All posts by Jonathan Chevreau

Retired Money: Sticker shock on Healthcare costs for Seniors

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Senior with her caregiver at home

Have you factored rising Healthcare costs into your retirement planning? Here’s my latest MoneySense Retired Money column, which you can access by clicking on the highlighted headline: One huge cost to factor into retirement plans.

That huge cost is of course unexpected medical expenses, which tend to escalate the further along you go in your golden years. Typically, the early years of Retirement (say, in your 60s) are dubbed “Go-Go” years, which are the healthy ones during which you can travel, and medical costs tend to be minimal.

Costs rise as you go from Slow-go to No-go years

But as time goes on, often between the late 60s and early 70s, you can expect a few medical problems to emerge for at least one member of a senior couple, if not both. That’s why they some dub the middle period the “Slow-go” years.

And of course, the last few years is where costs can really mount up: the so-called “No-go” years, especially if you no longer “stay in place” in your home, or require extensive in-home care, or are forced out of the family home altogether to go to a retirement home or nursing home.

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Business Owner suffering Pension Envy? Here’s a Remedy

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Jean-Pierre Laporte

The Globe & Mail’s Report on Business has just published my piece titled A remedy for sufferers of pension envy, which you can access by clicking the highlighted text.

It describes the long-established Individual Pension Plan (IPP) and a newer variant called the Personal Pension Plan (PPP). The creator of the latter, Jean-Pierre Laporte (pictured to the left) estimates 1.2 million Canadian business owners could benefit from these plans, which are in effect Defined Benefit (DB) pension plans designed for professionals and business owners.

The newer PPP from Integris Pension Management Corp. is a hybrid in that it can be either a DB plan or a more market-sensitive Defined Contribution (DC) pension.

Trevor Parry

Several sources in the piece have written at more length on these topics here on the Hub. For example, see this blog from the Hub last November: How a Personal Pension Plan can mimic gold-plated DB pensions. Or see Trevor Parry’s most recent Hub blog, Making Canada Great Again. Perry sees both IPPs and PPPs as increasingly relevant in the current Canadian tax environment.

Tim Paziuk

One source I consulted for the piece but didn’t appear is financial advisor and author Tim Paziuk. Paziuk – of Victoria, BC-based TPC Financial Group Ltd. – laments the fact that “employees of the public sector and large corporations enjoy benefits and retirement plans that are unavailable to the private business owner.” As he noted in a recent Hub blog after the last federal Budget — On the Middle Class and Paying One’s Fair Share of Taxes — the pending Liberal working paper on the middle class and tax fairness doesn’t augur well for owners of corporations and even family members who enjoy “income sprinkling” from such corporations.

Fortunately new tools like the PPP and the not-so-new IPP give business owners a way to fight back. You can find on the web various debates between those who prefer the IPP and the PPP. For example, also quoted in the Globe article is Stephen Cheng, of Westcoast Actuaries, who has debated the plans with LaPorte here. Laporte’s reply can be found here: Comparing old IPPs to PPPs.

Motley Fool: Canadians overrate their financial literacy?

P.S. Here’s my latest blog for Motley Fool Canada. The headline pretty much sums up the story: Overconfident Millennials and Gen X flunk Financial Literacy Test, but Boomers only marginally better.

And while on the topic of financial literacy, I was gratified to be named one of Canada’s top online finance influencers, as conveyed by RazorPlan.com in this post.

5 Steps to a Victorious Retirement

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Who doesn’t want a Victorious Retirement?

Just in time for the long weekend and Canada’s 150th birthday, MoneySense.ca has just published a 5-part series on retirement, going from deciding what you want to working longer, the Ages & Stages by decade, being a snowbird, and finally what to do once you finally reached the hallowed land of Retirement/Findependence/Victory Lap.

Here’s a summary of each piece (all written by Yours Truly), and links to the full articles:

1.) The first step: What do you really want?

Take a custom approach to retirement planning. There’s no point fretting too much about retirement and how much to save if you haven’t first determined what you want to DO once you’re retired. For starters, how are you going to fill those 2,000 hours a year you use to spend in the office and commuting? Click here for full article.

 

2.) We live longer. Why not work longer?

Ask questions about a retirement plan that’s right for you. Life expectancies are on the rise: more and more Baby Boomers can expect to become centenarians and that probably goes double for their children, the Millennials. Makes sense to consider working a little longer, if only part-time. Or if you really dislike your chosen profession, go back to school or retrain and find something you’d really enjoy doing in your golden years: preferably something that pays! Click here for full article.

 

3.) Snowbird? Learn the “substantial presence” test

Learn the tax pitfalls of retiring to the sun in the U.S. It all depends on how long you plan to stay down south each year: the formula isn’t simple. If you don’t relish the thought of paying tax to two countries, you may want to make sure you’re not considered to have a “substantial presence” in the U.S.  Click here for full article.

4.) Your retirement plan has a life cycle

Retirement planning strategies for every age. Every decade from your 20s to your 70s and beyond should take you a little further along the journey to financial independence/Retirement. Just like we all share the same fate in our human life cycle, so it is with the financial life cycle. Click here for full article.

 

5.) Retirement planning —after you retire

The plan doesn’t stop when you stop working.

My co-authored book Victory Lap Retirement features on its cover what appears to be a sprinter breaking through the finish line of a long marathon. But that doesn’t mean we’re saying Retirement is a literal finish line and with it the end of striving and purpose. In fact, we’re saying a “Victory Lap” really only begins when you reach the “finish line” of financial independence, or Findependence.

There will still be a big adjustment as you move from Wealth Accumulation to the De-accumulation or “Decumulation” phase: less earned income and more passive sources of income. And you’ll need to master the tax aspects because Tax may be one of the biggest expenses in Retirement. Click here for full article.

Do you need to “De-FANG” your portfolio of giant US tech stocks?

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Do you need to De-FANG your portfolio or are you so focused on Canada that you’re actually underweight on the big US tech stocks?

My latest MoneySense column looks at the post-Trump surge in tech stocks and the more recent retrenchment in the sector. For the full article, click on the highlighted text here: Do you need to de-FANG your portfolio.

FANG is of course the famous acronym created by Mad Money’s Jim Cramer and stands for Facebook, Amazon, Netflix and Google.

But as the piece goes into in some detail, and per the image above, there are alternative acronyms that include Apple and Microsoft, although not IBM (despite the graphic above).

The question is whether so-called “Couch Potato” type investors who use the MoneySense ETF All-stars already have sufficient technology exposure to participate in the expected long-term growth of technology and particularly Internet giants like Google, Facebook, Amazon and the like. Certainly after last week’s  big announcement that Amazon seeks to acquire Whole Foods, this question is increasingly relevant.

As you’ll see, broad-based ETFs tracking the S&P500 index already have significant tech exposure: roughly a third in these names. Less so for global ETFs exposed to firms outside North America, although these too have healthy exposure to the sector.

Canadian-centric investors woefully underweight technology

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Turning 65 soon? Service Canada wants to give you OAS benefits!

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Turning 65 in the next year? These things do eventually happen, God Willing!

The bad news is you are now considered by the Government to have reached Old Age; the good news is that also means Ottawa wants you to consider starting receiving Old Age Security (OAS) benefits the month after you officially turn 65.

My latest MoneySense column provides all the details, starting with a letter Service Canada should be sending you automatically shortly after you reach 64. Click on the highlighted text for the full column about how to get ready to receive Old Age Security benefits and possibly the Guaranteed Income Supplement (GIS) to OAS: What to expect when receiving OAS at 65.

As you’ll see, no action at all is required if they did send you this initial package and you’re happy to receive gross (pre-tax) cheques mailed to the address they have on file. If you want the funds deposited electronically to your bank and/or have tax deducted at source (as I did), then you either have to go to the web site provided or call them on the phone.

I have to say my initial attempt to do this on the Internet was a frustrating one. It turned out to be far easier to call them on the telephone on the English-language helpline listed in the letter: 1-800-777-9914. Due to “high call volume” I was put on hold for 15 minutes, during which time the automated voice advised listeners to apply for OAS at least six months before their 65th birthday and no more than a year in advance. It also said the maximum monthly OAS benefit is currently $578.53.

I chose to have 25% tax withdrawn at source so with no further action on my part, I can expect my first OAS deposit of $433.90 (net of tax) to arrive magically in my bank on or about May 29, 2018, and every month after that for as long as I live, like any other pension. By then it may be slightly more, as it may be indexed to the cost of living.

Take OAS early, CPP late if you can possibly swing it

Keep in mind that, like the Canada Pension Plan (CPP), you can opt to defer receipt of OAS benefits to as late as age 70, thereby raising the payout. I revealed my reasons for taking OAS as soon as it’s on offer in an earlier MoneySense column last summer: Why I’m taking OAS right at 65. Continue Reading…