How to ease into retirement, why investment fees could be delaying your retirement date and some math on investing your CPP and OAS benefits – The Globe and Mail

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In 2019, Tim Brennan began thinking about what his postretirement life would look like.

The 60-year-old Halifax entrepreneur had spent 21 years with the company he co-founded, Fit First Technologies, which produces software tools for human resources and recruiting. That December, he sat down with his partners and began talking about how he might wind down his involvement.

Then came the pandemic lockdowns weeks later, which put his plans into perspective: “I started walking in a city park every Wednesday afternoon during the first lockdown with a group of four or five guys I knew from a lawn-bowling club,” he recalls. “And I’d ask, ‘What do you do as a retired person?’

The biggest take-away from those walks, he says, was to “find out what’s important to you, and focus on that in retirement.”

For Mr. Brennan – whose identity, sense of purpose and social life was still substantially tied to work – that meant not retiring: At least not all the way.

He’s among many retirement-age Canadians making similar choices, says James Norris, a London, Ont.-based sales manager with human-resources firm Express Employment Professionals (EEP). Matthew Halliday reports

Retiree finds volunteering for ‘worthwhile causes’ helps build skills and connections

In the latest Tales from the Golden Age feature, retiree Chester Fedoruk talks about his life in retirement, and how his wife worried at first he didn’t have enough hobbies to keep busy. “I was able to ease her concerns relatively quickly,” he says. “My nonwork life has been busy with family and friends, reading, movies, restaurants, concerts and theatre.”

His advice for retirees is to find a worthwhile cause that builds on your past experience, expertise and interests “but that allows you to develop new skills and knowledge. Keep an open mind. Think of retirement as a new career; don’t specialize too early before you explore the volunteer marketplace and how you might fit in it.”

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? As part of its expanded coverage, Globe Investor is launching a new feature called Tales from the Golden Age, 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 at: jcowan@globeandmail.com with “Golden Age” in the subject line.

How investing fees could delay your retirement

Getting people to care about the investing fees they pay has been one of the most successful achievements in the personal finance field, writes the Globe’s personal finance columnist Rob Carrick.

“But there is still work to do. Too much money sits today in high-fee investing products that do not justify the cost,” he says, citing a Mercer Canada report on the subject.

Read the full opinion piece here.

How advisers can help seniors with high debt or facing bankruptcy

More seniors are carrying alarming debt levels, and they may turn to advisers to help get them out of the red – especially when facing insolvency.

“They can make hard choices now or later,” Steve Bridge, an advice-only certified financial planner and money coach at Money Coaches Canada Inc. in Vancouver tells Deanne Gage in this article for Globe Advisor. “Hard choices now might save them from bankruptcy later.”

When seniors come to him for advice on managing debt, Mr. Bridge looks at debt consolidation, selling assets, examining cash flow and revisiting budgets. He notes that seniors who have a severe debt situation often want to liquidate all assets to pay off creditors.

“The creditors call and harass them and they feel they have to take care of the debt right away with any funds,” Mr. Bridge says. But he cautions them to reconsider as some assets are creditor-proof.

Cora wants a comfortable estate-planning strategy

At age 79 and recently widowed, Cora is seeking the best way to wind down her assets, keep taxes to a minimum and leave an inheritance for her four children. Looking back, Cora and her family enjoyed a comfortable lifestyle. Her husband was an independent businessman, Cora worked in education. The children are in their late 40s and early 50s.

“We retired in our 50s and our income – about $75,000 each before tax – is a combination of rental income, pensions and investments,” Cora writes in an e-mail. “I have always preferred real estate,” she adds. “We bought our first building, a five-plex, in 1968 for $50,000.” She was 26. “I took this lesson from my grandparents’ experience in the 1930s.”

When she was 50, Cora sat down to figure out how much money she would need to retire comfortably. “Like all women of my generation, I was penalized for being a mother” because the years of working part-time reduced her pension entitlement. “I saw that my pension was not adequate so I bought a duplex to make up the shortfall.” More purchases followed.

Today, Cora has a mortgage-free house in the Greater Toronto Area and a portfolio of rental properties that generates about $100,000 a year after expenses. She has a defined benefit pension, indexed to inflation, that pays nearly $25,000 a year.

“Would I be better off selling my properties gradually or after death?” Cora asks. “Would I be better off giving my children money now and lighten my tax burden?” She also plans to donate to charity, which would lower her capital gains tax bill.

In the latest Financial Facelift column, Warren MacKenzie, head of financial planning at Optimize Wealth Management in Toronto, to look at Cora’s situation.

In case you missed it

Why your will should include plans for your pets

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

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

Ask Sixty Five

Question:

Great piece in the March 10 newsletter on the ramifications and the math when starting Canada Pension Plan (CPP) and Old Age Security (OAS) benefits and whether that be early, at 65, or when you defer it until 70. What I have not seen – and I would like to see – is the workup for the example when someone takes CPP early and invests the entire amount, takes OAS at 65 and invests the entire amount, and doesn’t access these monies until say age 70. I’m sure a reasonable rate of return can be assumed and what are the effects of compounding interest on those monies and how do they affect the break-even dates? Thank you for your consideration.

We asked Mike Preto, an adviser at Hillside Wealth Management who answered the original question, to answer this follow-up one:

Good question. Here’s what it looks like you take your CPP and OAS payments early, before you “need” them, and invest the retirement benefits until retirement.

Here are the key assumptions:

1. Take the CPP at age 60 and their OAS at 65
2. Invest all the after-tax proceeds from the pensions until age 70.
3. Earn a 6-per-cent rate of return. Your CPP and eventual OAS payments both rise by 3 per cent per year.
4. Pay tax at the 28.2 per cent marginal rate.
5. No OAS is ever clawed back from 65-70.
6. You save the first $6,000 per year into your tax-free savings account (TFSA) and the balance goes into a nonregistered account.

At the end of the year in which you turn 69, you would have about $79,000 in a TFSA and $62,500 in nonregistered investments. If we assume you draw 4.5 per cent per year from this portfolio, you could expect to receive an additional roughly $6,400 per year in retirement income. Of this, roughly 55 per cent is tax-free and the remaining 45 per cent is tax-preferred. The benefits of the TFSA and non- registered accounts shining bright here.

The government is going to “pay” you 7.2 per cent per year for every year you leave the CPP alone from 60 to 65 and the OAS from 65 to 70. You’ll receive an extra 8.4 per cent for every year you leave the CPP alone from 65 to 70.

Given these figures, you need to generate more than about 7.5 per cent per year on your investments – doable, but certainly not a given. In other words, 6 per cent isn’t going to cut it.

There is a catch though: if you took your pensions at 70 and then died at age 71, your beneficiaries would get nothing. If you took both pensions early, at 60 and 65, and you died at age 71, your beneficiaries would receive the market value of the portfolio at death.

Everyone’s situation is unique and proper care and attention are needed to make sure they are making decisions in line with their goals and dreams. We only get one chance at life; we better make the most of it.

Note to readers: We’ve received a number of Sixty Five reader questions on CPP and OAS benefits. In next week’s newsletter, we’ll answer many of those questions and provide some general information on these benefits. Stay tuned.

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 sixtyfive@globeandmail.com and we will find experts and answer your questions in future newsletters.

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