Archive for 2020

With an indexed defined benefit pension, does Benjamin still need to contribute to a TFSA or RRSP?

December 25th, 2020

Special to the The Globe and Mail – By Dianne Maley

A few years back, Benjamin made a work decision that changed his life for the better. He’s 34, single and living in British Columbia, where housing costs are high.

“I was working full-time as an engineer for seven years before deciding to forgo the stress and long hours for a more balanced life,” Benjamin writes in an e-mail. “For the past three years, I have been working part-time (roughly 35 hours a week) as a letter carrier for Canada Post, which I enjoy very much,” he writes. He’s now earning $52,300 a year gross, compared with $80,000 a year as an engineer. He’s been able to find time for his hobbies and volunteer work. “It’s been the culmination of a personal journey to live the good life,” Benjamin adds.

He’s kept his living costs low by sharing a house with roommates, but he might move to an apartment with his partner before long, in which case his housing costs rise.

After starting to shift his portfolio last spring into more socially conscious investments, Benjamin got cold feet and is sitting on a pile of cash. “I’m caught between being scared to buy into an overvalued market and being uncomfortable with such a large cash holding,” he says.

His questions: “Now that I have an indexed defined benefit pension, do I still need to contribute to a TFSA or RRSP?” Benjamin asks. He has stopped contributing to his RRSP for now. “Should I do something with my cash position – about $70,000 – even in this bull market in a highly uncertain time?” His goal is to retire at 65 or earlier with $50,000 a year after tax. He wonders as well whether he will ever be able to afford to buy an entry-level home.

We asked Ian Black, a financial planner and portfolio manager at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at Benjamin’s situation. Macdonald Shymko is a fee-only financial planning firm.

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Are winds in the right direction for Nancy and Nathan to reach their early retirement goals?

October 16th, 2020

Special to The Globe and Mail – By Dianne Maley

Vancouver professionals Nancy and Nathan are in the enviable position of being able to contemplate retiring from their jobs at age 55 while still enjoying a comfortable standard of living.

He is 42, she is 40. They have two children, age 6 and 9. Together Nathan and Nancy bring in $170,000 a year in employment income plus $4,000 a year in net rental income from an investment property. Nancy has a private practice that she plans to continue part-time after she leaves her current job. Both contribute to defined benefit pension plans at work indexed to inflation. At age 55, Nathan will get a pension of $27,345 a year in today’s dollars, while Nancy will get $13,415 a year plus a bridge benefit from 55 to age 65 of $5,350.

“We are wondering how we should be dividing up our extra money among RESPs [registered education savings plans], RRSPs [registered retirement savings plans] and mortgage prepayments,” Nathan writes in an e-mail. If they retire early, will they still be able to pay for their children’s university education? “How much should our RESP account have when the kids are 18, assuming a four-year degree?” Nathan asks. “Are we saving enough to retire at age 55?”

Their retirement spending goal is $80,000 a year after tax.

We asked Brinsley Saleken, a fee-only financial planner and portfolio manager at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at Nathan and Nancy’s situation.

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Can Beatrice, 91, Afford to Stay in Her Home Indefinitely?

September 4th, 2020

Special to The Globe and Mail – By Dianne Maley

web_kcBefore Beatrice’s husband died, they sold the family house and invested a substantial sum in a portfolio designed to generate as much income as possible. The rest of the sale proceeds they used to renovate the family cottage and make it their home.

“Here, for the past 20 years, my mum has lived frugally, and only recently has her health required more care,” her son, one of five children, writes in an e-mail. At the age of 91, Beatrice is in the early stages of dementia and depends on a live-in caregiver, a family member.

All was going well financially until the pandemic knocked down the stock market, laying bare the riskiness of Beatrice’s investments, at least one of which has suspended distributions – money Beatrice relies on to pay for her care. While the stock market recovered, Beatrice’s portfolio is still languishing, her son adds.

“We, her children, are looking for direction and options on how to manage these assets,” her son writes. “Her financial adviser has not changed the assets significantly despite our calls to reduce risk and focus on a 10-year plan to unwind her assets to support her financial needs.”

Will their mother be able to stay in her home for the rest of her life? the son asks. Are there changes that should be made to the portfolio?

We asked Keith Copping, a principal, financial planner and portfolio manager at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at Beatrice’s situation. Macdonald Shymko is a fee-only financial planning and portfolio management firm.

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Money 123: Make the Most of Your Money

April 28th, 2020

Special to Global News – By Erica Alini

Make the Most of Your Money

First, there was the Canada Emergency Response Benefit, which millions of Canadians are well acquainted with by now. This week the government started taking applications for the Canada Emergency Wage Subsidy, which will cover 75 per cent of employee wages for eligible businesses for up to 12 weeks.

The CERB and the CEWS overlap to a degree — and that is by design…

Should you change the way you invest?

You’ve heard the trope that financial markets are like a roller coaster. But between late February and March 23, the stock market took investors on the ride of their lives: a plunge of around 35 per cent of its value. Even those who remember well the 2008-2009 financial crisis will tell you this stock-market dive was shockingly steep.

It was a gut-wrenching moment — one that has prompted many to rethink their investment strategy. According to a recent poll conducted by Ipsos for Global News, some 14 per cent of Canadians are changing their approach to investing amid the novel coronavirus pandemic.

But is it a good idea?…



“Could you explain what the benefits are of a registered disability savings plan (RDSP)? We have a son diagnosed with autism and have a registered education savings plan (RESP) in place.”

— A Money123 reader 

“The RDSP is a savings plan meant to financially support a disabled person. Anyone can contribute to an RDSP with written permission of the plan holder who typically is the parent or guardian of the disabled beneficiary.

Contributions to an RDSP can be made until the disabled beneficiary turns 59. There is no limit on how much can be contributed in a year, but there is a lifetime cap of $200,000.

Contributions aren’t tax-deductible for the contributors, but investment growth is tax-deferred.

An RDSP may be eligible for two types of government grants: the Canada Disability Savings Grant and Canada Disability Savings Bond for low-income families, both are subject to income test.

RDSP withdrawals can be made to the beneficiary at any time and for any purpose. But the beneficiary must start receiving Lifetime Disability Assistance Payments by age 60, which will continue for the life of the beneficiary.

For the disabled beneficiary, withdrawals could include a blend of non-taxable amounts (capital contribution) and taxable amounts (grants, investment income and growth).

To qualify for an RDSP, your child must be eligible for Disability Tax Credit (DTC). Get your child’s doctor or psychologist to complete form T2201 and submit it to the CRA for approval.

If your child does not qualify for DTC, then stick with the RESP. Similar to the RDSP, the RESP is eligible for the Canada Education Savings Grant (with no income test) and Canada Learning Bond (subject to income test), and some provinces may have provincial grants available.

RESP withdrawals are taxed similarly to RDSP withdrawals.

From an RESP, Educational Assistance Payments (grants, income and growth) can be paid to a student if the student is enrolled in a qualifying educational program. RDSP payments do not require enrolment in a qualifying educational program.“

– Ngoc Day, certified financial planner, Macdonald, Shymko & Company

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With focus on ensuring Evelyn’s care, can James retire now or should he keep working?

February 14th, 2020

Special to the The Globe and Mail – By Dianne Maley

A year or so ago, Evelyn and James were looking forward to their impending retirement. Then Evelyn fell ill.

James’s first impulse was to quit his job to spend more time with his wife. But he also wants to ensure they can afford the best possible care.

“My wife was recently diagnosed with a form of dementia, which will, in the long term, require full-time care,” James writes in an e-mail. Costs for dementia care in an assisted-living home range from $6,000 to $10,000 a month. “It is highly uncertain as to when this level of care will be needed and for how long.” Survival rates, it seems, are “highly variable, and in some cases people can survive 20-plus years after the diagnosis.”

James, who will soon turn 62, earns $168,000 a year plus a bonus of about $50,000 working in sales. Evelyn is 59 and no longer working. She gets a defined benefit pension of $17,640 a year, including bridge benefit, falling to $10,600 at the age of 65. They have two sons, both in their early 30s.

“I had thought of retiring now to enjoy the time of relative lucidity, but I’m very concerned I will not have adequate resources to afford her care when it will be required,” James writes.

They are not without means. They have a house and an investment condo, rented to relatives at cost, as well as registered retirement savings plans and James’s substantial defined contribution pension plan, to which both he and his employer contribute.

“So the question is, should I continue to work and build the financial assets to provide care in the future?” James asks.

We asked Ian Black, a fee-only financial planner at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at James and Evelyn’s situation. Mr. Black holds the registered financial planner (RFP) designation.

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