Tag Archives: Financial Independence

Delay CPP & OAS until 70? – Some case studies

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By Ed Rempel

Special to the Financial Independence Hub

Planning the income for seniors often has the coolest opportunities to increase after-tax income.

The government pensions, CPP [Canada Pension Plan] and OAS [Old Age Security], are full of opportunities, because:

  • Seniors often have flexibility in taking taxable and non-taxable income.
  • OAS is subject to several “clawbacks” in addition to income tax.

To see these opportunities, you need to think creatively about pensions, tax and investments.

For example, in my recent article “Should I start my CPP early? – Real-Life Examples,” I found the single most important factor in whether to take CPP early before age 65 is how you invest.

Here you will see that the single most important factor in deciding whether to delay CPP after age 65 is: Will you withdraw more from your investments if you delay starting?

A quick review of the facts:

Delayed CPP Rules

  • The maximum CPP benefit in 2016 at age 65 is $1,092.50 per month, or $13,110 per year.
  • You can delay starting up to age 70 and you get 8.4% more for every year after age 65. If you start at age 70, you get 42% more for life, so the maximum is $18,616 per year.
  • New rules in 2012 allow you to start CPP even if you are still working.
  • If you are over 65 and still working, you can choose whether or not to pay into CPP.
  • Your 8 lowest earning years since age 18 (plus years when you had kids under age 7) are “dropped out” in calculating how much CPP you get.

Delayed OAS Rules

  • The maximum OAS benefit in 2016 at age 65 is $578.53 per month, or $6,942 per year.
  • You can delay starting up to age 70 and you get 7.2% more for every year after age 65. If you start at age 70, you get 36% more for life, so the maximum is $9,442 per year.

Continue Reading…

How to be wealthy & healthy, starting this Holiday Season

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Piggy bank balancing on seesaw over a bottle of pills
You can balance Health & Wealth with advisors on both

By Sandy Cardy

Special the Financial Independence Hub

The Holiday season is a very personal balancing act.  Every year we experience the same thing – multiple events featuring gut-bloating menus and Boxing Day blow outs followed by crash dieting for both your waist-line and your bottom line. How do you find that sweet spot between making the season joyful and memorable while avoiding the perils of two to three weeks of over-eating and spending followed by a blizzard of credit card debt?

It’s no secret that Canadians, particularly Baby Boomers in their sixties, are doing a poor job of managing their retirement savings, falling well short of amassing enough retirement funds. Canadians still find it difficult to apply one of the simplest financial planning principles: pay yourself before you pay for anything else.

If, like many boomers, your retirement plan is increasingly looking like harnessing yourself to a full-time job as long as possible, what happens if you fall sick? And when you gaze with furrowed brow at your bloated credit card balances in January, not only are you even further from any savings goals, the sheer shock of the amount owing can add an unwelcome dollop of stress to already overtaxed minds and bodies.  Never knowing when enough is enough, there aren’t any checks and balances on our impulse to over-consume.

Here are some tips to get re-balanced for 2017:

Every money decision you make, even the little ones, will have an impact on your retirement. Perhaps what you need now is a qualified advisor to help you achieve your goals: someone you trust wholeheartedly. A good advisor will ensure you are realizing all cost savings, and applying tax minimization strategies to build your net worth. Put it this way: it’s much more difficult to neglect simple investment principles when a financial planner is looking over your shoulder.

Healthcare advisors as important as financial advisors

Similarly, having one or more health care advisors available is essential. Whether you encounter a health crisis or want to pursue preventative health,  it’s key to find  nurturing and optimistic healers, either conventional or alternative, ones that involve you in your health care discussion.

Continue Reading…

ChangeRangers’ Mark Venning interviews Victory Lap Retirement co-authors

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Mark Venning, ChangeRangers.com

By Mark Venning, ChangeRangers.com

Special to the Financial Independence Hub

“We’re on a bit of a crusade to change the way our society thinks about retirement.” — Jonathan Chevreau & Mike Drak

Mike Drak and Jonathan Chevreau, co-authors of Victory Lap Retirement (published, October 2016) are not the first to head out on this crusade. Apart from the material on the larger subject of aging and longevity, in my library I must have at least 19 books, in addition to the stacks of reports, studies and new models on the subject of Retirement.

Over the twenty years in the career services industry, where I worked directly with business executives in their later life transitions – leaving the corporate crow’s nest, as I call it, I can appreciate where Mike and Jonathan are coming from in their take on this. I have produced three retirement programs since 2001, and in the process suffered from metaphor madness, developing novel ways of reframing the concept of retirement and our later life journey.

However, this Drak & Chevreau volume is a welcomed new addition to this crusade. The book, by way of its novelty, weaves the conversation from the threads of a concept called Findependence, as the cornerstone of a Victory Lap Retirement.  So here we go. Rather than a traditional book review, here in this blog post, I present views of the authors as shared through interview questions with them in late October.

Authors Interview

Mark’s Q: Your co-authored book, early on, takes a shot across the bow at the “financial media & financial services industries” in the way they persist to push “Retirement” as if it were some final destination. (There seems little shift between the 1970’s London Life’s Freedom 55, to Prudential’s 2016 Race for Retirement campaigns for example.) What one new key message should marketers take from reading Victory Lap that could become a differentiator in their marketing?

Mike: The industry is using the same commercials that they used 40 years ago. The only difference is that they are now in color. The world of retirement has changed significantly over the years and most people cannot afford nor do they want to live the lifestyle portrayed in their commercials.

Banks assume more money equals better retirement, which is wrong thinking. Banks are good with the investment piece but they need to become more involved with the lifestyle piece. How can you ever know if you have enough if you do not have a firm handle on what type of retirement lifestyle you want in retirement and what that lifestyle will cost?

Mark’s Q: At one point in Chapter 3, you make the point that: “Compounding the problem is the lack of financial education our children receive in school.” You also say in Chapter 4 that the importance of financial independence is a prerequisite to the new stage of life you call “Victory Lap Retirement.”  Let’s play here. What do you think about an opportunity for you to design/deliver a “Findependence” course relatable to high school teenagers that didn’t use the word Retirement? What then would the main message sound like to them?

Jon: We’d say there is an opportunity there. Continue Reading…

Considering a Sale Leaseback on a principal residence

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Quiet street with new houses and condo buildings on the background.This idea came to me while away fishing and the more I think about it the more appealing it becomes.

Sale leasebacks are common in the commercial property arena but I can’t recall seeing it discussed with respect to residential property.  I googled “sale leaseback residential property” and was pleasantly surprised to find that some people are already doing it.

Based on what I know, and my own particular situation, here is how it should work in theory.  My wife the Contessa would like to live downtown by the waterfront in Toronto one day. Austin is our only son still living with us, with our other two boys somehow managing to escape. So when Austin eventually, leaves the house will be largely empty. There is a good chance that Austin will move into residence in downtown Toronto when he goes to university in three years.

My mother, who is 92, is in a nursing home close to my house and I wouldn’t consider moving while she is there. Why move, complicate my life further and create unnecessary pressure?

My idea is to sell in the spring if residential real estate prices stay high and the market stays hot. I would negotiate a minimum five-year lease, which will allow me ample time to simplify and de-cumulate, getting rid of a lot surplus stuff accumulated over the years.

My Options

Continue Reading…

My recent blogs: KIPPERS, insecure retirement, annuities, post-Trump investing

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depositphotos_30337045_s-2015
KIPPERS. Should parents dip into retirement savings to help their kids?

As regular Hub readers may know, I often write financial articles for other (mostly) digital media, usually the Financial Post, MoneySense.ca and Motley Fool Canada. Here’s some of the most recent blogs or columns, with links via the headlines.

Nearing Retirement and still insecure about your finances? Sadly, you’re not alone. (FP, Nov. 17)). This came out of a survey released this week by Mackenzie Investments that suggested many of us actually feel less secure financially about retirement the closer the actual date arrives. One reason is grey divorce and another perhaps related one is dipping into retirement savings to help adult children.

The latter idea was explored In an earlier FP blog I wrote this week: When Boomers should turn the taps off (or on) when it comes to financial assistance for their kids. (FP, Nov 15). There I pass along a term I learned from occasional Hub guest blogger Doug Dahmer of Emeritus Retirement Solutions: KIPPERS, also mentioned in the photo caption above.

KIPPERS stands for Kids in Parents’ Pockets Eroding Retirement Savings.  I also mentioned this in a short segment on this topic on Tuesday with Peter Armstrong on CBC’s On the Money show.

A few weeks earlier, the CBC aired another segment between me and Armstrong titled You’ve never going to retire, and Here’s Why.

Canadian Personal Finance Conference this weekend

That of course touched on the new book I’ve coauthored with Mike Drak, Victory Lap Retirement. The FP has also been running excerpts of the book the last several Mondays. You can find the first four here. Number 5 is slated for next Monday. By the way, co-author and fellow blogger Mike Drak and I both plan to attend the Canadian Personal Finance Conference 2016 this weekend in Toronto. Hope to see other financial bloggers there!

Last weekend, the FP ran a my column on Locked-in Retirement Accounts (LIRAs): The RRSP’s less flexible cousin: Everything you need to know about the LIRA.  Watch for a followup column that addresses reader queries on this topic.

Earlier this week, Motley Fool Canada ran my take on investing in the post-Trump-victory world: Don’t dump your long-term investment plan over Trump’s victory. And it’s just published my latest quarterly report for Stock Advisor Canada, this one on CRM2 and Best Interest (only subscribers with a user name/password combo can access this).

Over at MoneySense.ca on November 11th was the online version of my most recent column from the November issue of the magazine, which is on annuities: How to win using annuities in retirement.

Hey, no one promised my Victory Lap Retirement would be easy!