your home based on your age, not your income, and there is no payment required. You can set it up like a line of credit where you only withdraw from it what you need, when you need it, or you can take the lump sum up front.
Let’s take a look at the numbers:
If your income in retirement is CPP and OAS only, then your annual income before taxes is approximately $20,000 per year. If you are applying for a mortgage or line of credit, you would qualify for about $80,000 assuming you have no other debts aside from the mortgage or HELOC you are applying for.
A three-year fixed term mortgage of $80,000 amortized over 25 years would require a monthly payment of $475 and a HELOC with an interest rate at prime plus 0.50 per cent (equivalent to 7.45 per cent in today’s market) would have a minimum monthly payment of interest only, which works out to $490.
With a reverse mortgage, if you are 70 and your home is a semi-detached in Toronto, for example, worth approx. $1 million, you would qualify for $400,000. You could take it as a line of credit and withdraw as needed or you could take it as a lump sum. There is no payment required. The interest will accrue monthly and every six months it will be added to the balance and the next six months of interest will be calculated on the new balance. This is referred to as “Interest compounded semi-annually, not in advance.” Your home will continue to grow in value over time and that will (hopefully) offset any cost of borrowing from the reverse mortgage.
A reverse mortgage is a great tool to help you stay in your home and supplement your income in retirement. Everyone’s situation is different and I highly recommend you speak to a professional about your options.
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.
