Is this couple’s retirement date realistic, given their spending goals? Plus, cracking the secret code to lifelong happiness

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Noah and Amelia wonder if they can afford to retire next year and still maintain their comfortable lifestyle. Noah is 61 and works in education, earning $110,000 a year. Amelia is 59 and works in social services, earning $80,000 a year.

Noah has a defined benefit pension plan that will entitle him to $62,400 a year including a bridge benefit of about $8,000 a year to 65. Amelia has a defined contribution pension plan with a market value of about $600,000. They have a mortgage-free house in Toronto.

“We would ideally like to take two vacations a year to a warm destination,” Noah writes in an e-mail. They may consider part-time work if “the numbers don’t work the way we need them to,” he adds. They have two children. “We would like to be able to help them out financially with small monetary gifts every once in a while if possible.”

Their retirement spending goal is $102,000 a year after tax, the same as they are spending now, excluding pension plan contributions. “Given our retirement goals and expenses, is our retirement date realistic?” Noah asks.

In the latest Financial Facelift, Ian Calvert, a certified financial planner, and a vice-president and principal of HighView Financial Group of Toronto, takes a look at Noah and Amelia’s situation.

Want a free financial facelift? E-mail finfacelift@gmail.com

What living to 100 means financially for kids and grandchildren

He’s 85 years old and now expects to live to 100. As a result, writes personal finance columnist Rob Carrick, changes must be made in how generous he and his wife are to their adult children and grandkids.

Meet a loyal Globe reader from Northern Ontario who we’ll call William. He’s one of a bunch of people who check in now and then to share their thoughts on money and life. Recently, William included Carrick in a family e-mail that caught his eye because it’s so matter-of-fact practical.

If he’s going to be living longer than he previously thought, Carrick says, he’ll have to be more cautious about spending his savings.

Read the full article here.

How to create a legal will in Canada

If you have anything of value – whether it’s savings and investments, a vehicle, a home, heirlooms, other assets – or if you have a child or even a pet, you need a will. Why? If you die without one, the courts will decide who inherits your possessions and property based on the estate laws in your province, and you’ll have no say as to who ends up looking after your dependents (including the furry ones).

There are a few ways you can go about drawing up a legal will. You can hire an estate lawyer, use an online or printed will kit, or even write one by hand (in most parts of the country). Each method has its pros and cons, and there are some important things to know and look out for.

Read the full article here.

In case you missed it:

We cracked the happiness code. Why are humans still a mess?

We might improve society, our jobs, or ourselves. But the question now, says columnist Tom Rachman, is whether we humans – brilliant enough to crack the happiness formula – will have the sense to follow it.

Rachman notes that awful feelings have been on the rise for a decade, according to the Gallup Negative Experience Index, surveying more than 125,000 people in dozens of countries, asking whether they suffered stress, pain, anger, sadness or worry the previous day. Meanwhile, the proportion of respondents defining their lives as the worst possible has quadrupled in the past 15 years.

Not all is bleak, though. Away from our fretting, experts have been toiling to crack the formula for happiness. If successful, they could transform society, alter the blather of politicians, perhaps even fix you (well, partly).

Read the full article here.

Should the minimum age to receive CPP be increased?

The Quebec Pension Plan (QPP) is currently undergoing a broad review, something that takes place every six years, write David Boisclair and Colin Busby of the Retirement Savings Institute at HEC Montreal. Experts are being interviewed and big issues will be debated. In 2023, Quebec is asking how it can improve or modernize the QPP, providing insights for its sibling plan, the Canada Pension Plan (CPP), which covers residents across the rest of the country.

Given that many countries around the world are revising their public pensions to grapple with the challenges of baby boomers entering retirement, an issue under review is whether the minimum retirement age should be increased. After all, the U.S. is gradually increasing the social security retirement age, which is now 67 for those born in 1960 or later, and France is proposing to increase its minimum age to 64, which would be up from age 60 in 2011.

Quebeckers and Canadians can apply for pension benefits at age 60, something that has been the case since the mid 1980s, but is this still suitable for our current context?

Read the full article here.

Retirement Q&A

Q: I am considering immigrating to the U.S. to live with my son and his wife. I am 78 and in fairly good condition. I draw OAS, CPP and a defined pension benefit. I would be applying as a family-class immigrant. Will I need a financial advisor and/or immigration lawyer to guide me through this process, as well as advise me on the legal and financial implications of collecting my pensions outside Canada?

We asked Kirsten Kelly, Partner, Immigration Law, and Pinaki Gandhi, Senior Tax Manager, both at KPMG Canada, to answer this one.

You would benefit from immigration, financial and cross-border tax advice before moving to the U.S. Look for separate counsel, as immigration and tax are highly specialized and complex areas. Consult with a U.S. immigration attorney and review the information online from the U.S. government. Most state bars have online tools to help you find local specialists. Confirm that the attorney you choose is in good standing with the state bar – there are a number of immigration scams and frauds, so make sure you use trusted sources.

Canada’s tax system is based on residency, so if you immigrate to the U.S., it could impact your residency status for Canadian tax purposes. If you are intending on ceasing income tax residency in Canada, generally, you should sever residential ties to Canada. That might entail disposing of personal property, and limiting social ties and other secondary ties to Canada (such as cancelling provincial healthcare coverage and your driver’s license).

For U.S. income tax purposes, you will be considered an income tax resident if you obtain a green card or spend a significant number of days in the U.S. Once you meet U.S. residency tests, you are subject to federal taxation on worldwide income. Canada also imposes a departure tax, which deems a departing taxpayer to have disposed of their worldwide assets at fair market value. This can give rise to a capital gains tax liability at the time of departure. The departure tax, however, would not be applicable to your Canadian home, if you own one, and interest in your pension plan, though may apply to other assets.

In general, your pension distributions will continue to be subject to a flat, non-resident withholding tax in Canada. Although the pension income will be taxable in both Canada and the U.S., the U.S. will allow a credit for the Canadian taxes paid, so you should not be subject to double taxation. OAS and CPP are only taxable in the U.S. under the Canada-US income tax treaty as though they are benefits paid under the U.S. system.

Seek advice from a cross-border tax professional before departing Canada, so that you can structure your affairs efficiently in the year of departure, any ongoing filing requirements to report Canadian sources of income, as well as any beneficial elections that may be made with your tax returns. You should seek further advice to ensure any Canadian-based investments you hold do not carry adverse U.S. tax consequences.

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.

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