Gertrude’s desired after-tax retirement budget is $65,000 to $70,000 a year, but with no workplace pension, her investments have to last a lifetimeTodd Korol/The Globe and Mail
After a spell of discouraging stock market performance, Gertrude wonders if she has enough savings and investments to retire in the next two or three years.
She’s thinking of leaving behind her $175,000 a year executive job in the Alberta oil patch – or “maybe not if I’m still having fun,” she writes in an e-mail. Gertrude is age 58 and single again. Her daughter, who is 23, is living at home while she completes her studies.
Gertrude’s desired after-tax retirement budget is $65,000 to $70,000 a year, but with no workplace pension, her investments have to last a lifetime.
“My portfolio has been flat for two years,” Gertrude writes. She moved her portfolio from one major investment dealer to another when the stock market was high “and then, of course, it fell shortly thereafter,” she adds. “I’m not sure if it’s that I don’t have the right asset mix or if it’s the manager – or neither and it’s just bad luck.”
We asked Clay Gillespie, a financial planner and portfolio manager at RGF Integrated Wealth Management in Vancouver, to look at Gertrude’s situation. Mr. Gillespie holds the certified financial planner (CFP) and chartered investment manager (CIM) designations.
What the Expert Says
Stock markets around the world performed very well in 2021 and very poorly in 2022, so Gertrude should not be surprised that her returns were flat, Mr. Gillespie says. “There have been only four times since 1928 that fixed income [bonds] and equities [stocks] have been down in the same year,” he says. “Even balanced portfolios had a difficult time in 2022.”
One of the greatest risks in retirement planning is having the stock market drop substantially just before or just after you retire, the planner says. “I would suggest that she start adjusting her portfolio to be ready for generating her desired retirement income.”
The timing of returns in retirement can actually be more important than the long-term return on your invested capital, Mr. Gillespie says. “This is called sequence of returns risk. Negative returns early in retirement can have a dramatic or even catastrophic effect on your ability to generate your retirement income through your retirement years.”
Gertrude’s first step should be to decide how much money she needs to redeem from her portfolio to generate her desired income. This will be a combination of withdrawals from her registered funds, earnings from her non-registered funds and possibly some return of capital. “She wants to make sure she uses the marginal tax brackets to her advantage. You never want to miss using a low tax bracket while generating your income,” the planner says.
He recommends the following strategy: Invest one year’s income in a high-yield savings account that will be used for the first year’s income, one year’s income in a one-year guaranteed investment certificate and one year’s income in a two-year GIC.
“She should then invest the balance of her investments in a growth portfolio based on her risk tolerance,” Mr. Gillespie says. She should also draw up an investment policy statement that spells out how her funds should be invested.
The rationale behind this strategy is that the high-yield savings account will deplete itself over the first year. After the first year, if the growth part of the portfolio has risen in value, then take the following year’s income from the growth portion (that is, use some of the growth part of the portfolio to replenish the high-yield savings account).
If, however, the stock market performs poorly and the growth account decreases in value, then use the maturing GIC to replenish the high-yield savings account. If the GIC is not used for income, it will be reinvested for a guaranteed period of two years.
“In the years when the market earns extraordinary returns, not only should you use this growth for income purposes, but you should also take additional funds from the growth account to purchase additional GICs to fund your income the next time the stock market is down in value,” the planner says. “This strategy only works because you avoid taking income from any part of your portfolio that is declining in value.”
Gertrude’s retirement spending goal is $70,000 a year after tax and inflation. “If the income was fully taxable, this represents a gross pretax income of about $95,000 a year,” the planner says. “I would suggest that Gertrude withdraw $40,000 a year from her registered funds and generate the remainder of the income from the earnings in her non-registered accounts.”
Based on Mr. Gillespie’s analysis, though, Gertrude should be able to generate a net spendable income (after tax and inflation) of about $97,000 a year until she is age 95 – well above her target. This assumes that she earns an annual rate of return of three percentage points more than the inflation rate.
“She can generate more than her desired retirement income. So, if she continues to work, she’s working because she wants to work, and not because she needs to work,” he says.
He did not include the equity in her principal residence in this calculation. “This gives her the flexibility of staying in her house or moving into a new type of living environment in retirement,” the planner says.
He suggests Gertrude defer her Canada Pension Plan and Old Age Security benefits to age 70. She will need to withdraw significantly more from her investment assets in the first 10 years because of these deferrals.
In mid- to late retirement, “we like to see day-to-day living expenses met by government pensions, company pensions or a life annuity,” the planner says. These programs increase with the rate of inflation and are the best forms of longevity protection we have in Canada,” he says. “You cannot outlive these funds – and they don’t need to be managed.”
“We believe the best time to buy a life annuity is in your mid- to late 70s,” he says. He recommends using registered funds such as RRSPs to do so.
“Use up registered funds first because they are fully taxed on your death,” Mr. Gillespie says. For example, if Gertrude died today, her entire RRSP balance would be taxed as income, with up to 50 per cent going to the government. (It would pass tax deferred to a spouse.) “You want to redeem your registered funds over your lifetime if possible.”
“At Gertrude’s age 70, we estimate that her government benefits and registered funds (in the form of a life annuity) could generate gross income of about $72,000 a year, about three-quarters of her desired income,” he says. She could then use the non-registered funds “to fight off the effects of inflation over time.”
Client Situation
The Person: Gertude, 58, and her daughter, 23.
The Problem: Can Gertrude afford to retire in a couple years if she chooses to? Is her portfolio properly invested?
The Plan: Draw heavily on her registered savings early in retirement, deferring government benefits to age 70. Because she has no company pension, she should use some of her savings to buy a life annuity in her mid- to late 70s. Start readying her portfolio to provide the income she will need.
The Payoff: Peace of mind.
Monthly net income: $9,145 (excludes variable bonus).
Losing a loved one is never easy, and the legal steps that follow can add even more stress to an already difficult time.
For years, families in Vancouver (and Canada in general) have struggled with a complex probate process—filled with paperwork and legal challenges.
Thankfully, recent changes to Canada’s probate laws aim to make this process simpler and easier to navigate.
Let’s unearth how these updates can simplify the process for you and your family.
What is probate?
Probate might sound complicated, but it’s simply the legal process of settling someone’s estate after death.
Here’s how it works.
Validating the will. The court checks if the will is legal and valid.
Appointing an executor. If named in the will, the executor manages the estate. If not, the court appoints someone.
Settling debts and taxes. The executor (and you) pays debts and taxes before anything can be given.
Distributing the estate. Once everything is settled, the executor distributes the remaining assets according to the will or legal rules.
Probate ensures everything is done by the book, giving you peace of mind during a difficult time.
Recent Changes in Canadian Probate Laws
Several updates to probate law in the country are making the process smoother for you and your family.
Here’s a closer look at the fundamental changes that are making a real difference.
1) Virtual witnessing of wills
Now permanent in many provinces, including British Columbia, wills can be signed and witnessed remotely through video calls.
Such a change makes estate planning more accessible, especially for those in remote areas or with limited mobility.
2) Simplified process for small estates
Smaller estates, like those under 25,000 CAD in BC, now have a faster, simplified probate process.
Fewer forms and legal steps mean less hassle for families handling modest estates.
3) Substantial compliance for wills
Courts can now approve wills with minor errors if they reflect the person’s true intentions.
This update prevents unnecessary legal challenges and ensures the deceased’s wishes are respected.
These changes help make probate less stressful and more efficient for you and other families across Canada.
The Probate Process and You: The Role of a Probate Lawyer
(Image: Freepik.com)
Working with a probate lawyer in Vancouver can significantly simplify the probate process, especially given the city’s complex legal landscape.
Here’s how they can help.
Navigating the legal process
Probate lawyers ensure all legal steps are followed, preventing costly mistakes and ensuring the estate is managed properly.
Handling paperwork and deadlines
They manage all the paperwork and court deadlines, taking the burden off of you during this difficult time.
Resolving disputes
If conflicts arise, probate lawyers resolve them, avoiding legal battles.
Providing you peace of mind
With a probate lawyer’s expertise, you can trust that the estate is being handled efficiently and according to the law.
With a skilled probate lawyer, you can ensure the entire process is smooth and stress-free.
Why These Changes Matter
The updates to probate law make a big difference for Canadian families. Here’s why.
Less stress for you. Simplified processes mean you can focus on grieving, not paperwork.
Faster estate settlements. Estates are settled more quickly, so beneficiaries don’t face long delays.
Fewer disputes. Courts can now honor will with minor errors, reducing family conflicts.
Accessible for everyone. Virtual witnessing and easier rules for small estates make probate more accessible for everyone, no matter where you live.
With these changes, probate becomes smoother and more manageable for you and your family.
How to Prepare for the Probate Process
Even with the recent changes, being prepared makes probate smoother. Here are a few steps to help you prepare.
Create a will. Ensure a valid will is in place to avoid complications.
Choose an executor. Pick someone responsible for managing the estate and discuss their role with them.
Organize documents. Keep key financial and legal documents in one place for easy access.
Talk to your family. Have open conversations with your family to prevent future misunderstandings.
Get legal advice. Consult with a probate lawyer to ensure everything is legally sound and up-to-date.
These simple steps make the probate process easier for everyone involved.
Wrapping Up: Making Probate Easier in Vancouver
Recent updates in probate law are simplifying the process for families, from virtual witnessing to easier estate rules. These reforms are designed to ease the burden, helping you focus on what matters—grieving and respecting your dead loved ones’ final wishes.
Despite these changes, it’s best to consult a probate lawyer to ensure you can manage everything properly. Remember, they’re here to help you during this difficult time.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
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