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.

What you must know about Life Insurance and Coronavirus (COVID-19)

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LSMinsurance.ca; Photo credit: hopkinsmedicine.org

By Lorne Marr, CFP

Special to the Financial Independence Hub

What is Coronavirus and why is it so scary for life insurers?

The entire insurance business is based on risks and the ability to evaluate them. At the same time, life insurance companies do not like situations where they do not have enough information and statistics about risks related to their potential customers. People who have or had Coronavirus (also called COVID-19) represent this case.

The current outbreak of Coronavirus has already infected over 70,000 worldwide resulting, so far, in over 1,800 deaths. The majority of cases are taking place in China. Nevertheless, it has already spread across more than 25 other countries and is growing. The world’s knowledge about this virus is still fairly limited, including very approximate data about its death rate and the ways it spreads. Currently there is no vaccine. The current estimations put COVID-19’s death rate at approximately 3% as per GlobalNews. Comparatively, the death rate of SARS (outbreak in 2003) was placed at 9.6% and the death rate of Ebola (also known as EVD – Ebola Virus Disease) varied from 25% to 90% with the average values at 50% as per the World Health Organization.

All this leaves life insurance companies with a lot of uncertainty on how to deal with current and past Coronavirus patients. We reached out to a number of Canadian insurers to understand how they would treat such cases.

Insurance companies are all about managing risk

Insurance companies are all about managing risks and ensuring that they collect revenue in order to run their business and pay for claims. Insurers do this through defining various levels of life insurance products associated with different levels of risk. An overview below shows key products with their key characteristics.

  • In a nutshell, standard life insurance is associated with low risks, comes with the highest coverage limits, but REQUIRES both a detailed medical exam and completion of a medical questionnaire.
  • Simplified life insurance comes WITHOUT medical exams (which makes it very attractive for some people) but WITH a short, medical questionnaire. It comes at a cost and coverage limits are lower than standard life insurance.
  • Guaranteed life insurance DOES NOT require medical exams NOR a medical questionnaire. It is a life insurance product that you can always buy, but it comes at much higher costs, with limited coverage, and extra clauses not providing any coverage if an applicant passes away in the first two years after purchasing the policy.

Two last life insurance types are also called no medical life insurance since they do not require a medical exam. They are increasingly popular among seniors and people with health conditions.

How do insurance companies treat people with Coronavirus?

Our inquiries to various insurance specialists showed that there are two groups of insurers:

  1. Those who do not have a defined approach of dealing with Coronavirus and
  2. Those who are able to share the exact conditions under which people with Coronavirus will be able to get life insurance.
    The first group of insurers would either decline your application or delay it until a clear course of action is defined or offer you only guaranteed issue life insurance.
    The second group of insurers will be able to offer you a standard life insurance policy, but only once you are within defined parameters which are:
    • 3 months have passed since full recovery OR
    • Fully healed and cleared by a physician after being diagnosed with Coronavirus
    An overview below illustrates this concept:

What exactly do the insurers say if they are not ready to provide insurance?

The first group of insurers who are not open to providing life insurance for Coronavirus patients say:

7 tips to create and maintain a healthy Lifestyle

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By Jessica Ann

Special to the Financial Independence Hub

A healthy lifestyle is a significant factor that can make your life more enjoyable. If you want to enjoy more of life and all the perks that come with it, you have to make sure that you are physically and emotionally healthy. These are the requirements for a longer and productive life.

Everyone should be able to recognize that having a happy existence is something they can achieve if they’re willing to embrace a life that is focused on caring for physical, mental and emotional flourishing. There are many factors that may affect your physical health but you also have to know that you can always change things and maintain a healthy lifestyle.

Here are some of the most important tips to help you create and maintain a healthy lifestyle:

 Apply rule ‘Early to Bed Early to Rise’

 You often hear people who were not able to get enough sleep about how this deprivation has affected their daily routine. Your productivity is also dependent on how well you rested the night before. This is because the body needs to recharge after a tiring day. With this, you should make it a part of your list to apply the rule ‘early to bed, early to rise.’ Make this a habit and be consistent in following this rule. This is  important especially if you are a very busy person.

Diifferent distractors can hinder you from sleeping early and these are the ones you have to eliminate. Before going to bed, you should put your smart phone and other gadgets aside. This way, you will be able to sleep immediately. Early risers have the best opportunity to do more during the day because they have more energy. Let this be a motivation for you to be able to apply this rule for yourself.

 Exercise regularly

Regular exercise is important for everyone because of the different benefits we can get from it. First, this is one of the most natural ways to reduce weight. For people who are planning on losing weight naturally, they should set a regular exercise routine. Aside from that, it can also lower blood pressure and the blood cholesterol level. And if you want to take care of your heart and avoid the risk of type 2 diabetes, exercise is the best thing to consider. As well as a regular meditation practice for helping calm the mind before bed. Mindfulness meditation is also best.

 Avoid Junk foods

 You become what you eat. This may sound a bit harsh but the reality is that the junk foods that you are eating greatly affect your body and your whole system. Remember that the body depends on the food you eat and how it functions in the long run will be affected if you are not going to choose wisely. There are different ways on how junk food can affect you. Instead of supplying your body with the right amount of energy, you are depriving yourself with the nutrients that you need to get through with the day. Continue Reading…

The costs of Quality of Life in our later years

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SeniorsAdvocate.ca

By Barbara J. Kirby, Certified Professional Consultant on Aging (CPCA)

Special to the Financial Independence Hub

Everyone measures quality of life differently but the underlying concern for many older people is how long their money will last? Aging and health conditions may dictate the type of accommodations and amount of support you need now or down the road. However, quality of life does not need to be measured by where you live but more by the effort you put into caring for yourself and planning for the right supports to be around you, including type and frequency of that support.

Whatever our situation we also need to draw on our inner strength to find comfort and solace if our lifestyle is not as expected. Basically, we need to toughen up. What is it that holds us back from having a good quality of life as we age then? Some of it is denial, and refusing to deal withour chronic aches and pains, loss of mobility, loss of hearing and loss of eyesightas well as simple activities such as cooking for ourselves and cleaning.

We either need to have the ability to pay to relieve the stress of these issues, or have other family or community resources and our quality of life can improve dramatically. I have seen the biggest turnaround in the quality of life for people who participate in fitness and social programs. Those who receive in-home physiotherapy get and use hearing aids that work well, have cataract surgery, knee replacements and hip replacements all with a good rehabilitation programs and continued physiotherapy after they come home.

These are all without exception of course to each individual unique circumstances but the simple rule of thumb is plan to pay for these support services. Rehab twice a week may cost anywhere from $50 to $150 per visit and a companion twice a week may cost anywhere from $25.00 to $40.00 per hour and usually expects to work for a minimum of 3 hours; some companies are saying 4 hours now. Having a family member who is a good advocate for you, who makes an effort to understand and ask questions re: medical issues, and who knows how to access resources when needed is a bonus. You can’t always expect a family member to fit into this role.

In addition, hiring a companion to give your family member a break is important: someone who is equal to you as a peer to have engaging conversations with and has the ability to drive. The common questions asked are, where will I live? What is available? How much will it cost? These are not simple questions to answer because there are many variables. Here are just a few questions to consider.

• What is your income level?

• Do you have retirement savings or access to other capital?

• What community do you want to live in?

• What are your health conditions?

• What are your expectations in relation to your future health needs as you age?

• How soon do you want to move and do you have family or anyone to support you In Canada and the Province of B.C.?

Our social system provides us with most of our medical expenses and offers subsidized housing and care if we are lower income. Accessing independent or assisted housing can be confusing. There are many access points to the different types of housing including, subsidized, private, co-op housing, co-housing, market rental housing, and low-income housing. Some of the entry points may be through the health authorities, or BC Housing, or directly through the homes and other various housing societies.

There is not one central point where you have access to all. You can go on line to Seniors Services Society, or call BC211or call a local seniors centre for information or ask for help from a professional housing specialist. Beware of the ones who don’t charge but are paid a referral fee by some of the private assisted living homes.

Here are rough numbers but they will give you an idea of where you fit in. Continue Reading…

A new take on death and cross-border taxes

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By Elena Hanson

Special to the Financial Independence Hub

Many Canadians work in the United States. But what if you worked there, owned an IRA (Individual Retirement Account), came back, and died here? What happens to the beneficiaries?

It depends on your age, marital status, and who the beneficiaries are. Add to that maturity of the account itself and what type of IRA it is. Furthermore, on December 20, 2019, President Donald Trump signed into law the ‘Setting Every Community Up for Retirement Enhancement Act’ (SECURE Act), which changed some key IRA rules. This kind of scenario can easily wind up as a dog’s breakfast, especially in the hands of a lawyer, accountant or financial advisor who isn’t up to snuff on the ins and outs of an IRA.

In a traditional IRA contributions are tax-deferred, as they are with a Canadian RRSP, and income is taxed in the U.S. when the money is paid out. U.S. law is such that account owners must begin to make required minimum withdrawals when they turn 72. This is like a RRIF in Canada. But if you pass away before that withdrawal period begins, there are three options for reporting the interest, as per one’s Canadian tax responsibilities:

1.) Include the fair market value of the IRA which becomes taxable on the Canadian income tax return of the deceased for the year of death.

2.) Include the fair market value of the IRA on a separate ‘Rights or Things’ income tax return which is due one year after the date of death.

3.) Legally transfer the rights to the account to a beneficiary, but this must be done within a certain period. Such an option is available only to beneficiaries designated in the IRA. If that beneficiary is Canadian, they must include the interest on their Canadian tax return. If the beneficiary is not Canadian, the amount is not taxed here.

What if you die after withdrawal begins?

Now, what if you pass away after the withdrawal period begins? This is a whole new kettle of fish because you, or your beneficiary, are dealing directly with the Internal Revenue Service (IRS).

Let’s say the deceased person passed away in 2020 but began making withdrawals in 2015. In that situation their interest in the IRA is not regarded as ‘Rights or Things.’ The amount of any annuity payment is included in the income of the deceased for the year of death: in this case, 2018. The balance would then be reported by the beneficiaries on their income tax return when they receive the payments after inheriting the account, and this would continue for as long as they are designated as direct beneficiaries.

This is where it’s important to have a tax professional – your lawyer, accountant or financial advisor – knowledgeable about IRAs. In fact, the U.S. levies income taxes only when amounts are paid out from an IRA.

So, assume a Canadian person who owns an IRA suddenly dies before their withdrawal period commences, and their designated beneficiary is also Canadian.

In this scenario the third option may be best; legally transfer the rights to the account to a beneficiary, and when that person receives payments, they must pay a 15% U.S. tax withholding. In addition, they must report the payment on their Canadian tax return but can claim the 15% U.S. tax withholding as a foreign tax credit.

However, if your advisor isn’t familiar with how an IRA works or IRS rules, the result may be the dog’s breakfast referred to earlier. For example, with Option #1 or #2, Canada ends up double-dipping on the IRA. Canada taxes the full value of the IRA in the year of death.

IRAs aren’t taxed until distributed in the U.S.

However, in the U.S., the IRA does not get taxed until it has been distributed. So, what ends up happening is that in the year of death, Canada gets its first dip by taxing the IRA on the decedent’s tax return. Later on, when the IRA gets distributed, the U.S. will tax the same income once it is distributed to the Canadian beneficiary, and Canada dips again by taxing the same income on the beneficiary’s tax return this time around.

Therefore, option #3 is best because it prevents the IRA from being taxed in full twice. Paying tax on your interest once is enough. Who wants to pay it twice? But this can, and does, happen. Continue Reading…

How to enjoy your Retirement years on a Fixed Income

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Photo via Rawpixel

By Sharon Wagner

Special to the Financial Independence Hub

For many new retirees, adapting to a fixed income can be a bit of a challenge. However, living on a limited budget shouldn’t take any fulfillment out of your golden years. With a few budget tweaks and some smart financial planning, you’ll be able to enjoy today and remain financially secure for the future. Here are some quick budgeting tips for financial success now that you’re retired.

Cut unnecessary subscriptions and services

If you’re not careful, memberships and subscriptions can eat up a lot of your budget. For example, canceling your cable subscription and replacing it with an inexpensive streaming service can save you hundreds of dollars a year! Gone are the days of paying for a bunch of channels you never watch. If you decide to cut the cord and do away with your cable box, you’ll want to get a streaming device so you can watch your favorite shows and movies on your TV. Simply compare streaming devices to match the features and the right device with your budget.

Spend less on food

Eating out frequently can eat a massive hole in your budget. According to Nestle Professional, senior households spend thousands on eating out every year! Considering that cooking a meal at home costs a fraction of dining out, you can save a significant amount of money by spending more time in the kitchen.

Get familiar with some quick and easy meals that you can throw together the next time you’re tempted to order takeout. You can also take steps to cut down on grocery spending: review flyers and look for deals, write a shopping list, and don’t buy anything that’s not on your list.

Pay off debt

If you have debt, make a plan to pay it off as soon as possible. Any money you pay in interest on your debt is money you can’t spend on fun retirement hobbies and activities. Kiplinger recommends starting by focusing on high-interest debt. Credit card debt can be particularly burdensome, so do whatever you can to avoid taking on more. Medical debt can also be overwhelming, but credit experts advise against prioritizing this type of debt since it typically carries low to no zero interest. Continue Reading…