Grey Bruce Boomers Fall 2021

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FINANCE by Michele Mannerow moving and keeping healthy becomes more difficult, and their world becomes smaller. If, on the other hand, someone has remained active, they often continue enjoying their physical and social activities well into their 80s and 90s. I highly recommend the book What Makes Olga Run by <strong>Bruce</strong> Grierson. A reporter follows decathlete and nonagenarian, Ogla, around for about five years to see how she can still run, swim, do yoga, etc., when so many others are either already gone or housebound. In short, (and spoiler alert!) he basically surmises that one should strive to do something different every day, with people you like. You don’t have to run or lift weights, but even playing bridge, walking or taking an art class is beneficial. Let’s face it – there is no shortage of things around here to keep us active and socially connected. Retirement income. This falls a little more clearly into my wheelhouse. Ideally 10 years (and certainly five) before retirement, my clients begin to regularly review their expenses to determine how they will change in retirement. Some costs will decline, others will increase, and some will be entirely new or gone forever. It doesn’t have to be super specific. Armed with this information, we can review the various pools of assets and income, which will provide for these planned expenses. Starting with the basics (government CPP and OAS), and working up from there (private pensions, RRSP/RRIFs, TFSAs, investment accounts, possible inheritances, sale of real estate), while including reasonable long-term inflation and investment returns, we can determine with reasonable certainty if any revisions to expenses may be required or if the plan has a reasonable expectation of working over the long term. The next step is to determine the most tax-efficient way of both investing and generating income from the portfolio. Do we take CPP early or delay it? Are there any plans to work part time? How can the income be generated while keeping an eye on the OAS clawback level? Do dividend-paying investments belong in the RRIF, TFSA or investment account? Should I draw from the RRIF or investment account first or a combination of both? How much up and down of returns am I comfortable with and willing to accept in my portfolio throughout my retirement? I recommend investing a portion of the portfolio in cash or “safe” investments to keep the retirement income going without having to draw from investments that may drift down in value over the short term. Our experiences of the 2008-09 and March-April 2020 market corrections have made the value of this strategy crystal clear. My clients and I often discuss having different “buckets” in their portfolio. The “cash bucket” is available for the required monthly income. The second “growth bucket” is the investments that over time will contribute to the cash bucket through dividends or interest. We will also occasionally “harvest” growth or capital gains from this bucket to replenish the cash bucket. What options can I consider to offset the historically low interest rates of cash, GICs and bonds? Gone are the days when you can find a low-volatility investment that pays anything close to a five per cent income. How will my assets be distributed once I am gone? Known as estate planning, the building block of an organized estate is leaving clearly written instructions – through your will and Powers of Attorney – and having accounts and insurance policy beneficiary designations that agree with the legal documents. Communicate your wishes to your family and executors so there are no surprises that can lead to arguments after you are gone. I’ve recently discovered online estate organization tools that both look at the storage and organization of legal documents and physical assets and also recognize the significant digital assets and accounts we have now created. This whole digital asset category wasn’t even a thing 10 years ago! They track and allow your executor to shut down your social media accounts, as well as online banking and investment accounts. Take a peek at www. readywhen.com for more information. The judicious use of naming a spouse or child as joint owners of certain assets may be useful but can also cause difficult situations that end up with a family in court. This is one tool that must be used only after careful consultation with a professional. Many people will change assets to joint ownership in an effort to avoid probate fees, yet if paying these fees (1.5% of the asset value) means the assets are distributed to the right people, 26 • GREYBRUCEBOOMERS.COM
y Michele Mannerow FINANCE without any court time and expense, I strongly believe they’re worth it. Give some thought to what you want to be left in your estate when you are gone. Would you rather pay less tax yourself and leave more highly taxable assets to your estate and beneficiaries? Take minimum RRIF payments and spend your investment or TFSA? Or would you rather pay the tax as you go and leave almost no tax owing and payable by your estate? I seem to be finding that the TFSA is the favoured child (so to speak). As you can name beneficiaries and have the account paid out at your death with no taxes or probate fees owing, I like to think of it as the last man standing and leave it intact for inheritance, if at all possible. The principal residence exemption also allows for the house to be sold with no taxes owing. There may be probate fees owing but again, if fees get the funds into the hands of the right people, it’s my opinion that it’s a small price to pay. The good news is that some time and effort can make a world of difference in your finances and reduce your stress levels during and after your retirement. Oh… and the other good news? The storm has moved on, so it’s time to hit the lake! Michele Mannerow, CFP, RFP, CIM, FCSI, FMA, is a financial advisor, Manulife Securities Incorporated and Life Insurance Advisor, Manulife Securities Insurance Inc., based in Owen Sound. Visit her online at mannerow.ca. Stocks, bonds, and mutual funds are offered through Manulife Securities Incorporated. Insurance products and services are sold through Manulife Securities Insurance Inc. Please confirm with your Advisor which company you are dealing with for each of your products and services. The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Incorporated or Manulife Securities Insurance Inc. BY PLAYING A CRITICAL ROLE IN CANADA’S CLEAN ENERGY FUTURE. brucepower.com FALL <strong>2021</strong> • 27
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Grey Bruce Boomers Fall 2021

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