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Amid rising values for recreational properties, not to mention annual costs such as taxes and upkeep, the unhappy challenge for many older Canadians is how to sell the cherished family cottage without upsetting their children.
For some, the decision to sell might be financial, as the attendant costs of property ownership only go higher. For others, it could be health reasons, the death of a spouse or the reality that for all the wonderful memories the property created, the kids and grandkids don’t use it enough to justify keeping it.
Regardless of the underlying reasoning behind any sale, letting go can be a lot more difficult than selecting an agent and listing the property.
“The biggest difference I find between urban real estate and recreation real estate is the emotional attachment people have to their recreational properties,” says Rob Serediuk, an agent with Sotheby’s International Realty Canada who specializes in cottage properties in Ontario’s Haliburton and Muskoka regions.
He notes that prices for vacation properties soared during the pandemic when people began working remotely. Now, with urban property prices retreating with higher interest rates, he expects more recreational property to come on the market.
“There are a lot of people that are on the fence on whether or not they want to sell,” he says. Paul Brent reports
A cottage succession story to learn from
When it comes to your cottage, there’s no one-size-fits-all succession plan, writes Tim Cestnick in the Globe. In this article, he shares an approach taken by one couple whose kids are getting by just fine as they share the cottage mom and dad left to them.
Retired university administrator seeks satisfaction over self-indulgence
In the latest Tales from the Golden Age feature, Wendy Bonus, 80, of Thornhill, Ont., talks about why she and her husband Hal retired in their 50s, despite warnings they’d be bored.
“A number of friends said to us at the time, ‘I’ll never retire because I love what I do for a living.’ We had jobs we enjoyed, but they weren’t our identity. We wanted the freedom to follow some of our passions and the opportunity to do different things,” she says.
“There’s a saying that you shouldn’t retire from something but rather to something, and we did just that. But I didn’t want retirement to be one long round of self-indulgence; I was afraid of not being productive, and volunteer work took care of that.”
Calling all retirees: Are you a retiree interested in discussing what life is like now that you’ve stopped working? What are the highs and lows of leaving the so-called rat race? How has retirement evolved for you? Globe Investor looking for people to participate in its Tales from the Golden Age feature, which looks at the realities of retirement living. We’ll also ask you to offer some advice for others in retirement, or those considering it. If you’re interested in being interviewed for this feature, please e-mail us a few details about your retirement life so far at: firstname.lastname@example.org
Should this 60-something couple take out a reverse mortgage on their house?
In their 60s with their house their main asset, Milo and Maeve are finding it tough to get by on government benefits alone. Maeve is age 66, Milo 69. They both earn a little extra working part-time.
“There is about $410,000 in equity in our home, but we are low income seniors and can’t get a line of credit,” Maeve writes in an e-mail. “We have no private pensions, investments or dividends.” Their situation is not unusual.
They are hearing conflicting reports about reverse mortgages, “but for a couple like us, with no kids to worry about leaving money to, it seems to make sense,” Maeve writes. “We would like some cash on hand for expenses like vet bills for our kitties, new eyeglasses for each of us and perhaps the occasional short trip.”
Their goal is to stay in their house as long as possible by “adapting it to our needs as we age,” she adds. It means adding a main floor bathroom. Because they are an hour or so from Toronto, the rental market in the small town where they live is “incredibly tight,” Maeve adds. They don’t want to sell, “but we don’t have a nest egg to help with unforeseen home costs like the new furnace we just got!”
Does a small reverse mortgage make sense? In the latest Financial Facelift column, Warren MacKenzie, head of financial planning at Optimize Wealth Management in Toronto, looks at their situation.
Interested in being featured in the Globe’s Financial Facelift feature? E-mail us about your unique financial situation at email@example.com.
In case you missed it
What older parents should know about paying for their child’s wedding
People are getting married later in life, a trend that’s giving parents who pitch in more time to save. However, financial advisers caution the cost comes at a time when parents might need to earmark the money for themselves.
Being close to retirement “can make it difficult to take a big chunk of money and hand it over, even if it is for a celebration you want to help your child with,” says Jason Heath, managing director of Markham, Ont.-based Objective Financial Partners Inc.
“Often, I end up having discussions with clients about how much they can help out their children, whether it’s for a wedding or otherwise, without compromising their own finances.”
The good news for parents with children heading to the altar is that wedding costs are now often spread out among family members. In the past, a bride’s parents traditionally paid for the wedding and reception, and the groom’s parents for the rehearsal dinner and bar. Times have changed. Many couples are chipping in to cover their own wedding costs.
“They have established their careers, which means that they’re also in a very different position financially than couples would have been 30 years ago,” wedding planner Karina Lemke says. Dene Moore reports
Why some retirees go back to work
Cherie Catena returned to work after retiring once before – and she’d like to do it again. The 67-year-old worked at Xerox from 1974 to 2013, when she was laid off with a severance package in her late 50s.
“I wasn’t planning on retiring,” says the resident of St. Catharines, Ont. “I got up in the morning and sat in my condo and thought, ‘Oh my god, what do I do?’”
After a stint working in retail, she got a job with a Xerox dealer and worked another eight years before being told, once again, that it was time to retire. That was last year, and after a winter without work, Ms. Catena is itching to get back in the game. She says she was always so focused on her work that she didn’t explore many extracurricular activities, and now she doesn’t know where to start.
“I thought of volunteering or taking up golf. But there is a fulfilment when you get dressed up in the morning and you go out to work,” says Ms. Catena, whose father worked in the finance department at the City of Niagara Falls until he was 80 years old. “People tell me, ‘You’re getting older, you have to enjoy your life, blah blah blah.’ I have worked my whole life and that’s what I thrive on.”
Research shows Canadians past retirement age are increasingly choosing a mix of leisure activities and paid work, compared with the more predictable hard stop of past generations. While some keep working because they need money, others decide to stay in the work force for other reasons: they like the stimulation and social life that comes with having a job. “You get to see people. It uplifts your mood,” Ms. Catena says. Saira Peesker reports
Register for a Globe and Mail event on retirement
Inflation. Rising interest rates. Markets responding to impacts from the pandemic, the conflict in Ukraine and supply chain issues. These forces are changing the outlook for retirement income and savings in positive and negative ways.
Money Matters, the first Globe and Mail event in the Retirement Investing Road Show series, will provide tactics for retirees looking to assess their spending, goals and income. It will also provide strategies for growth and security in the shifting economy. Speakers include Rob Carrick, The Globe’s personal finance columnist, keynote speaker Kelly Keehn, a personal finance educator and author of Talk Money to Me, and more.
To register for this free, in-person event in Toronto, or virtually, click here.
Ask Sixty Five
Question: I’m 65 and still working. I plan on retiring in a few years. I have a defined-benefit (DB) pension (not indexed) that will pay out a little over $100,000 per year before tax and a defined contribution (DC) pension plan worth approximately $550,000. We also have maxed out our tax-free savings account (TFSA), and the current value is approximately $200,000. My plan when I retire is to hold off on taking my Canada Pension Plan (CPP) and Old Age Security (OAS) until age 68 or 69 and withdraw about $50,000 per year from my DC pension plan. In addition, approximately $12,000 annually from our TFSA. Our total annual income combined with my DC pension will be approximately $167,000 per year before tax. My wife has no pension, so I plan on splitting my income to reduce income taxes. When I start claiming my CPP and OAS, I plan on reducing that same amount from my DC pension plan. We have two properties with no debt. I would appreciate your opinion. Am I on the right track?
We asked Jason Heath, certified financial planner and managing director at fee-only planning firm Objective Financial Partners Inc. in Markham, Ont., to answer this one:
Let’s assume you and your wife are entitled to the maximum OAS as lifelong or long-time Canadian residents. Let’s also assume you are entitled to the maximum CPP, and she is entitled to 50 per cent of the maximum. On this basis, your total pension income might be about $140,000 per year. Only $40,000 would be indexed to inflation – your CPP and OAS. Your investments might support $30,000 per year of indexed withdrawals as a ballpark estimate.
You and your wife can split your $100,000 DB pension income, your Life Income Fund (LIF) withdrawals, and even your CPP pension entitlement earned during your marriage. (Your DC pension needs to be converted to an LIF to take withdrawals). I estimate your after-tax cash flow at about $130,000.
Despite your DB pension not being adjusted for inflation, you could probably afford to spend more than $100,000 per year indexed for life as a rough estimate. That excludes using any home equity from either of your properties.
Your plan to withdraw $50,000 per year from your DC pension, after converting it to an LIF, has an impediment. Say you retire the year you turn 67. The maximum LIF withdrawal permitted will be between 4.97 per cent and 7.52 per cent of the value, depending on the province. If the account grows to $600,000 by then, your maximum would be between about $30,000 and $45,000. However, some provinces allow you to unlock a portion of your locked-in account.
When you prepare to begin your DB pension, you should consider your health and your wife’s health as it relates to survivor options available. Pensions may have an option to have between 0 and 100 per cent of the pension continue upon your death. The higher the survivor percentage, the lower the pension.
The healthier your wife is relative to you, the more beneficial the higher percentage is. Mind you, a woman in her 60s is likely to live about two years longer than a man in his 60s. Given your pension is well over 50 per cent of your retirement income, I would be inclined to consider a relatively high survivor option.
Deferring CPP and OAS is most beneficial for those with a long life expectancy. If you live well into your 80s, you will receive more lifetime income if you defer, even after considering the time value of money. If you have already contributed the maximum to CPP, you may want to either opt-out by filing form CPT30 with the Canada Revenue Agency and providing it to your employer, or start your CPP so that your contributions provide a post-retirement benefit. Keep in mind OAS has a clawback or reduction if your income exceeds about $82,000.