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Meika and Floyd are inseparable: So it makes perfect sense that ‘Pink Floyd,’ a flame-point Himalayan cat with peachy-pink ears, nose and paws, and sandy-coloured, long-haired Meika with pale blue eyes, remain together should anything happen to their human caretakers. “The four-footed are part of our family, and we want to make sure they stay together once we’re gone,” says co-parent Terry Cooke, a retired University of Manitoba administrative worker.
To ensure that happens, the two cats are in her and her partner Wes Pastuzenko’s will, with a special provision dictating their beloved felines go to a no-kill shelter. “They have agreed to take them as a pair until they are adopted together, or stay there together until the end of their lives,” says Ms. Cooke, adding the will also sets aside money to pay for their cats’ care at the shelter.
At one time, Ms. Cooke and her partner’s pet-focused estate plan would have seemed a little eccentric. But such provisions are now commonplace, particularly among retirees who increasingly consider their furry friends ‘companions’ instead of ‘pets,’ says Toronto lawyer Barry Seltzer. Joel Schlesinger reports.
Should Ryan and Theo annuitize some of their savings to offset longevity risk?
Ryan and Theo enjoy an enviable lifestyle thanks in part to Ryan’s high consulting income, their mortgage-free house in small-town Ontario and the freedom that comes from being self-employed.
Ryan, who nets about $196,000 a year after business expenses, is 57. He wants to slow down significantly in three years. Theo, who is 65 and earns $25,000 a year after expenses, wants to stop working next year. While neither has a company pension, they have substantial savings and investments. Their jointly held stock portfolio generates $25,000 in investment income.
“Travel is our highest priority for the foreseeable future when we are both well,” Ryan writes in an e-mail. “Because we have no children, it is not a priority for us to leave a large inheritance to anyone,” Ryan writes. “Our plan is to use all our assets including the value of our primary residence, which would fund our long-term care in the last decade of our lives,” he adds.
Their main question is how to mitigate longevity risk. “Should we annuitize some of our savings?” Ryan asks. “If so, should we wait to do so later, say, when we dispose of our primary residence in 15 or 20 years? Or should we start doing so when we start full retirement?” They also wonder how to “decumulate” their assets in the most tax-efficient way. Should Ryan continue to make contributions to Theo’s spousal RRSP? Their retirement spending goal is $146,500 a year after tax.
In the latest Financial Facelift article, Ian Calvert, a vice-president and principal at HighView Financial Group in Toronto, looks at Ryan and Theo’s situation.
Dos and don’ts of borrowing against your home equity to invest
Paying off your mortgage is a lifetime ambition that represents financial freedom for many people. “For others, all that untapped equity is dead money,” writes Robert McLister, an interest rate analyst and mortgage strategist, in a column for the Globe.
“If you’re in the minority of homeowners who are disciplined with investments, financially secure, risk tolerant and don’t rely on home equity for retirement, a paid off home can work against you,” he says.
He notes the Canadian Real Estate Association pegs the average home value at $748,439 and the average homeowner has more than 72-per-cent equity, according to 2021 data from Mortgage Professionals Canada.
If we assume you borrow the maximum 80 per cent of that average home’s value, you’re left with about $394,000 in investable equity, Mr. McLister writes. “That’s assuming one is well-suited to such a strategy” – a key point he touches on in this latest piece that looks at the pros and cons of borrowing against your home equity to invest.
You have a will – but could your loved ones find it?
If you died suddenly, would your partner know where your will and insurance policy are, where you bank and where your investments are? What about more mundane things like who services the furnace in your home and who your plumber is?
In a recent newsletter, Globe personal finance columnist Rob Carrick asked readers if they have answered the ‘what happens to my family if I die suddenly’ question.
“My aim was to help people feel more in control of their lives by having a will and term life insurance,” Mr. Carrick writes in a recent blog post, in which he includes some additional advice from a legal expert.
In case you missed it
Why birdwatching has become the hot new hobby for seniors
Spring migration, winding down to retirement and the pandemic made a birder out of Diana Gibbs.
In May, 2020, the Toronto resident went with a birdwatching friend to the park on the Leslie Street Spit on Lake Ontario. Ms. Gibbs, now 66, was beginning to retire from her career fundraising for human rights and social justice organizations. “The woods were just alive with sound,” Ms. Gibbs says. “It was really quite striking … a memory that stayed with me.”
Ms. Gibbs joined the legions of Canadians who have discovered the joys of birdwatching, a flexible and addictive hobby that’s growing in popularity during the pandemic. Birds Canada reports that the online bird checklist platform, eBird Canada, saw a 30 per cent jump in people submitting data between 2019 and 2020, says Jody Allair, the organization’s director of community engagement. The number jumped another 14 per cent to 31,961 users in 2021, he says. Kathy Kerr reports.
What you need to know about getting a knee replacement
Bill Stevenson has been waiting years for a new left knee. The active 84-year-old, a former civil servant, had his right knee replaced seven years ago. “I played squash three times a week for about 25 years,” he says. “The surgeon thought all that stopping and starting wore out the meniscus in my knees.”
The right knee surgery happened fairly quickly, but the procedure for the left has been pushed back several times due to COVID-19. Mr. Stevenson is trying to stay positive, but his lack of mobility is frustrating. “I use a cane if I’m going more than half a block,” he says. “After a block, I have to slow down and rest.”
Mr. Stevenson is one of thousands of Canadians waiting for a knee replacement, a procedure that even pre-pandemic had wait times of six months or more, according to the Canadian Institute for Health Information. Anna Sharratt reports.
Ask Sixty Five
Question: I am hoping to retire in a couple of years at age 60 and have multiple income sources including almost $1-million in registered accounts including an RRSP, LIRA and TFSA, and roughly $1-million in investments through my incorporated consulting business. I don’t have a company pension, nor do I have any non-registered personal investments currently. My plan is to delay CPP and OAS to age 70. I live comfortably off about $45,000 a year. Given this information, what sources should I withdraw from first when I retire? Or should it be a combination of the registered/business income sources? It probably goes without saying, but the goal is to do the withdrawals as tax-efficiently as possible so that my money lasts as long as possible. Any advice would be appreciated. Thanks.
We asked Jingchan Hu, a partner in the tax group at Crowe Soberman LLP, Chartered Professional Accountants to answer this one:
While there’s no “one-size-fits-all” answer to the most tax-efficient combination of retirement income withdrawals, there are several considerations to think about regarding your specific situation:
1. Investment breakdown between RRSP/LIRA/TFSA accounts: Withdrawals from RRSP/LIRA accounts are fully taxable at your marginal tax rates, but TFSA withdrawals are non-taxable. Deferring withdrawals from RRSP/LIRA accounts allows for those investments to continue growing tax-free. However, remember that at the end of the year in which you turn 71, the RRSP/LIRA accounts must be converted to a RRIF or annuity and mandatory minimum withdrawals must be made in the following years. If a significant portion of your registered investments are in RRSP/LIRA accounts, consider drawing down on those accounts to reduce the future minimum mandatory withdrawals.
When considering your $45,000 yearly cash flow needs, you may be able to only withdraw from your TFSA on retirement and pay no tax for several years. Consider whether you want to minimize current tax, or if you also want to minimize the tax payable on your passing.
2. Investment income earned and accrued gains on investments held in the incorporated consulting business’ investment account: Investment income earned in a corporation is taxed at high rates. When a shareholder withdraws funds from the corporation (in the form of a dividend), some of the corporate tax paid on the investment income is recoverable. Individuals are subject to tax at marginal tax rates. Based on your required level of personal cash flow, your personal rate of tax on the dividends paid to you by your corporation will result in a reduced overall investment income tax rate. If you have no other sources of income in the year, you can receive about $30,000 of non-eligible dividend income from your corporation without paying personal income tax.
3. Final income tax: The remaining value of your RRSP/LIRA accounts are fully taxable on your death as well as the value of your incorporated consulting business. TFSA accounts are not taxable at death and can be left to your beneficiaries tax-free. Make sure that you methodically draw down on the value of your RRSP/LIRA and shares of the consulting business (in the form of dividends) over your retirement years to guarantee that you pay current tax at your lower marginal rates and reduce your ultimate tax liability at death. This allows the value of your TFSA to grow tax-free, which can be left to your beneficiaries.
Have a question about money or lifestyle topics for seniors, or want to suggest a story idea for the Sixty Five series? Please e-mail us at firstname.lastname@example.org and we will find experts and answer your questions in future newsletters.