Fred Lum/The Globe and Mail
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There was a time, back in the 1960s, when Jimmy Pattison seemed to most Canadians like a magic trick. He was driven by unknown forces. “A jumping-bean of a man” is how one writer put it. One minute he was the owner of a car dealership, and practically the next, he was a “tycoon.”
He’d bought an underachieving company selling outdoor illuminated signs and turned it into a conglomerate. A Vancouver newspaper called him a billionaire long before he’d actually achieved that status; it just seemed inevitable. By the mid-1980s he owned nearly 40 companies, all related to consumer goods or services, and still he wasn’t satisfied.
He was the kind of rich man who owned a yacht luxurious enough to host Prince Charles and Princess Diana, yet still checked the coin-return boxes of every payphone he passed. The latest Forbes estimate puts his net worth at close to $15 billion, though he never took the Jim Pattison Group public, so it’s hard to know for sure.
His value as an example of what any Canadian with an insatiable appetite for business success can achieve, however, might be immeasurable.
Read the full interview with Pattison for ROB Magazine here.
Ed and Patti, both 58, have defined benefit pensions. But without a spending plan, can they afford to retire early?
They’re also both itching to retire from their well-paying jobs. Ed works in education and Patti at a government agency, and their combined salaries total $204,000. Both have pensions indexed to inflation.
“I plan to retire on my 60th birthday in 2024,” Patti writes in an e-mail. Ed hopes to quit in 2027 when he turns 63. However, they plan to work part-time until they begin getting government benefits at age 65, although they’d prefer not to. Their short-term goal is to travel, heading to Europe in the fall and to a hot climate in winter.
They want to stay in their Maritime home as long as they can – then leave it to their two children, now in their late 20s. Their retirement spending goal is $80,000 a year after tax.
In the latest Financial Facelift, Matthew Ardrey, a certified financial planner and portfolio manager at TriDelta Financial in Toronto, takes a look at Ed and Patti’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com
How much do you need to save to have $75,000 in retirement income?
In the latest Charting Retirement article, Fred Vettese, former chief actuary of Morneau Shepell and author of Retirement Income for Life, looks at what it takes to generate $75,000 annually here.
In case you missed it
These four RRSP tips can help improve your retirement
A lot of people are do-it-yourself retirement savers – and that’s great, writes tax expert Tim Cestnick. Just make sure you’re doing things properly, he adds. Cestnick recalls the story of the 64-year-old man from Gumperda, Germany, who was arrested after drilling a hole through a neighbour’s wall in their duplex home. Turns out the man had spent two days trapped in his own basement after laying bricks to block an entrance but forgot to leave himself a way to get out. Oops. He didn’t plan that very well.
When it comes to RRSPs, says Cestnick, bad planning is not likely to get you arrested, but could affect your lifestyle later. He suggests you consider these ideas to improve the outlook for your RRSP savings.
Read the full article here.
How to manage RRIF withdrawals tax-efficiently to avoid ‘a hefty penalty’
What goes into a registered retirement savings plan (RRSP) must eventually come out and be taxed as income. Often, that happens after the RRSP has been converted into a registered retirement income fund (RRIF), at which point a specific percentage must be withdrawn every year.
Still, advisors employ many strategies to reduce taxes on RRIF withdrawals at or above the minimum – something that may be especially important as retired clients seek more income to meet higher costs driven by inflation.
Read the full article here.
Retirement Q&A
Q: I am 93, widowed, in a seniors home, with a lot of money in the stock market. My government pension is adequate to live on. I have two sons with families who are my beneficiaries. Should I just leave the money in the stock market as is or cash out before my eventual passing?
We asked Howard Kabot, Vice-President, Financial Planning, RBC Wealth Management in Toronto, to answer this one.
This question raises important considerations about the goals, as a future centenarian, you have for your estate, how much risk you’re taking and how taxes will be paid.
If you leave it all as is, your stocks will go to your estate when you pass. When your executor is settling your estate, they will need to decide how best to provide these assets to your beneficiaries. They could pass the stocks on to the beneficiaries without selling them, or sell them first, then pass that money to the beneficiaries.
Either way, there may be a tax liability that has to be paid when the estate is settled. That’s because when you pass, there’s a “deemed disposition” on your estate assets at “fair market value” – whether the assets were actually sold or not.
If the executor decides to pass the stocks directly to the beneficiaries, the taxes still must be paid by the estate and the executor must ensure there are enough funds to cover any potential tax liability owed. But going that route means there must be money available to cover the taxes, either from the estate or out of pocket from the beneficiaries.
Now, if you sell before you pass, then you yourself will need to pay the taxes on any taxable capital gains. But this might be the way to go here. Given your age, even though you’re in good health, you need to consider the risk you’re taking by keeping so much of your money in stocks, especially if your goal is to protect your estate value.
Even for younger people, it’s important to consider how much of your money you allocate to stocks, and how much you allocate to safer fixed-income investments. Generally, as you get closer to retirement, you want to allocate more of your money to fixed-income investments like bonds and GICs. It’s also worth considering that, right now, these safer investments are paying higher interest than they have for years.
Regardless, you should make sure you recently updated your estate plan, including your beneficiary designations and executor appointment in your Will, as well as your Power of Attorney. You should also get professional tax and investment advice based on your individual situation if you haven’t already.
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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