Victory Lap

Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.

Retired Money: Is this Covid-19 bear market good reason to delay Retirement?

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MoneySense.ca: Photo by Renate Vanaga on Unsplash

Is the Coronavirus-induced bear market reason to delay Retirement? Some suggest Baby Boomers may be forced to delay their Retirement by up to five years.  My latest MoneySense Retired Money column looks at this in some depth. Click on the highlighted headline to retrieve full article: Should you delay your Retirement because of Covid-19?

Fortunately those with Defined Benefit (DB) pensions may not have to delay Retirement at all: “so long as the pension plan is healthy and well-funded their retirement plan should remain intact,” says Aaron Hector, vice president of Calgary-based Doherty & Bryant Financial Strategists.

But inflation-indexed DB pensions are increasingly rare. Those counting mostly on their RRSPs, TFSAs and non-registered savings “have more reason to be concerned,” Hector cautions, “Valuations have fallen and some companies will be forced to reduce or cut their dividends, which will put a damper on income sources. For them, it would come down to whether or not they had previously built up an adequate cushion to allow for this market correction.”

3 benefits to postponing Retirement

Fee-only financial planner Robb Engen, of the Boomer & Echo blog, says “there’s no doubt investors nearing retirement have been impacted by the Covid-19 crisis.” He sees three benefits to postponing retirement: more time to earn and save; fewer years of drawing down on portfolios; and stock investments have more time to recover their value. Continue Reading…

Tips for transitioning your employees to work from home

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By Shannon Hicks

For the Financial Independence Hub

For businesses to thrive, they must give importance to their employees. They are an essential part of any company because their competence is what drives growth.

As an employer, there are a number of practices that you can adopt to make your employees more efficient at their tasks, especially in these times when a worldwide health crisis is at hand and most employees are at home.

Working from home poses a lot of obstacles to employees. Hence, as an employer, it is important to motivate them to concentrate on their respective tasks. This way, even though the whole world and economies have been disrupted, your business is still able to generate high-quality outputs.

Here are some tips to transition your employees to working from home:

1.) Help them set up their workspace at home

The first problem that employees face when they start working from home is whether or not they have the hardware necessary to carry out their tasks. So, as an employer, it should be your first concern as well.

Thus, when transitioning your employees to work from home, ask them if they have the necessary equipment or hardware, such as a computer, for them to be able to perform their tasks. If they lack the essential implements, then, allow them to borrow those from the office. Let them take home the units they use at work; after all, no one would be using those. Of course, they need to return the devices once they resume working at the office.

Furthermore, allow your employees to download or install applications that your company will be using to communicate and manage tasks. Make it clear which tools and workforce management system will be utilized so they can have them installed on their respective devices as soon as possible.

For example, Slack can be used for communication purposes, while Zoom can be used for teleconferencing. Making this clear early on will allow your employees to familiarize themselves with the tools, so they would be efficient in using them as soon as they need to.

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2.) Be flexible in your working policies

Each employee will have a different setup at home. While some are living alone in their own apartments, some are with their families and may even have kids at home. Thus, it is understandable that when employees start working from home, they will have different schedules as to when they are best able to work.

So, when making policies for employees working from home, be understanding of their circumstances. For example, you may not need to set specific working hours; rather, keep them focused on finishing tasks before or on the deadline.

For better communication, you can schedule a weekly or bi-weekly teleconference, or you can also take advantage of a specific time when everyone is available. Thus, communication is always open and everyone can regularly give updates on their tasks.

3.) Keep communication lines open

Weekly teleconference or virtual meetings should not be the only time that managers and employees are able to talk and give updates. Continue Reading…

Retired Money: The survivorship downside of deferring CPP benefits

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My latest MoneySense Retired Money column is the second part of a series on CPP and survivorship issues. You can find part 2 by clicking on the highlighted headline here: Reconsidering when to take CPP benefits amid Covid-19 risk.  You can find the first part here and yesterday’s Hub summary here.

What’s all that about Covid-19 risk? It’s admittedly a bit morbid but after all, retirement survivor benefits are all about expected longevity and mortality. To the extent Covid-19 provides a slightly higher probability of a spouse passing away before expected, it underlines the fact senior couples need to think about survivor benefits. They should have all along, of course, but this crisis just makes the issue that much more tangible.

The main sources in the column are again retired advisor Warren Baldwin, who personally took his own CPP at 66 in part because of survivorship issues, and TriDelta Financial president Ted Rechtshaffen, who tackled the topic in this recent column in the Financial Post. There he  described the unfairness of CPP and how it may have “effectively” no survivor benefits. He observed that if a couple both collect full CPP and one dies, the other receives a one-time $2,500 death benefit, but loses the entire ongoing CPP benefits of the deceased.

But if the same couple has one person collecting a full CPP benefit and their partner never paid into the plan and collects $0 CPP, if either dies the net result is they will continue to collect one full CPP benefit. The maximum survivor benefit is 60% of the maximum pension, since no individual can collect more than 100% of a CPP benefit. However, if one person currently receives less than 100%, if the partner dies, that person can top up the CPP payment up to 100% out of the amount being collected by the partner.

For most seniors, dropping combined maximum CPP income (at age 65, in 2019) from $27,600 a year to just $13,800 constitutes a huge hit if both partners contributed a lot to CPP over the years. Rechtshaffen suggested these rules “almost provide an incentive to only have one working partner over the years. It hurts couples in which both partners worked full time.” He also made some suggestions on how Ottawa could redress this unfair situation.

Asher Tward, Tridelta’s VP estate planning, generated quotes on a life-only, $14,110 per annum, single-person annuity, no survivorship, with the payment 2% indexed. He found a typical quote for a 65-year old male with 2% indexation was worth $316,000, while a typical quote for a 65-year old female with 2% indexation was worth $355,000. We also asked what it would cost to buy the same annuity with a 60% survivorship payout to the surviving spouse. The relevant comparison is someone with no spouse or who has a spouse with maximum CPP against a person who has a spouse who has no CPP. For a registered annuity for couples like my wife and I, Tward found a joint annuity with 2% indexation and a 60% survivor benefit was worth $358,000, with either partner being the survivor.

So for a couple with maximum CPP, the total “value” is around $700,000. If they can afford it, they could defer collecting benefits by living off RRSPs and other savings; however those assets are fully estate-protected for either survivors or beneficiaries.

“There is a degree of use-it-or-lose-it in the CPP,” Baldwin concludes, adding it behaves somewhat like a tontine, except with no lump sum at the end.

Similar issues with OAS

OAS presents a similar issue: at just over $7,000 a year, it would have a value around 50% of CPP: about $150,000, so why not collect as soon as possible? Continue Reading…

Retired Money: A new CPP calculator, and why I took my CPP at 66

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MoneySense.ca: Photo created by senivpetro – www.freepik.com

My latest MoneySense Retired Money column has just been published and looks at CPP survivorship issues. Tucked in there I reveal for the first time my personal decision to take the Canada Pension Plan at age 66, which I did last summer a few months after reaching that

It was more of a cash flow issue in light of the fact that just prior to this, my wife had left her full-time and well-paid job in the transportation industry. But I mention another consideration: the quirky CPP survivorship rules. Now I realize most couples in their 60s don’t dwell on our mortality much if they are in good health and keep care of themselves. And bear in mind my decision was long before the Coronavirus pandemic, which disproportionately affects seniors.

The first of a two-part series on this issue you can find by clicking on the highlighted headline: When is the best time to start taking your CPP payments?

We will look at the followup tomorrow.

Normally, those ready to retire contact Service Canada to get a record of past CPP contributions. They send you benefit estimates (both for CPP and OAS) some months before you turn 65 but you can also obtain this information before or after by visiting Canada.ca. There you can find a CPP/OAS calculator provided by Ottawa, providing an estimate of expected sources of income.

Doug Runchey and David Field team up on a new CPP calculator

While OAS is straightforward, optimizing CPP is surprisingly complicated, so much so that Doug Runchey (one of the country’s preeminent experts on both programs) provides calculation services to help individuals make optimal decisions on timing the start of benefits. Runchey used to be at Service Canada, so is intimately familiar with the ins and outs of the timing of receipt of these programs. Continue Reading…

10 Millennials on how they approach planning for their Retirement

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The importance of planning for retirement is something every parent, mentor, and financial advisor will reiterate time and time again. While the general concept makes sense, it isn’t always accessible or palpable for all parties, especially millennials. Previous generations seem to have prioritized their finances, so what about millennials? How are they handling it?

Below, 10 millennials talk about their approach to retirement planning.

Admit that you don’t know

As a millennial, I think the greatest service that someone in my generation can do is admit that they don’t know what they don’t know: and then find someone who can teach them. Let’s face it, retirement planning is a convoluted phrase that doesn’t express its various nuances. My advice: if it is accessible, partner with a fiduciary financial advisor to help map out your future financial goals and create a plan. If it isn’t accessible at this moment, make it a habit of setting aside a few dollars each payday until you can hire a financial advisor. Action is important; however, informed action is what will serve you best in the long run. — Desiree Cunningham, Markitors

Avoid high fees

If you are an investor, you want to earn income on your retirement balance. Whether you are identified as a “Boomer” or “Millennial,” that desire doesn’t change. What you do tend to see with millennials in regards to their retirement plan is the avoidance of high fees. With a long road ahead to retirement, retirement planning fees can eat into a retirement balance.  — Kimberly Kriewald, AVANA Capital

Benefits, Benefits, Benefits

As a staffing agency, we’ve worked with hundreds of employers in helping them attract and retain talent. We have placed many millennials in roles over the years. The thing that helps put employers over the top in terms of ability to attract talent relates to the strength of an employee benefits package. When discussing benefits, a “401k” is often the first thing millennial candidates ask about. At this point, it’s almost an expectation that an employer offers a retirement plan as part of their offering. — Ryan Nouis, TruPath

Start early

Retirement has always been top of mind when financial planning. The earlier you start, the more time your money has to compound interest and accumulate wealth. This smart financial philosophy only gets stronger when you consider that most employers offer a dollar for dollar match up to a certain percentage. — Megan Chiamos, 365 Cannabis

Make ends meet

Many millennials are in a tough spot: they are trying to make ends meet in a difficult economy. Most millennials I know value building meaningful lives and experiences: above accumulating wealth. — Rebecca Longawa, Halong Esports

It varies

Before diving in, I think it is important to highlight the fact that the age range that constitutes a millennial is vast. Some are in their young ’20s and just entering the workforce, while others are in their ’30s and may have a family of their own. With that said, everyone’s financial situations are different. Some people have student loans, medical bills, family obligations, etc. and may not have the means to put away as much as they like. Others may have more freedom and the capacity to save up more. It really depends on the individual. — Shiela Lokareddy, UCSD Health

Compound interest

From what I understand, millennials are not putting as much money or thought into their retirement planning as generations prior. Continue Reading…