Maxine and Claude are in good shape financially, with savings, a mortgage-free house in the Greater Toronto Area and no debt.Tijana Martin/The Globe and Mail
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With his 66th birthday nearing, Claude hopes to retire from his $120,000-a-year job by year-end. His wife, Maxine, is 67 and working part-time. Her income varies.
They have three adult children, 30, 32 and 34, two of whom have moved back home.
Claude had a bout with cancer recently and as the main breadwinner, “I wish to make sure that there is a solid future with or without me in the picture,” he writes in an e-mail.
Maxine and Claude are in good shape financially, with savings, a mortgage-free house in the Greater Toronto Area and no debt.
“Another consideration – and one that is difficult to factor – is our two adult children who are still at home,” Claude writes. “Living outside of our home, both struggled with the cost of rent, food and transportation.” They help one son pay for $550 worth of medication each month that is not covered by his work benefits.
When they retire from work, Claude and Maxine want to “live and age in place and travel if possible,” Claude writes. Their retirement spending target is $90,000 a year after tax.
They wonder which savings and investment accounts to draw funds from first.
In this Financial Facelift, Steve Bridge, a CFP and advice-only financial planner at Money Coaches Canada in North Vancouver, takes a look at Claude and Maxine’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
How long can Canadian women expect to live?
In the latest Charting Retirement article, Frederick Vettese, former chief actuary at Morneau Shepell and author of Retirement Income for Life, takes a look at the life expectancy of women in Canada here.
The Liberals promised to increase the CPP survivor’s pension – here’s where we stand on that
The federal government is talking to the provinces about addressing one of the most disappointing features of the Canada Pension Plan, reports personal finance columnist Rob Carrick.
The Liberal election platforms of 2019 and 2021 both promised a 25-per-cent bump in the CPP survivor’s benefit, he notes, which is paid to surviving partners of CPP contributors. The Liberals have delivered on a promise to increase Old Age Security for people aged 75-plus, but the CPP survivor’s pension continues to pay little or nothing in some cases.
The Finance Department says the government remains committed to increasing the CPP survivor’s benefit by 25 per cent and is currently in discussion with provincial and territorial governments as part of a regular three-year review of the CPP.
With our aging population, Carrick adds, this country needs a public debate right now about all retirement benefits. Should the age for starting OAS be pushed back to 67 from 65? Do we need to be so aggressive in clawing back the Guaranteed Income Supplement (GIS) from low-income seniors if their incomes rise? And how do we help solo seniors, mainly women, who have either lost a partner through death or marriage breakdown, or been single their whole lives?
Read the full article here.
In case you missed it
Proposed tax changes in Canada could stifle large charitable gifts
“I know, I know. It’s not December yet, so why am I talking about charitable giving?” writes Tim Cestnick in this Tax Matters column. Well, he explains, the needs in the community and among charities don’t wane in the summer months, though donating often does. And to make matters worse, there are looming changes to our tax law that will undoubtedly affect the level of large gifts that are made to charities in this country.
Twenty-five years ago, in 1998, 25.8 per cent of Canadians claimed donations on their tax returns, notes Cestnick. In 2021, he adds, that figure was just 17.7 per cent – and the percentage continues to decline.
The good news? The total amount of donations has increased over that time to $11.8-billion from $4.3-billion. That’s because the number of very large donations, generally made by wealthier Canadians, has increased over the years. In fact, the rise in the level of gifts has exceeded inflation by more than double over that time.
So it would seem inappropriate to introduce tax laws that would negatively affect donations from wealthier folks. After all, tax rules that encourage charitable giving are not loopholes or tax schemes to somehow enrich the wealthy. When a person donates to charity, it costs them real money out of their pocket – even after the tax incentives.
Read the full article here.
Financial scams are evolving thanks to new technologies like AI. Here are three tips to protect yourself
Your daughter calls you, sobbing. She says she’s been kidnapped. Then a man gets on the phone and demands a $1-million ransom. There’s no way you can come up with that amount of money, but the kidnapper quickly drops the price to $50,000 in cash.
This was the scenario Jennifer DeStefano faced earlier this year in Arizona and the one she recounted in a Senate judiciary committee on June 13, writes contributing personal finance columnist Preet Banerjee. It was eventually revealed to be an elaborate scam when her daughter was located safe at home.
But, asks Banerjee, how was the call made with her daughter’s voice? Turns out it was allegedly manufactured with technology that can clone and synthesize any voice into repeating whatever you would like it to say.
While we are inundated with the wild and wonderful things technology can do, from applying real-time face filters on TikTok and Instagram, deepfake videos that allow us to see Arnold Schwarzenegger’s face seamlessly integrated onto other actors’ performances, or using ChatGPT to write essays for school, scam artists are similarly effective at using these technologies to steal money from people.
Think you’re immune?
Read the full article here.
Retirement Q&A
Q: My partner and I are both 66 and we don’t feel we have enough to retire in this era of longer lifespans combined with inflation. How do you advise those of us who want to stop working during this time of economic uncertainty?
We asked Howard Kabot, vice-president of financial planning at RBC Wealth Management Services in Toronto, to answer this one.
The only way to truly feel comfortable and to get peace of mind is to do a financial plan. “When can I afford to retire?” is probably one of the most frequent questions that we deal with. Making the decision to stop working can be onerous. There are so many variables to consider.
- How long will you live? Assume you will live to age 95, even 100 if it suits you. Let’s plan NOT to outlive our money.
- How much will you need? The amount you need can be based on a number of factors. Start with what you’re currently spending and sit down and prepare a budget. You may be surprised by what you learn. Take the number you arrive at and deduct those expenses that may disappear in retirement (e.g. will your mortgage be paid off?) and add in the extras (e.g., travel, hobbies, recreation, etc.). This final number will determine your annual retirement needs.
- Account for inflation. Inflation will increase your annual need every year. Be conservative but rational with your estimate. Somewhere in the range of 2% to 2.25% is reasonable.
- What are your sources of income? Are those sources guaranteed and dependable or somewhat risky? Government and private pensions, for example, would be considered reliable. Other sources of income like dividends and interest would be considered less so.
- How does your reliable income match up with your basic needs, i.e. food, shelter, clothing, etc.? You don’t want to rely on discretionary income to cover the basics.
- How do you envision your discretionary lifestyle? We’re talking about the fun part of retirement: the travel, recreation, entertainment, etc. that will require funding. You should be aiming to fund this part of your retirement from income over and above what is required to meet your basic needs.
- Plan for declining health. Retirement homes can be expensive. Alternatively, you may choose to have help brought into the home. Don’t be caught off guard by how much this will cost.
A good financial planning tool will give the user the ability to “what-if” their outcomes. If you find your initial inputs are leaving you somewhat short (i.e. running out of funds prior to age 95) then adjust your assumptions. Perhaps you’ll need to work a little longer or spend a little less. Ultimately you have the power to create the scenario that is best for you.
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. Read more here and sign up for our weekly Retirement Newsletter.