Lauren Fonda in Ajijic, Mexico.Handout
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“I retired in 2021 at the age of 65 after a career teaching music and art – first in Saskatchewan and British Columbia, then internationally in Indonesia, Vietnam, South Africa, Saudi Arabia, Poland and Myanmar,” says Lauren Fonda, 67, in the latest Tales from the Golden Age.
Fonda had planned on retiring after her fifth international teaching contract ended in Poland, but a friend who managed international schools in Southeast Asia offered her a two-year contract teaching art at Yangon International School in Myanmar starting in August, 2019. A few months later, COVID-19 came along.
“Most international teachers, including myself, evacuated the country and taught online classes from other locations. After spending some time in Thailand, I moved back to my hometown of Medstead, Sask., and taught online classes out of my sister’s basement – in the same home where we grew up.”
In February, 2021, there was a military coup in Myanmar and, says Fonda, mayhem broke out across the country. “My students were traumatized, but they persevered. Then, my contract ended about a year later. It wasn’t how I wanted my 33-year teaching career to end, working online out of my sister’s basement, but the pandemic has thrown people many curveballs.”
She initially thought she would retire in her hometown, but after a while, she says, she realized she couldn’t live in that little town again after having lived and worked all over the world. “It would have been a good move financially, but not socially – not for me anyway,” she adds. “I then tried living in a larger town in Alberta where my brother, his wife and two of my international friends were living, but everybody was so busy working that I rarely saw them. I was lonely, depressed and bored, which was not what I had envisioned for my retirement.”
In November last year, she moved to Ajijic, Mexico, a small town on the north shore of Lake Chapala. “I chose Mexico because it’s a culturally rich country with friendly and welcoming people,” says Fonda.
Read the full article here.
Can Mitch and Michelle help their kids buy homes without jeopardizing their own retirement?
Mitch and Michelle are physicians – immigrants to Canada – near the end of their careers. Their work has taken them across different countries and continents. Michelle is 58 and Mitch is 60.
In 2014, they settled in Canada with their three children. Mitch retired from work but Michelle continued, forming a professional medical corporation from which she had been drawing a salary and dividends. She has scaled back her workload and is taking only a dividend this year.
Over time, Mitch bought three condos in the Greater Toronto area, the first of which has risen substantially in value. He and Michelle live in one, two of their children live in another and the third one they rent out. They also have sizable holdings in their self-directed investment accounts.
“We are thrifty people and want to know: After so many years of one-hundred-hour work weeks, can we finally spend time and money travelling?” Michelle asks in an e-mail. “Can we chip in and help our three children to buy their first homes with prices so high?” They ask whether they can give each child $200,000 without jeopardizing their own retirement plans. The children are 22, 25 and 28.
Michelle hopes to quit working early next year and wonders how best to begin drawing down their various accounts. Their retirement spending goal is $120,000 a year after tax.
In this Financial Facelift, Barbara Knoblach, a certified financial planner at Money Coaches Canada in Edmonton, looks at Mitch and Michelle’s situation.
Want a free financial facelift? E-mail finfacelift@gmail.com.
What are the odds I will die alone?
In the latest Charting Retirement article, Fred Vettese, former chief actuary at Morneau Shepell and author of Retirement Income for Life, takes a look at the chances of being survived by a spouse here.
In case you missed it
A last-minute plan for those on the verge of retirement
Planning for your golden years doesn’t have to scare you, writes Report on Business reporter Ian McGugan in this retirement package. The reality of retirement is far more positive than people think. McGugan answered commonly asked questions about planning for life after work. Here’s one to start. How can I fix a broken retirement plan?
Don’t despair if retirement is a decade away and you’re not quite where you want to be financially. You have options.
The obvious one is to save more. If that’s not possible, consider working longer.
“The way the retirement math works, working a few years longer can make a huge difference,” says David Aston, author of The Sleep-Easy Retirement Guide. Delaying retirement gives you more time to save. It gives your investments more time to grow. And it means your savings don’t have to support you for as long.
On top of all that, working longer may allow you to defer Canada Pension Plan (CPP) and Old Age Security (OAS) past the standard start at age 65. Those who put off collecting CPP until 70 will collect 42 per cent more a month than if they started at 65. In the case of OAS, 36 per cent more.
“If people are worried about the future, CPP is the best guarantee they are going to get,” says Bonnie-Jeanne MacDonald, director of research for financial security at the National Institute on Ageing. “It’s safe from market crashes, it’s safe from inflation, it’s safe from financial scams.”
Read the full article here.
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This grocery calculator will help you spot ways to squeeze inflation out of your food bill
What’s the impact of inflation on your food spend at the supermarket? The recipe for a financially lean grocery list is well-known: It usually includes changes such as swapping meat for legumes and trading some fresh produce for the frozen kind. But while those substitutions will lower your overall grocery bill, they won’t necessarily protect you from price increases.
That’s because food inflation can hit inexpensive staples. For example, global disruptions to the supply of wheat can cause price hikes for products such as bread and pasta. If you’re looking for more ways to shield your grocery cart from inflation, it pays to look at how prices for different product types have changed in recent years.
In the fresh produce aisle, for example, you’ll find that the prices of many fruits and vegetables regularly see wild swings, while bananas have a remarkably steady track record.
This calculator will help you spot more ways to squeeze inflation out of your bill.
Retirement Q&A
Q: I’ve decided I want to spend more of my retirement savings on things like travel and my grandchildren. I’m wondering if I should direct my adviser to take it from my RRIF, TFSA or taxable account. I’d like to minimize the amount of tax I’m paying, if possible.
We asked John DiSabatino, portfolio manager and investment adviser at The Donath & DiSabatino Wealth Management Group, BMO Private Wealth, in Markham, Ont., to answer this one.
As a starting point, it’s essential to work closely with a knowledgeable financial/tax adviser who can analyze your specific financial situation, goals and tax considerations. They can help tailor a withdrawal strategy that aligns with your unique retirement objectives to minimize tax implications.
Intuitively, you might ask why not just draw from TFSAs as a first step? The main reason why you would not do this is to preserve the amount of capital you have available to compound in a tax free manner. Typically, the first place to seek additional funds would be your taxable investment account where you may be able to draw funds from earned income generated and already subject to tax. Sources include the following:
- Capital Gains: Selling investments in taxable accounts may trigger capital gains tax, which is based on the profit made from the sale.
- Dividends: Dividends earned from investments in taxable accounts are subject to preferential dividend tax rates.
- Interest Income: Any interest earned in taxable accounts is taxed as ordinary income.
If your cash flow requirements are not fully met from these distributions, additional capital could be raised by trimming and/or selling existing investments that do not trigger capital gains. This can sometimes be accomplished by selling multiple positions with gains and losses that offset each other. If available, you could also utilize realized capital losses carried forward from previous years.
After exploring options with taxable accounts, the next step then would be to withdraw from your Tax-Free Savings Account (TFSA). Some key features of TFSAs are:
- Tax-Free Growth: Investments within TFSAs grow tax-free, and withdrawals are also tax-free.
- Contribution Limits: TFSAs have annual contribution limits, and any excess contributions may result in penalties.
- Replenishing Contribution Room: If you withdraw from your TFSA, you can replenish the contribution room in future years.
As a last step, you could ponder drawing funds from your Registered Retirement Income Fund (RRIF) for amounts over and above your mandatory minimum annual withdrawals. Since withdrawals from RRIFs are treated as taxable income, the amount withdrawn will be added to your regular income for the year at your highest marginal tax rate.
Some final thoughts and considerations when withdrawing investment funds:
- Assess your current tax bracket to determine the potential impact of withdrawals from taxable and RRIF accounts on your overall tax liability.
- Estimate your future tax brackets to gauge the impact of RRIF withdrawals, especially considering government pension benefits like CPP and OAS, which can affect taxable income.
Please remember that tax rules and regulations may change over time, so it is crucial that you stay informed and adapt your withdrawal strategy accordingly.
The Globe and Mail
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