This Changes Everything

A pile of coins symbolize the need to save money for retirement to remain financially secure and pursue a lifestyle of choice.

At my sixtieth birthday celebration, a student of mine made a toast. “To a life well lived,” she said raising her glass high.  I’ve been trying to live up to her testimonial ever since.

How to configure your life as a retiree and how to implement a realistic plan that focuses on what matters most to you is an enormous challenge.  The plan requires thought and heart and conversations with loved ones and professionals. In my case, not only do I rely on the good intentions of family, but on the professional advice of a trusted accountant and lawyer.

Although not of all of your retirement blueprint has to do with money, the smart configuration of your assets and liabilities helps. In the latest federal budget, those approaching retirement or living in retirement have been handed a silver platter of goodies. Now is the time to figure out how best to deploy those goodies to make for the best retirement possible.

In April, the federal budget boosted the annual TSFA (tax free saving account) ceiling from $5,500 to $10,000 yearly while reducing the minimum withdrawal from a RRIF (Registered Retirement Income Fund) from 7.38 percent to 5.28 percent yearly.  RRIF withdrawals aren’t mandatory until you turn 71.

These new budget items change most of what we took for granted about saving for and after retirement, and eventually spending some or all of our lifelong accumulated assets.  In April the TFSA became increasingly crucial to the implementation of your plan.

In Tim Cestnick’s Globe and Mail column, “Review Your Savings Strategy amid TFSA, RRIF Changes,” the managing director of advanced wealth planning for Scotiabank Global Wealth Management, illustrates how the value of your TFSA can increase under the new laws governing contribution limits. “If you were to invest $5,500 in your TFSA for the next 20 years and were to earn 7 per cent on your money, you’d end up with $241,258. By contributing $10,000 annually instead, your TFSA jumps to $438,652 in value at that same rate of return.”

This changes everything.  First of all, you can transfer the amounts cashed in from your RRIF, after paying the requisite tax, to a sheltered TFSA.  Or you can unlock some of the tax-free equity in your home or cottage with a reverse mortgage and transfer this wealth to your TFSA.  These decisions are complicated and I’d suggest contacting a professional advisor to make sure you have enough income in retirement to stay secure and able to pursue the life style you’ve chosen.

If you are speaking with an advisor you’ll need to calculate your government pensions, usually a combination of CPP and OAS, your employment defined benefit or defined contribution pension plan, salary from any part-time work, investment income, home equity, and estate planning for your spouse, common-law partner or children.

It’s important to ensure that the inheritance you wish to leave behind is clearly spelled out in your will and that you understand the tax implications of who you leave your money to. For instance, if you name a spouse or common-law partner as successor of your TSFA, he or she can take over the plan without paying taxes. If you name your spouse as the beneficiary, it gets more complicated.

The other event that changes everything for many retirees is the rise in the price of houses in the GTA (Greater Toronto Area) this spring. For years I’d been reading in newspaper columns and listening to financial gurus on television talk about how the price of large suburban homes would plummet when boomers began downsizing. In fact, the opposite is the case. Today properties east of Toronto, all the way to Whitby, and west of Toronto, all the way to Oakville, have risen more than 20 per cent this spring.

In suburban White Oaks, an area north of the multi-million dollar mansions in lakefront Oakville, homes on the market mostly come without stainless steel appliances, stand-alone bathtubs, or exquisitely manicured grounds, but so what?  For families in search of spacious four-bedroom homes with generous backyards, minutes from highways and reliable public transportation, the average $736,776 price point is generating a proliferation of sold signs at 100 per cent of the asking price.

In central Toronto, tiny three-bedroom row houses with postage-size pebbled gardens and street parking, located in the old meat-packing district of the Junction, are selling for more, and that’s after intense bidding wars.

Suburban prices are a sign that family homes are more than holding their value. There is no rush to sell your home before you are absolutely ready. Even the federal government is encouraging you to stay put by offering a $1500 tax credit on renovations that allow you to manage independently in your home.

Over time the Canadian government’s financial prescription for seniors has tipped radically in favour of retirees. Rising house prices and imaginative tax laws are helping you to unlock the value of your home by using reverse mortgages or homeowners’ lines of credit by investing your wealth in tax-sheltered investments.

Financial certainty remains a big part of the prescription, but it’s not the only piece. After meeting with friends who retired in recent years, I’m discovering that each of them passionately wishes to remain physically, intellectually and emotionally active.

The bases on the retirement diamond aren’t marked yet but everyone is trying to hit a home run.  For some it could be a second career or volunteer work, for others travel and adventure, for still others, returning to college or university.

The question is often asked: “what do retirees want?”  I’d say we want to turn our dreams into reality and figuring out how to optimize the new budget in pursuit of these dreams will help us to navigate the bases.

It’s called a life well lived.

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