For Anne Swan, 59, pictured by the waterfront in downtown Toronto, the pending question of retirement has caused a lot of anxiety.Laura Proctor/The Globe and Mail
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Anne Swan retired at the end of 2023 after an almost 40-year career in the pharmaceutical industry. “When my last project ran its course, I decided to step out of the corporate world,” says the 59-year-old in this Tales From the Golden Age article. “I loved my experience in the industry, but I’m not sure I want to jump back into another full-time career with all the commitments, stress and strain that go with it.” Also, she says she has no interest in climbing the corporate ladder at this point in her life.
Swan agonized over the decision as she’s not sure if she’s truly finished working. “Retirement feels so final,” she says. “So, instead of declaring myself retired, I’m taking what I call an ‘adult gap year.’” While she is 90 per cent certain she won’t return to corporate life, she’s giving herself the space to figure it out. “I’m a few months in, and it has been a bit of a roller coaster. Most days are better than I expected, but other days I’m bored and lack direction. I can only handle so much idle time.”
For some people, the transition away from work seems easy, she says. “For me, the combination of turning 60 this year and the pending question of retirement has caused a lot of anxiety,” she adds. “I am a two-time widow and mother to three kids and two stepkids, all almost adults. I know life is short. I want to live it fully, and sitting at someone else’s desk isn’t going to get me where I want to go.” Swan feels that, as long as she’s healthy, there’s another full chapter ahead of her.
“I’m taking this year to get reacquainted with myself and do things I enjoy. My partner also recently retired but, unlike me, he has no anxiety over the decision at all. He has a lot of hobbies and is happy with life at a slower speed.”
Swan’s advice to others thinking about retirement is to be patient. “It sounds corny, but give yourself some time and space to be in the moment and to roll through the highs and lows.”
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.
How long can Larry and Bonnie keep their cottage after retirement?
Larry is a skilled tradesman earning $110,000 a year. His wife, Bonnie, earns $15,000 a year working part-time for a local retailer. They are both 65.
As well as about $600,000 in savings, Larry and Bonnie have a mortgage-free house and cottage in Ontario. They have three adult children, two of whom live at home.
Larry plans to retire in July, while Bonnie plans to keep working part-time until the age of 70.
They hope to keep both their house and cottage for at least another decade. “We expect we may have to hang on to them longer to use as a safety net for our kids who can’t afford the cost of housing,” Bonnie writes in an e-mail. They hope to help their children with education expenses, rent if needed, and “early gifting” as part of their inheritance.
Bonnie and Larry have managed their own investments and are looking to possibly convert all or a portion of their RRSPs into registered retirement income funds, or RRIFs, starting this year, Bonnie writes.
After Larry leaves the work force they plan to spend summers at the cottage and winters snowmobiling or skiing in British Columbia, she adds.
Should we consider delaying Larry’s Canada Pension Plan and Old Age Security benefits and instead withdraw larger amounts from our RRIF between age 65 and 70?” Bonnie asks. Their retirement spending goal is $65,000 a year.
In this Financial Facelift, Ian Calvert, a certified financial planner and principal at HighView Financial Group, takes a look at Larry and Bonnie’s situation.
Seven ways the 2024 federal budget affects your finances, from selling your cottage to RESPs
The Trudeau government had already announced a slew of affordability initiatives ahead of the release of its 2024 federal budget, but there were also a number of pocketbook measures in the spending plan that Ottawa had mostly kept mum about, writes personal finance reporter Erica Alini in this personal finance article. Arguably the biggest surprise was a proposed increase in the capital gain inclusion rate, a change the government says will boost revenues by raising taxes on the wealthy but experts warn could also hit some middle-class taxpayers.
Ottawa also provided a target start date for the much-anticipated Canada Disability Benefit for low-income, working-age Canadians. Aside from the well-telegraphed array of new housing policies, the budget outlined a smattering of small tax benefits and consumer protection measures, from tweaks to the alternative minimum tax to changes to registered education savings plans (RESPs).
Read some of the highlights on the key measures that affect Canadians’ bottom lines here.
In case you missed it
Here’s how tax planning changes once you retire
For many working Canadians, filing taxes is relatively straightforward: You get a T4 slip from your employer, maybe make a deduction for contributing to your registered retirement savings plan (RRSP), and perhaps claim the odd credit, depending on the current tax rules.
However, writes Brenda Bouw in this Globe Advisor article, your tax picture can get more complex in retirement, given the new and varied income sources. These often include workplace pensions, RRSPs, registered retirement income funds (RRIFs), locked-in retirement income funds (LRIFs), Canada Pension Plan (CPP) and Old Age Security (OAS) benefits, non-registered investment accounts, and maybe some extra cash from part-time or occasional work.
“The more buckets you have, the more flexible you are in controlling your income levels … The key is figuring out which buckets to take money from and when,” says Brianne Gardner, financial advisor and co-founder of Velocity Investment Partners at Raymond James Ltd. in Vancouver.
She says Canadians need to be more strategic in the decumulation stage of life to minimize their taxes not just from year to year but for the longer term, while also factoring in tax changes.
“Nobody has it planned out perfectly, but a rough idea helps us forecast ‘what-if’ scenarios and different tax planning strategies,” she says.
Owen Winkelmolen, an advice-only financial planner and founder of financial planning firm PlanEasy.ca in London, Ont., divides the planning into three age categories: pre-65, 65 to 70, and 72 and older.
“Your tax picture changes depending on your age, what income phase you’re in, and your income sources,” he says.
Read the full article here for a look at some of the tax considerations for retirees in each of these three phases.
For more from Globe Advisor, visit our homepage.
Seven ways to leverage a tax refund into big savings or gains
The Canada Revenue Agency reports that close to two of three people who filed their taxes already have received a refund, and the average amount is $2,113, writes personal finance columnist Rob Carrick. That’s enough to do something for your personal finances with lasting benefit. Here are some ideas:
• Add the money to the down payment for your next vehicle purchase: Financing a new vehicle these days is alarmingly expensive as a result of high interest rates and prices. The more you put down, the less you need to borrow.
• Add it to a child or grandchild’s registered education savings plan: Contribute $2,113 to an RESP and you get $422.60 added to the plan via the Canada Education Savings Grant. A guaranteed 20 per cent return.
• Add it to your registered retirement savings plan: Puts you on the path to another tax refund for the 2024 tax year, plus you benefit from tax-free compounding in your RRSP over the years.
For more ways to leverage a tax refund, read Carrick’s advice here.
Retirement Q & A
Q: Your columns often deal with waiting until 70 to claim CPP but little is said about RRIFing an RRSP. What are the best steps when considering to RRIF all or part of an RRSP? If I RRIF an RRSP, can I still maintain control of the investments if my RRSP was self-directed and continue to decide how to maintain cash for the withdrawals? Can I reverse the RRIF if I deem it useful?
We asked John DiSabatino, portfolio manager and investment advisor at The Donath & DiSabatino Wealth Management Group, BMO Private Wealth, in Markham, Ontario, to answer this one.
A: Thank you for your question. When considering whether to convert part or all your registered retirement saving plan, or RRSP, into a registered retirement income fund, or RRIF, it’s crucial to take several steps:
- Assess your retirement needs: Determine your retirement income requirements, including living expenses, health care costs, and any other financial commitments. Consider how converting your RRSP to a RRIF fits into your overall retirement plan.
- Understand tax implications: Converting your RRSP to a RRIF triggers taxable income, as withdrawals from a RRIF are considered taxable income. Evaluate how this will impact your tax situation both now and in the future.
- Evaluate withdrawal strategies: Decide on a withdrawal strategy that aligns with your retirement goals and financial situation. Determine how much you’ll withdraw annually from the RRIF and how you’ll manage the investments within the RRIF to support your income needs.
- Consider investment control: If your RRSP was self-directed and you want to maintain control over your investments, ensure that the financial institution where you convert the RRSP to a RRIF offers self-directed options. Confirm that you can continue managing your investments according to your preferences.
- Review withdrawal rules: Understand the minimum annual withdrawal requirements for RRIFs, which are based on your age and the value of the RRIF. Ensure that these rules align with your income needs and financial goals.
- Consult with a financial advisor: Seek guidance from a financial advisor or tax professional who can provide personalized advice based on your specific circumstances. They can help you evaluate the pros and cons of converting your RRSP to a RRIF and assist you in developing a retirement income strategy.
- Review reversal options: Under certain circumstances, it may be possible to transfer an excess amount – above the minimum RRIF withdrawal – from a RRIF back to an RRSP. You must be under the age of 71. Discuss this type of transfer with your tax/financial advisors to see if you qualify.
One additional benefit to consider when converting your RRSP to a RRIF is the pension tax credit. The pension tax credit is available to individuals aged 65 or older who are eligible for pension income, including income from a RRIF. The credit amount is calculated as 15 per cent of eligible pension income up to a maximum amount. For 2024, the federal maximum pension income amount eligible for the credit is $2,000. Therefore, provided you have sufficient pension income, a maximum federal pension income tax credit of $300 ($2,000 maximum amount x 15 per cent) is available. You may also qualify for provincial pension tax credits as well. It’s important to note that the actual tax savings will depend on various factors, including your total income, other tax credits and deductions you may be eligible for, and the specific tax rates in your province or territory.
Before making any decisions, it’s essential to evaluate how the pension tax credit may apply to your specific situation and consult with a tax professional. They can provide personalized guidance on maximizing tax benefits in retirement, including the potential advantages of converting your RRSP to a RRIF and utilizing the pension tax credit.
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.
