HOW YOU CAN PREPARE FOR RETIREMENT

HOW YOU CAN PREPARE FOR RETIREMENT

As you prepare for your retirement, we know that although it is an exciting time, it can also be a bit nerve-wracking as you move from earning an income to drawing an income from your investments, pension, etc.

In this video, Kelley Doerksen, CFP® walks you through some of the steps you can take to feel more prepared and confident that you will have what you need to live comfortably, retire successfully and enjoy the wealth you have accumulated.

Watch the video here:

https://youtu.be/usUtMbKUqTs

A large part of what we do when preparing financial plans for clients is helping to prepare for retirement of course; and although clients are excited to make the transition from working life to retirement, it also comes with some stress and concern related to whether or not you will have enough financially to do the things you want to do when retirement comes. It also can be a challenging period of time mentally, moving from the process of earning an income to drawing an income from your investments, pensions, and so forth. Even though a lot of clients might know factually by way of our financial planning, that they are going to be fully capable of retiring financially, and they might know intuitively that they are going to be able to retire comfortably, it still can be challenging.

One thing that we often recommend clients do is get a good understanding for themselves of what their expenses might look like; and this will help pair the financial plan really successfully with the goals and values that you as the client would like to see achieved over your retirement.

An easy way to start looking at your costs, first and foremost, is understanding what you are spending currently. We all have certain months of the year where we are going to spend a little bit more than usual, so assess your regular spending months – months that you do not have big events or parties or travel or so forth and get a good handle on what those regular costs look like. Understand your fixed expenses – your property taxes and utilities, and all of those things that you can understand are going to be fairly consistent from month to month.

Go forward from that and understand what it is that you might need to spend money on, or more importantly might want to spend money on throughout your retirement stage.

We do recommend that people quite literally take a walk through their homes prior to retirement. Assess for yourself what major expenses are going to be needed through your house, whether that is a new roof or a fence that needs to be replaced or updated. All of those large expenditures can and should be projected in your financial plan. Again, knowing what those might look like and an estimate of cost will help us determine whether or not the assets that you have accumulated are going to be sufficient to cover off those large expenses.

Another thing that you want to keep in mind is, oftentimes, people in the first few years of retirement or maybe just prior, will look at purchasing a vehicle – maybe it is the last vehicle you intend to purchase or own, and understanding what that cost might look like and how that would impact potentially drawing from your assets can be beneficial as well.

The most important part of understanding your retirement expenses is to try and get an assessment for yourself of the expenses that you are excited to spend money on.

Many people are going to put the most time into travel for example, in the first 10 years of their retirement. And so, understanding what that looks like for you, whether that is a number of small trips or a number of once in a lifetime experiences. We can work with those expenses; we can project them into your financial plan and you can walk away feeling confident that the dollars that you have accumulated are going to be able to provide you with your basic living expenses of course, but also most importantly, those need to do, want to do experiences throughout retirement that you have worked hard to save for and you want to be able to comfortably use your money for.

When planning for retirement, understanding your goals and your objectives and what you value is absolutely critical; and pairing those with the expenses that you would like to see for yourself is a really meaningful use of your time and helps us build a financial plan that is going to help you see that you can meet those needs comfortably, retire successfully, and enjoy the wealth that you have accumulated.

Learn more about our retirement planning services here.

QUESTIONS FROM CLIENTS: HOW ARE MY ASSETS TAXED AT DEATH?

QUESTIONS FROM CLIENTS: HOW ARE MY ASSETS TAXED AT DEATH?

A common question we often get from clients is how assets are taxed at death. Watch our latest video here:

https://youtu.be/V-IY0VnNaZU

Today we are going to touch on a few of the pieces of information that you need to know about different categories of assets and how they are taxed.

One thing that is important to note is that in Canada we do not have inheritance taxes, however some jurisdictions around the world do, and that may or may not apply to certain Canadian residents, depending on where assets are held.

We are going to talk specifically about Canadian resident, Canadian assets today. We are going to discuss Non-Registered Assets, Registered Accounts, and some things to be aware of with beneficiary designations on those accounts if applicable.

Many provinces and territories do apply probate fees to estates; and taxation for everybody, whether or not probate fees apply, is a really important topic to start thinking about for yourself and for your family.

On death, assets in a Non-Registered account are deemed disposed the day of death. And this will often trigger capital gains or capital losses, or both. And taxation on these gains or losses are going to be applied at the level of the estate of the individual that is deceased. Capital losses, if those are applicable, can actually be applied to any income in the year of death, and potentially other years, so speak to your accountant about that. Capital losses can be used against other forms of income, not just capital gains.

Registered accounts are eligible for beneficiaries to be designated. Many people choose to designate beneficiaries that will receive the proceeds of their registered account at death. If a rollover provision is available, such as to a spouse, there is no taxation that needs to be addressed at the time of the deceased’s passing, as the assets in the registered account will essentially rollover to the spouse at the time of death. If the beneficiary of the registered account is not the spouse or eligible for a rollover, the registered assets will still be provided to the beneficiary in full, however it is very important to note that taxation does still occur on the full value of the registered account, and at the level of the deceased.

For example, if the registered account, for round numbers is worth $100,000 on the date of death, and there are two beneficiaries for which the rollover does not apply – each beneficiary will receive $50,000, and the estate still needs to pay tax on the $100,000 of deemed income for the deceased. Keep that in mind when you apply your beneficiary designations to the registered account.

A Tax-Free Savings Account can have both a successor-holder named, which can only be one’s spouse, as well as contingent beneficiaries. It is not common that people consider adding contingent beneficiaries to a Tax-Free Savings Account if their spouse is named successor-holder already; however, we have seen many circumstances where one loses testamentary capacity later in life and their successor-holder is deceased (their spouse is deceased), and we can then no longer name or add beneficiaries to their Tax-Free Savings Account. So do consider this, and review your own designations for those accounts to ensure that your estate and beneficiary designations are up to date and where you would like them to be. Of course, a Tax-Free Savings Account does not have tax applied, so if beneficiary designations have been elected, the dollars in the Tax-Free Savings Account will be distributed accordingly with no taxation necessary at any point.

Estate planning is very complex and we have just touched on a couple of issues today. There is a lot more to it and all estate planning should be considered in the context of your goals and your objectives.

Please reach out to us, we are happy to connect you with a lawyer and answer any questions that we are able to help you with. Learn more about our estate planning services here.