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.
My latest MoneySense Retired Money column looks at one unexpected upside of inflation; the government’s indexing to inflation of tax brackets, retirement savings limits and OAS thresholds. You can find the full column by clicking on the link here: Inflation a scourge for retirees? Ottawa’s silver lining(s)
TFSA room rises to $7,000
Fans of the popular Tax-free Savings Account (TFSA) will experience this as early as Jan. 1, 2024, when the annual maximum contribution room rises to $7,000, up from $6,500 in 2023. As of January 2024, someone who has never before contributed to a TFSA now has cumulative contribution room of $95,000.
In November Kyle Prevost’s weekly Making Sense of the Markets column included an item titled Make inflation work for you. “We shouldn’t ignore or discount the more advantageous aspects of inflation, such as increased government benefits and more contribution room in our RRSPs and TFSAs.”
Prevost linked to a spreadsheet posted on X (formerly Twitter) by financial advisor Aaron Hector, posted late in October, after the CPI announcement that Ottawa’s official inflation indexing rate for 2024 would be a sizeable 4.7%. While below 2023’s 6.3% indexation rate, it’s well above 2022’s 2.4% and 2021’s 1%.
Also quoted in the MoneySense column is Matthew Ardrey, wealth advisor with Toronto-based TriDelta Financial. “One of the main benefits is paying less taxes.” Income tax brackets increase with inflation each year. For example, in 2021 the lowest tax bracket in Ontario ended at $45,142 of income. “Starting in 2024, this lowest tax bracket now ends at $51,446. This is a 14% increase over just a few years.” Continue Reading…
With people living longer than ever, retirement now makes up a significant portion of our lives. Could it be the perfect time to start a business? Here are the pros and cons of becoming an entrepreneur in your golden years.
Important Considerations
Entrepreneurship can enrich your life in immeasurable ways. However, before launching your own business, you should consider the following challenges.
Financial Risk
According to a 2018 study by Harvard Business Review, older entrepreneurs tend to run more successful companies. The businesses that financially thrive in their first five years are, on average, started by 45-year-old entrepreneurs, probably due to this cohort’s experience and willingness to take risks.
Although the odds may be in your favor, it’s still important to consider whether you have the capital to run a business — and to pick up the pieces if it doesn’t work out. Over 80% of small businesses fail because of cash flow problems. Decide how much money you’re willing to invest and potentially lose in your new venture.
Time Commitment
How do you envision retirement? If you’re considering entrepreneurship, you’re probably not the type of person who wants to lounge around sipping drinks on a beach.
If you do want a more relaxed retirement, however, you might find the time commitment required to run a business overwhelming. Entrepreneurs often put in long days to get their businesses up and running. Even after your company gets off the ground, you may find yourself having to work longer hours than you were expecting.
Of course, as a business owner, you also have a lot of sway over how big you want to let your venture get. If things start getting out of hand, you can always scale back.
Social Security Deductions
If you’re younger than full retirement age in the U.S. — which can range from 66-67, depending on when you were born — becoming an entrepreneur during retirement can affect your Social Security benefits.
Before you reach full retirement age, the IRS will deduct one dollar from your benefit payments for every two dollars you earn above $21,240. The year you reach full retirement age, the IRS will subtract one dollar from your Social Security benefits for every three dollars you earn above $56,520.
Consider whether these fees will impact your ability to retire comfortably. You might find you’re earning more money from your business than you would from Social Security anyway, so the deductions may be of little consequence.
Benefits of Entrepreneurship
Although it may be challenging, starting your own business will likely enrich your life. Here are some ways it could positively affect your retirement: Continue Reading…
Money management is essential to help your savings thrive and benefit your [U.S.] retirement accounts. Discover movements to minimize taxable income.
By Dan Coconate
Special to Financial Independence Hub
Navigating the path to a financially secure retirement can often seem like navigating a labyrinth with no exit. With so many potential strategies and considerations, it’s easy to feel overwhelmed. However, efficient tax management is key to unlocking a financially comfortable retirement.
By adeptly managing your taxable income, particularly through individual retirement accounts (IRAs) [or in Canada, RRSPs], you can pave a clear path through the complexities of retirement planning, positioning yourself for a secure, worry-free future. Understanding the necessary movements to minimize taxable income in a retirement account will help you optimize and maximize your retirement savings.
Contribute to a Traditional IRA
Investing in a traditional IRA can be a smart move to effectively reduce your taxable income. Your contributions may be tax deductible, depending on your income and whether your work’s retirement plan also covers your spouse.
The more you contribute to your traditional IRA within the IRS contribution limits, the more you can reduce your taxable income for the year.
Consider a Roth IRA Conversion
A Roth IRA conversion is a strategic financial decision that can secure tax-free income during retirement. When you convert from a traditional IRA to a Roth IRA, you pay taxes on the converted amount in the year of conversion. [Roth IRAs are the U.S. equivalent of Canada’s Tax-Free Savings Accounts or TFSAs] Continue Reading…
Jon Chevreau and Canada Podcasts’ Philip Bliss: https://canadaspodcast.com/findependencehub/
By Philip Bliss
Special to Financial Independence Hub
In an age where knowledge is easily accessible, podcasts have emerged as one of the most potent tools for personal development.
Findependence [aka Financial Independence] is a goal many aspire to, but achieving it often requires a solid understanding of money management, investments, and entrepreneurship. This is where podcasts shine, providing a wealth of knowledge and inspiration that can be instrumental in your journey towards financial freedom.
This new tool is particularly valuable in the fast-paced world of entrepreneurship, where the quest for knowledge and inspiration is ceaseless. In this digital age, Canada’s Podcast has emerged as a game-changer, becoming a cornerstone for Canadian entrepreneurial development and a key to enabling Findependence. Let’s explore why these audio/video gems are so critical to the journey of every aspiring entrepreneur.
1.) Education at your Fingertips
Podcasts offer a wide array of financial knowledge, from personal finance basics to advanced investment strategies. By tuning into podcasts, you can learn about budgeting, saving, and investing while going about your daily routine. Whether you’re commuting, exercising, or doing household chores, these audio programs allow you to convert idle time into a valuable learning opportunity.
Some popular finance podcasts like “The Dave Ramsey Show” and “BiggerPockets Money” offer practical advice on budgeting, getting out of debt, and achieving financial freedom. These shows are like having a personal finance mentor guiding you through the intricacies of money management.
2.) Diverse Perspectives and Ideas
Findependence is not a one-size-fits-all goal. Everyone’s journey is unique, and podcasts reflect this diversity. Podcast hosts often bring their personal experiences and perspectives to the table, offering a rich tapestry of ideas and approaches to achieving financial success.
You can listen to real-life stories of people who have achieved findependence, learning from their triumphs and pitfalls. This diversity of experiences can help you tailor your approach to fit your own circumstances and goals.
3.) Investing Insights
For those looking to grow their wealth through investments, podcasts can be a treasure trove of valuable insights. Whether you’re interested in stocks, real estate, cryptocurrencies, or other investment avenues, there’s likely a podcast that caters to your interests.
Podcasts like “Invest Like the Best” and “The Motley Fool” provide deep dives into various investment strategies, market analysis, and expert interviews. By regularly listening to such shows, you can stay updated on market trends and make informed investment decisions.
4.) Motivation and Inspiration
Findependence can be a long and challenging journey. At times, you may find yourself discouraged or unsure about your financial decisions. Podcasts can serve as a source of motivation and inspiration, reminding you of the benefits of findependence and keeping your goals in focus.
Many findependence podcasts share stories of people who have achieved their financial goals against all odds. These tales of perseverance and success can fuel your determination and keep you on track, even when the path seems daunting.
5.) Building a Supportive Community
Podcasts often come with dedicated communities. These communities provide a space to discuss financial topics, share experiences, and seek advice from like-minded individuals. Engaging with these communities can be a valuable source of support as you work towards findependence. Continue Reading…
Let’s face it: When families list their favorite financial planning projects, legacy planning rarely makes the cut. It may feel as if you’re putting the emphasis exclusively on death and taxes, rather than your lifetime pursuits such as building a career, pursuing your personal interests, stewarding your kids into adulthood, and retiring in style.
Then again, I believe the term “legacy planning” is misleading to begin with. It sounds so dry and formal — as if it’s only for uber-rich, multigenerational dynasties, or the tail end of your lifespan.
No wonder most people put off planning for it.
In reality, legacy planning can be worthwhile for almost anyone. And it’s not just for later in life; key aspects of it can help you enjoy a more enriched life today. In today’s Timeless Tip, we’ll cover the possibilities.
What is Legacy Planning?
Instead of treating legacy planning as a tedious, end-of-life chore, I like to think of it as being more like a bonus round of lifestyle planning across four core quests:
Family Ties: Legacy planning helps you keep more of your wealth in the family. Importantly, it lets you define who your family is, in a world where multiple marriages and blended families may more often be the norm than an exception to the rule.
You or your Heirs: Legacy planning can also be defined by what it is not. If your top priority is having enough to enjoy your retirement in style, your legacy planning will differ from someone who dreams of leaving the largest possible inheritance to their heirs.
Charitable Giving: Legacy planning also helps you chart out how and when you’d like to support your causes and charities of interest. Hint: You don’t have to wait until you’re gone to leave a legacy.
Tax Reduction: Even if you’re fine with letting inheritance laws guide how your estate will be distributed, most of us would prefer a tax-efficient transfer. Legacy planning strategies abound here.
How do you define “Family”?
First, let’s address the piece most of us associate with legacy planning: Who gets what stuff after you’re gone? If your estate seems perfectly straightforward, you may be tempted to just let your heirs sort it out. Unfortunately, this can leave you and your loved ones uneasy — not just moving forward, but right now.
Unintended Consequences: Check your provincial inheritance laws, and you may be surprised by what will happen to your assets if you die intestate (without a will). Your preferences may differ dramatically from the government’s.
Unresolved Heirlooms: Resolving which loved ones are to receive which treasured heirlooms and other portions of your wealth, can bring you and your family more peace — today, and moving forward.
The Angst of Uncertainty: Most of us also feel better knowing we’ve done what we can to spare our heirs the pain of having to untangle an unplanned estate at the same time they are grieving a profound loss.
The logistics of estate planning need not be extensive. They can range from essential to more advanced:
Wills: A basic will might suffice if you simply want to ensure particular people directly inherit particular pieces or portions of your estate, as permitted by law — especially when your preferences differ from provincial law.
Trusts and Foundations: You may want to up the ante with targeted trusts to cover additional nuances in your life. For example, trusts can provide for underage heirs, an heir with special needs, or other complexities, such as if your family owns a business in which some, but not all family members are involved. Private foundations come into play if you are interested in increasing the scope of your multigenerational charitable giving.
Insurance: Life insurance is also an often-overlooked tool for providing gap funding to cover taxable wealth transfers, especially when family businesses are involved.
Bottom line, making plans today for your wealth transfer to happen with minimal muss, fuss, costs, and complications can free you to better enjoy your assets throughout your life.
Spending or Preserving?
As we covered in “Retiring Reliably, Leaving a Legacy or Balancing Both?, ” another key question is: Do you want to earmark excess wealth for your optimal retirement, an optimal legacy, or a balance of both? Different lifestyles call for different legacy plans.
You may not think of investment management as part of traditional legacy planning. But you’ll be better at both if you combine forces. For example, if you want to emphasize leaving a legacy, your investment portfolio’s average expected return should exceed your withdrawal rate, so inflation doesn’t eat away at the balance. This usually means keeping more of your investments working in the markets, while also arranging for a way to take out cash on a regular, tax-efficient basis. Continue Reading…
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