Longevity & Aging

No doubt about it: at some point we’re neither semi-retired, findependent or fully retired. We’re out there in a retirement community or retirement home, and maybe for a few years near the end of this incarnation, some time to reflect on it all in a nursing home. Our Longevity & Aging category features our own unique blog posts, as well as blog feeds from Mark Venning’s ChangeRangers.com and other experts.

Retired Money: The LIRA-to-LIF deadline and more on the RRSP-to-RRIF deadline

My latest MoneySense Retired Money column is the second part of an in-depth-look at the deadline those with RRSPs don’t want to miss once they turn 71. Part 1 appeared in March and can be found here.

The full new column can be found by clicking on the highlighted headline here: RRSP to RRIF, and LIRA to LIF: How it all gets done.

For convenience, here are some highlights:

The first column looked at the necessity of winding up RRSPs by the end of the year you  turn 71: a topic that becomes increasingly compelling as the deadline approaches. This followup column looks at two related topics: the similar deadline of LIRA-to-LIF conversions and the alternative of full or partial annuitization.

LIRAs are Locked-in Retirement Accounts and analogous to RRSPs, albeit with different rules. They usually originate from some employer pension to which you once contributed in a former job. To protect you from yourself you can’t extract funds in your younger years unless you qualify for a few needs-based exceptions. LIFs are Life Income Funds, in effect the annuities LIRAs are obliged to become, also at the end of your 71st year.

The full MoneySense column looks at our personal experience in converting my wife’s LIRA to a LIF, aided by Rona Birenbaum, founder of Caring for Clients. Note that the timing of the conversion is NOT affected by having a younger spouse: that only affects the annual minimum withdrawal calculus.

In my case, having turned 71 early this April, I have until the end of this year (2024) to convert my RRSP to a RRIF. The first required minimum withdrawal must occur in 2025: by the end of 2025 I must have withdrawn the annual minimum.

You can choose RRIF payment frequencies: usually monthly, quarterly, semi annually or once a year: you just have to specify which date. I imagine we’ll go monthly.

Currently, our retirement accounts are held at the discount brokerage unit of a Canadian bank, although we use a second discount broker for some non-registered holdings. While the LIRA will be the basis of an annuity provided by an insurer selected by Caring for Clients, most of our RRSPs will likely become RRIFs, probably by November of this year.  Our hope is that we will keep largely the same investments as are being held now and administer them ourselves, with an eye to maintaining enough cash to meet our monthly withdrawal targets.

Self-directed RRIFs

The new vehicle will bear a familiar name for those with self-directed RRSPs: it’s a Self-directed RRIF. At our bank, it was a simple matter of entering the RRSP and finding the link to convert it to a self-directed RRIF. Once there, you tick boxes on when you want the money, withdrawal frequency and (optionally) choose a tax withholding rate. You can also specify that your withdrawals will be based on your spouse’s age, assuming they are younger.

You can of course also go through a similar process with any financial institution’s full-service brokerage or investment advisor, ideally with at least one face-to-face meeting.  One thing Birenbaum says retirees often miss is specifying tax withholding, since there is no minimum withholding tax period required on the minimum withdrawal. I imagine we will ask to have 30% tax taken out at the time of each withdrawal: which is what we do with existing pension income. It’s on the high side to make up for the fact we also have taxable investment income (mostly dividends) that is NOT taxed at source.

             “I find the majority of retirees like having that withholding tax held at source so they don’t have to deal with installments and owing the CRA.” You can of course have more than 30% withheld.

            With a LIRA, you need to get the account liquid before the money is sent to the insurance company to annuitize. This means keeping tabs on the maturity dates of GICs or other fixed income.

            The paperwork is minimal: we provided a recent LIRA statement, then had an online meeting with one of Birenbaum’s insurance-licensed advisors to go through the application, then sign a transfer form to move the cash to the insurance company for a deferred annuity. The transfer takes a few weeks, with the actual annuity rate determined when the insurance company actually receives the money: registered transfers are recalculated at the point of purchase. There is a form T2033, which is an RRSP-to-RRIF transfer form that moves the money from the bank to the insurance company.

Having a mix of RRIF and annuities

Semi-retired actuary and author Fred Vettese says he has endorsed retirees buying a life annuity ever since the first edition of his book “Retirement Income for Life” back in 2018. “If you buy one, it should be a joint-and-survivor type, meaning it pays out a benefit to the survivor for life.” Continue Reading…

Comparing Disability Insurance and Critical Illness Insurance

By Lorne Marr, LSM Insurance

Image courtesy LSM Insurance

Disability Insurance and Critical Illness Insurance: Why the Choice Is Not Straightforward

Choosing between disability insurance and critical illness insurance is a decision filled with complexities and nuances that go beyond simply comparing premiums and payouts. One of the primary confusions arises from the overlap in coverages between disability insurance and critical illness insurance. Both types aim to provide financial support in the event of serious health issues, yet they serve different purposes.

Disability insurance replaces a portion of your income if you’re unable to work due to an illness or injury. Critical illness insurance, on the other hand, provides a lump-sum payment upon diagnosis of specific conditions listed in the policy, such as cancer, heart attack, or stroke.

The cost of disability insurance is closely linked to one’s occupational class, with higher premiums for those in jobs deemed higher risk or seasonal. This categorization means that individuals in professions with greater physical demands or inherent risks — such as construction workers or miners — may face significantly higher costs for disability insurance. This aspect can make disability insurance less accessible or more expensive for those who potentially need it the most, complicating the decision-making process.

For freelancers, entrepreneurs, and others without a steady paychecque, obtaining disability insurance can be particularly challenging. Insurers often require proof of income to determine benefit levels, making the quoting and application process more complex for those with variable incomes.

Many people may already have some form of disability or critical illness coverage through group insurance plans provided by employers, unions, or associations. Additionally, government programs like the Workers’ Safety and Insurance Board (WSIB) in certain jurisdictions offer protection against work-related injuries and illnesses. Awareness of these coverages is essential to avoid unnecessary duplication and to identify any coverage gaps that private insurance could fill.

It is also important to note that your smoking status has a differing impact on disability insurance and critical illness insurance premiums and eligibility. Since many critical illnesses covered by these policies, such as heart disease and cancer, are directly linked to smoking, smokers may find critical illness insurance to be more expensive or harder to qualify for compared to disability insurance.

Before deciding on which one – or if both – are right for you, it’s crucial to understand these products on a deeper level. So, let’s dive in and learn more.

What are Disability Insurance and Critical Illness Products?

The table below provides a detailed comparison of disability insurance and critical illness insurance. Note that there are some areas of overlap between the two coverages.

Where Disability Insurance and Critical Illness Coverages Overlap

It is important to note that some health conditions are unique based on the type of policy selected, but there is still some crossover between what is covered on disability insurance, and what is covered by critical illness insurance.

If you are interested to read more about Disability insurance, here is a detailed overview of all long-term disability insurance components and all short-term disability insurance elements.

What Scenarios do we Compare and Why

We compare a few typical scenarios, which results in significant differences between critical illness and disability insurance quotes. For all the scenarios we use the following coverage values:

  • Disability insurance: 70% of the current monthly salary of $7,500 = $5,250/month
  • Critical illness Insurance: $300,000

 Scenario 1: Disability Insurance vs Critical Illness Insurance Premiums for An Office Employee (AKA “Safe Job”) Continue Reading…

Managing a Windfall: Sudden increases in Net Worth and how to handle them

Image courtesy Pexels/Tima Miroshnichenko

By Devin Partida

Special to Financial Independence Hub

The initial excitement of suddenly receiving an inheritance, lottery win or large bonus is palpable, presenting what seems like endless possibilities. However, this euphoria gives way to the daunting reality of managing significant amounts of money.

You face complex decisions that involve managing your new wealth responsibly and planning for your future in ways you might not have considered before. This transformative moment calls for careful consideration and strategic financial planning to ensure your sudden wealth leads to long-term security and success.

The Reality of Sudden Wealth

Many people believe sudden wealth is a one-way ticket to lifelong happiness, but the reality is far more complex. Despite the number of U.S. adults in the upper-income tier rising from 14% in 1971 to 20% in 2019, managing significant financial resources introduces many new challenges.

You might think money will solve all your problems, but it often brings issues, including increased responsibility, potential isolation and the need for meticulous financial planning. Instead of viewing wealth as a simple solution, recognize it as a valuable tool requiring savvy management to benefit your life. This approach ensures you handle your finances wisely, considering the intricate balance between enjoying your wealth and maintaining it for the future.

Understanding the Psychological Impacts

When you receive a sudden windfall, confusion and stress quickly cloud the initial rush of joy as you face unexpected financial decisions. People sometimes refer to this whirlwind of emotions as “sudden wealth syndrome” — a phenomenon that can lead to anxiety, poor judgment and hasty financial decisions.

Taking deliberate steps is crucial to maintaining emotional stability. They include the following:

  • Pause and allow yourself time to adjust
  • Consult with a financial advisor and tax expert
  • Seek support from professionals or support groups

These help you manage your new circumstances wisely and guarantee you make the most of your windfall without emotional turmoil.

Practical steps to manage a Windfall

Create a budget tailored to your new financial situation to manage a sudden windfall adeptly. Start by calculating your net worth to gain a clear understanding of where you stand money-wise. Before making any major decisions, place your funds in a temporary, safe location like a high-yield savings account to ensure they remain secure while you explore your options.

Additionally, take the time to educate yourself on financial management and investment strategies. Enhancing your knowledge in these areas will empower you to make informed decisions that align with your long-term financial goals. This proactive approach will help you maximize the benefits of your newfound wealth.

The Importance of a Structured Financial Plan

A comprehensive financial plan is essential to manage and sustain your wealth effectively. Harness the power of technological advancements like AI and machine learning, which can predict upcoming financial trends and assess investment risks precisely. Moreover, seek the expertise of professional financial advisors who can tailor a plan specifically suited to your unique needs and goals. Continue Reading…

Conquering Retirement Fear: from Apprehension to Adventure

Many dream of retirement, but as the big day approaches, some experience a surprising emotion: fear. Billy and Akaisha Kaderli, your guides to navigating retirement, delve into the anxieties that can lurk beneath the surface of financial preparedness.


By Billy and Akaisha Kaderli

Special to Financial Independence Hub

All of your ducks are in a row.

You have saved and carefully invested for years, and the personal discipline is about to pay off.

So why is there apprehension in the bottom of your belly? Let’s be honest. There is risk involved, and the future no longer seems certain or familiar.

“What if I forgot about something?” you think, and start going over every plan you have made.

No one likes to admit straight out that they are afraid of retirement. Why, that sounds silly. But changing your life from one of being focused on work duties, raising a family, paying bills, and receiving that dependable paycheck every week to one of the virtually unknown has its own set of stresses. You’re being dishonest if you say it’s not a big leap mentally, emotionally, or financially.

Lack of confidence often underlies questions disguised as logistics on how to retire. Sometimes, one must simply take the leap of faith, making a companion of the ever-present question “What if?”

If you have spent your whole life building security and providing that same security the best you could for your family, then stepping into the unknown world of retirement is like jumping off a cliff.

Even if you’re as prepared as you think you are.

Sure, we can distract ourselves with dreams of endless golf, or margaritas on an exotic beach somewhere, but when it’s quiet, we find ourselves looking over our shoulders, wondering whether some forgotten component is lurking just out of sight.

What if I run out of money?,” you whisper to yourself.

Perhaps your personal fear-mongering nemesis is health care in retirement, your portfolio balance or even something as simple as boredom. There can be great comfort gained from all of one’s time being planned out months in advance.

Going sailing, Boracay, Philippine Islands

Going sailing, Boracay, Philippine Islands

To expect retirement to be free of hitches or snags is unreasonable. There are no guarantees in life. None of us knows what the future will bring, and this is true whether you’re working or retired. Continue Reading…

Retired Money: How to double CPP benefits while also hedging against inflation and longevity

My latest MoneySense Retired Money looks in more detail at the National Institute of Ageing’s recent series of papers on CPP (and OAS). As the Hub reported on April 11th, few Canadians are aware that delaying CPP benefits to age 70 can more than double (2.2 times actually) eventual monthly benefits compared to taking it early at age 60. That blog reproduced a chart from the NIA that showed just how much money Canadians are leaving on the table by NOT deferring benefits as long as possible.

The other major chart from the NIA paper is reproduced above, showing just how important most retirees view the guaranteed inflation-indexed income that CPP and OAS provide. As the new column points out, for many retirees — especially those who worked most of their careers in the private sector and don’t enjoy a Defined Benefit employer pension — CPP and OAS are the closest thing they’ll have to a guaranteed-for-life inflation-indexed annuity.

The new MoneySense column focuses on how delayed CPP benefits not only generate higher absolute amounts of income  but also carry with it the important related benefits of more longevity insurance and inflation protection.

You can find the full column by clicking on this highlighted headline: How to double your CPP income.

It features input from several well-known retirement experts, including noted finance professor and author Dr. Moshe Milvevsky, retired Mercer actuary Malcolm Hamilton, author and semi-retired actuary Fred Vettese, TriDelta Senior Financial Planner Matthew Ardrey and the lead author of the NIA report, Bonnie Jean MacDonald.

Delaying CPP is “the best annuity-buying strategy you can implement.”

Milevsky sums it up well, when he says “delaying CPP is the best ‘annuity-buying strategy’ you can implement. Everything else is just Plan B.” Audrey makes a similar point: CPP is “an annuity and an indexed annuity at that … This helps protect the purchasing power of this income stream through retirement. Many people wish they had an indexed DB [defined benefit] pension and in fact we all do. It is the CPP.”

You’ll probably see much more press on this topic as the NIA is releasing a paper each month between May and December. May 8th will be general education on the Canadian retirement income system while July 17th will explain the mechanics of delaying CPP (and QPP) benefits.