All posts by Marie Engen

Becoming Retirement Ready

Posted By Marie Engen | January 17, 2018

It’s likely that investing for retirement is the most long-range, expensive goal most of us will ever face. In the early years that far off future can be pretty vague, and many of us wait until we actually retire before putting a plan together, if we plan at all. Smart retirees start thinking about what they want to be doing once they retire about five or so years before stopping work. By this time, people have decided that they want to retire, but are not totally certain of the date yet.

The Dream Stage

The most common way to start retirement planning is to determine how much money we will need. But, there is no magic number for everyone. Each person, or couple, is unique. A happy, fulfilling retirement means different things to different people. The amount you need depends on your lifestyle choices, so you won’t know exactly until you decide on what you want to do.

Retirement is not a one-time event. It’s an ongoing process that can last thirty years or more. It begins with focusing on what’s truly important to you and defining your hopes for the future. You probably have some idea of how you’d like to spend your retirement. But for now, don’t focus on the budget. Focus on ideas. Start listing all the things you want to do. What activities will you continue, and what new ones do you want to try? These activities could include travel, socializing, being with grandchildren and other family members (how much time? every weekend or just special occasions), playing sports, volunteering, reading, gardening, or crafts.

This doesn’t have to be a bucket list – just things that will give you pleasure. Get out your notebook and be as specific as you can. Don’t just write “travel,” write “take a round-the-world cruise,” or “see the African savannah by hot air balloon.”

Retiring Couples

Just because you’re married doesn’t mean you’re at the same place in your careers. Although you may be ready to focus on your flute playing, your spouse might still want to head to the office every day. Sometimes people aren’t quite ready to give up working yet for whatever reason. But at some point you will be retired together, and before that time you need to have a serious discussion with your spouse. Partners often have dramatically different ideas about what retirement will look like. One RBC retirement poll discovered that nearly 70% of pre-retired Canadians aged 50 and older have yet to discuss their hopes for their post-career lives with their spouse or partner.

Communication is key. You and your spouse need to be on the same page. Often people have very different visions of retirement. You may want to buy a motor home and barrel across the country, whereas your spouse may want to spend more time with the grandkids, or volunteer for a favourite non-profit. For decades you’ve spent most of your day apart.

Spending 24/7 together can require some adjustments. So you’re not continuously in each other’s pocket, find a balance between the amount of together time and time you spend apart pursuing individual interests.

Prioritize

Once you’ve decided on what you want to do, start doing your homework. If a Mediterranean cruise is the first thing on your agenda, start researching cruise lines, look at prices and schedules, and so on.

If you’d like to move to another province or country (either snowbirding or permanently), pull up all the information you can find and schedule at least a couple of visits to see what it would be like to live there. Also, investigate whether there are any tax or estate implications you need to be aware of. You should get this research done well before your planned retirement date to find just the right options. If you find out something that changes your mind, you’ll have plenty of time to go back to the drawing board.

Their ideal retirement age is 58 and the acceptable age is 65.
They would ideally like to take a major trip every year, it would be acceptable to take a major trip every three years and a couple of minor ones in the off years.
Ideally, they want to remain in their home and keep their oceanside cottage, but they would consider either downsizing their home or selling it and living permanently in the cottage.

There might be potential trade-offs and you may need to consider different scenarios. The couple wishes to leave their children a considerable inheritance and give bequests to various charities. However, Tim’s father is currently in a nursing home. The possibility of either of them also experiencing a serious illness with the resulting cost of nursing care may reduce or eliminate this goal. Or if they are really worried, they may look into long-term care insurance.

Schedule medical checkups now

To get the most out of your retirement – and life in general – you want to be as healthy as possible. A little preventative medical attention can go a long way.

Schedule a complete physical and dental work. Work with your medical providers on a plan to improve or maintain your health.

Commit to eating healthy, exercising, getting enough sleep, and staying mentally sharp with brain games.

Final thoughts

Retirement is the time when you’ll finally get to do all the things you’ve always wanted to do, but didn’t have the time or money to manage them.

Establish a preliminary retirement plan, consider multiple scenarios, and revisit the plan shortly before actual retirement.

Coming Soon: Will your retirement nest egg be adequate? Gaining a clear understanding of all your resources.

Marie Engen is the “Boomer” half of Boomer & Echo. In addition to being co-author of the website, Marie is a fee-only financial planner based in Kelowna, B.C. This article originally ran at the Boomer & Echo site on January 9 and is republished here with permission.

January is a great time for these 4 financial planning action items

Posted By Marie Engen | January 5, 2018

January rings in the New Year, a sign of optimism, and the annual promise of something new: adopting resolutions, setting goals and looking ahead. It’s also a time to reflect on the previous year. Making resolutions is common for many, but less than 40% will actually achieve what they set out to do.

Nevertheless, for those looking for improvement in their financial health, here are some good habits to follow at the beginning of each year.

January is a good month to…

Save

1. ) Calculate your net worth

You know how to do this. Total up all your wealth building assets – home, investments – subtract your debts – mortgage, credit cards, car loan, and voila – the resulting total is your net worth, or in other words, the current picture of your financial standing.

There are lots of online calculators that help you do this, but don’t stop there. Redo the calculation at least once a year. Create your own spreadsheet so you can compare several years. It will help you see if you’re moving in the right direction. Otherwise, how can you know if you’re getting ahead?

Also read: Your financial plan is a compass

Focus on what you can do to improve your finances, and if you find yourself getting off track, do some course corrections and carry on.

2.) Revisit your goals

January is also a good time to review your goals. If you have a spouse or partner, set aside some quiet time this month to have the money talk. Have an honest discussion about your short-term and long-term goals and check to see whether you are still on track to meet them.

Or, maybe your situation or priorities have changed, and you need to reassess. If something is not working, go back and modify. Since you can’t know what the future holds for you, a period of five years is a manageable target.

Also read: Create your own financial plan with these eight steps

Map out a few steps for the current year that will see you heading towards a better financial situation. Continue Reading…

Advanced RRSP Strategies (Beyond the Basics)

Posted By Marie Engen | December 21, 2017

RRSPs are a valuable tool for many taxpayers, which is why they are the backbone of many retirement plans. Getting the most out of your RRSP often involves thinking several years ahead, rather than just when the contribution deadline is looming.

Here are five RRSP strategies to get you thinking beyond the basics:

Claiming RRSP deductions

Most of us claim our RRSP deductions in the tax year we make the contribution, but you don’t have to. In fact, you can choose to deduct only a portion or none at all and carry it forward.

If you expect to move into a higher tax bracket next year from say, a big promotion, or the sale of rental property, you should still make your contribution to take advantage of tax-free compounding. But, it may be worth waiting to claim the deduction the next year (or later) when your marginal rate will be higher and you will get a substantially bigger tax refund.

Level out income

CPP Survivor Benefits not what many were hoping for

Posted By Marie Engen | August 25, 2017

Enhancements to the CPP are always being suggested, largely to address the fact that fewer Canadians now have workplace pensions. The latest deal made by provincial Finance Ministers in June 2016 will boost CPP income from one quarter of pensionable earnings to one-third. The change will phase in slowly from 2019 to 2025 (when the pensionable earnings target will be $82,700), so it will be a while for these changes to be felt by future retirees.

Of more pressing concern to current retirees, and not addressed – or even on the radar – is the issue of CPP survivor benefits.

As noted in this Globe and Mail article, if you find yourself widowed, you may not get the survivor benefit that you expected.

CPP Survivor Benefits calculation

Old Age Security (OAS) explained

Posted By Marie Engen | August 22, 2017

Old Age Security (OAS) was originally intended to be a universal program to provide income support payments to Canadian seniors. It is one of the cornerstones of Canada’s retirement income system.

It is not a pension plan. You don’t make contributions. OAS is a government benefit program that is financed out of general revenue.

Employment history is not a factor in determining eligibility. You can receive OAS benefits even if you have never worked, or are still working.

Residency requirements have to be met. The amount you receive is determined by how long you have lived in Canada after the age of 18.

Everyone who has been a resident of Canada for at least ten years (after age 18) is eligible to collect OAS starting at age sixty-five. Normally, you qualify for the full amount only if you have been a resident for at least forty years after turning 18.

You may still qualify for full or partial payments if you meet certain other requirements.

Up to September 2017, the maximum monthly benefit is $583.74. This rate is reviewed four times a year and may be adjusted based on the cost of living measured by the Consumer Price Index. OAS is taxable income.

OAS for low income seniors

Anyone who receives OAS and whose income falls below a certain level may be eligible to receive additional non-taxable monthly payments.

The Guaranteed Income Supplement provides a monthly benefit to low income OAS recipients. It is an income tested benefit. This means your total income from the previous year (combined income for couples) is used to determine your eligibility.
Allowance is available to 60-64-year-old spouses/common-law partners of OAS recipients who also receive GIS.
If you are sixty to sixty-four years old and are widowed, you may be eligible to receive the Allowance for the Survivor.

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