If you use news headlines as a guide, it would seem that group benefits at work – health, dental, chiropractic and more – are getting a bad rap, and benefits fraud is the reason.
While the vast majority of employees make legitimate benefits claims, the bad apples get all of the publicity. One of the worst in recent years was the fraud involving the Toronto Transit Commission, which was linked to more than 220 employees who have either been fired or resigned.
In many cases of fraud, service providers collude with benefits plan members to get money out of the plan. So, they claim for orthotics that are never delivered, or claim for prescription glasses but receive designer sunglasses, or submit a receipt for a therapeutic massage when they actually received a sexual massage from a massage parlour.
The chill effect
The trouble with fraud, and all of the warnings about “don’t abuse your plan” is that it can create a chill effect on those who want to use the “health services” part of their plan (in-person treatments and therapies) for legitimate reasons. People can feel that using these benefits outside of an emergency situation equates to taking advantage of their plan. So, they don’t get their knee checked by a chiropractor, or get a back massage for their lower back pain, or get the orthotics they need to prevent problems down the road.
And the most underused benefit area, according to Canada’s largest provider of group benefits, Sun Life Financial, is for psychological services. For Canadian employers with 50 or more employees, 88% of employees make at least one prescription drug claim in a year but only 5% make a claim for psychological services. This is despite the fact that mental health issues are a leading cause of short and long-term disability claims. You can read the full report here.
Think prevention: Make use of your plan
My point is a simple one: employers want employees to take the prevention steps needed to stay healthy. It’s beneficial for both the employee and the business. Yes, there are short-term costs for preventative treatments, but these short-term costs can avoid larger long-term costs, such as multi-year disability leaves. This is especially true for mental health issues.
All to say, if you’re lucky enough to have a benefits plan, don’t wait for an emergency to learn about the preventative treatments available to you. From dental check ups, to mental health therapy, to chiropractic adjustments, there are subsidized treatment options available to help you stay healthy and productive.
Enjoy the rest of your day!
There are lots of positives to retirement and your senior years: fewer costs, more leisure time, and less daily stress to name a few. And these are all worth celebrating. But the negatives can be crushing: more body pains and disease, the deaths of close friends and family, and being that much closer to death yourself.
It’s not that age 65 or 70 can’t be wonderful. It often is. If you could freeze the best time of older age, most people would take it in a snap, even over their younger years. But you can’t freeze time, so onward we go to the inevitable: settling our estate (but without us being there).
Bolt out of the gate
These facts don’t depress me, they actually motivate me. I’m not a senior yet, but many in my circle are. And the ones who impress me are the ones who embrace their senior/retirement years right out of the gate.
That means making maximum use of the freedom that comes with their “new normal.” While the activities people choose will differ radically, one common thread is often a need to watch cashflow a little more carefully. For many, it’s a balance between enjoying life now and not running out of money later.
Which brings me to my confession and my point, with the confession first: I’ve never been a coupon clipper. My spending could be described (charitably) as a bit loose. I know I could get $30 off my phone bill for 6 months if I phoned Bell and threatened to leave, but I save my energy for my work and family and choose to battle Bell another day.
Now my point: that “other day” should be when you turn 60. The reason? The discounts are far too rich to turn down, you have a little more time to organize your life around saving, and your need (if you’re retired) has likely never been greater.
From banking, to grocery and drugstore shopping, to travel, you can easily knock 20% to 50% off your costs once you reach your prime senior years. And those savings can be channelled into pursuits that you find most meaningful.
You have to know what’s available and sometimes you have to ask. But the deals (which are not time-limited) are substantial.
This website is a great place to start
Happy 60th, and happy saving. Thanks for reading!
Is it possible for today’s seniors to return to their hippie past? For some, plans are in the works.
Youth of the 1960s were a powerful social force that introduced a greater acceptance of community or “commune” living. While the concept never went mainstream, commune-type living is a niche arrangement that takes many forms today, from housing co-operatives in the city, to back-to-the-earth rural compounds, to religious groups seeking to live with their own kind.
If there’s a “hippie” feel to all of this, it’s for good reason. Many of these communities are progressive, socialist in leaning, and seeking a higher ideal in their living. It sure sounds like the 1960s.
Which takes us to commune living for seniors. I heard about this first from a group of men who played hockey together and lived in the same neighbourhood. Recognizing that many would need to “cash out” and sell their homes as they got older, the group lamented the possible loss of their community. One answer was to establish a single housing collective that everyone could move to to maintain their social bonds.
While that idea has never gotten beyond beer talk (at least not yet), I recently learned of another friend who was actively involved in a group that had moved beyond the talking stage and were scouting potential building sites. It may not be for me, but it certainly put the idea on my radar.
The push for senior communes
The attractiveness of senior communes is that it bypasses traditional retirement homes (too institutional) or living alone arrangements (no community, too lonely). A commune brings like-minded people together who can care for each other – and bring in help as needed as group members age.
Of course, there are countless hurdles to such arrangements that range from funding, to legal status, to rules relating to who can live in the complex and what the responsibilities of living there entail.
The Huffington Post ran an article about this recently.
One of the Toronto groups mentioned in the article, Baba Yaga Place, is in the process of making their community living project a reality. It’s modelled on a Paris commune of senior women that is up and running. The Paris commune took 13 years to establish, but Baba Yaga Place is hoping their development stage is quicker. You can follow their progress through their website.
Are you ready to channel your inner-hippie as you enter your senior years? You may soon have options.
Thanks for reading,
We’re almost 19 years into the new century, so it seems a little late to be talking about the “new” 21st century version of retirement. Or does it?
For those in their 50s or 60s approaching retirement, I don’t think so. If you’re getting close to retirement, you likely have parents who retired in the last century. Pre-internet, pre-smartphone, pre-Amazon delivery on demand. There’s a good chance that at least one parent is still alive, and, like it or not, our “vision” of retirement is shaped by those living it now.
And those living it now made retirement decisions based on life in the 20th century. We may consciously want a different type of retirement, but subconsciously we can be influenced by our parent’s retirement path, whether we know it or not.
So, how could your retirement decisions be different than those of your parents? Here are a few things to consider.
- Shrinking distances: Many retirees want to be in close proximity to their children and grandchildren – and that has influenced many in choosing a home location, even within the same city. But the emergence of advancements like self-driving cars (coming soon), discount airlines, and video calls has made it easier to connect. You may have a much broader radius for home location than you think.
- Enhanced services: In today’s Amazon era, just about anything can be delivered to our doorstep. In Ontario, even the government-controlled liquor store can deliver to your home. This not only decreases your need to be living near certain retail locations, it could allow you to stay in your own home much longer than previous generations. Virtual health care (via text or video conference) has also emerged as a service that brings health care to you rather than the other way around.
- Longevity: Life expectancy gains have slowed a bit recently (as noted by the Canadian Investment Review) but lifespans continue to increase and medical advancements will continue to improve health as we age. For you, it means planning for a longer, healthier life (think 90s, not 80s). This fact can influence many factors, from ability to pursue a second career, to the asset allocation for your retirement savings, to your ability to gift money to family members during your lifetime.
The 21st century has been with us for while – and there are more options out there than you may have realized for your retirement. Make sure your plans reflect it.
Thanks for reading!
It’s been a cold winter, and the snowbird culture is alive and well in Canada. The southern United States continues to swallow up planeloads and carloads of Canadians visiting for a few months each year. And good for them – they’ve earned their time in the sun.
But what if you’re more adventurous? You’re in or approaching retirement and looking for something more than sun. You want to experience a different culture, a different lifestyle – while still enjoying a break from the worst of winter.
This list of 10 places to retire abroad caught my eye for a couple of reasons. First, many of the locations I would never have considered for a retirement retreat. I was surprised at the countries and regions chosen, and it opened my eyes to some new possibilities. Second, the list is updated each year based on many factors, from currency changes to improvements to infrastructure. There’s clearly some rigour to the analysis.
The top 4 for 2017?
- Portugal’s Algarve Region
- Valletta, Malta
- Mazatlan, Mexico
- Abruzzo, Italy
The Forbes article has the full list for 2017, and you can click on the link at the beginning to sign up to receive the list for 2018. And if you’re looking at the tried and true U.S.A. to plant your winter roots, here are some suggestions:
If you buy abroad, put planning in place
If you do buy property outside of Canada, whether it’s in the U.S. or further abroad, the impact of this purchase on your estate should be addressed upfront, and reflected in your will and potentially in your tax planning due to different estates laws in different countries.
So, before you take the plunge, make sure you’ve surveyed the issues with a lawyer, ideally both in Canada and in the country in which you’re purchasing property. A little planning upfront can ensure you enjoy your winter retreat without worry or issue.
Thank you for reading … Have a great day,
Is a deceased’s Pre-Retirement Death Benefit to be included in the calculation of the value of an estate for the purposes of determining dependant support? That was the question asked and answered in Cotnam v. Rousseau, 2018 ONSC 216 (CanLII). There, a child of a deceased made a claim for dependant support as against the father’s estate. The estate had a nominal residual value. Accordingly, the applicant sought a determination that a Pre-Retirement Death Benefit payable to the deceased’s spouse was deemed to be part of the estate for purposes of determining the quantum of dependant support.
Section72(1) of the Succession Law Reform Act expands the potential assets available for the support of a dependant making a claim as against the estate. Section 72 lists a number of assets that are deemed to be part of the estate. The list includes “Any amount payable under a designation of beneficiary.”
The wrinkle with respect to the Pre-Retirement Death Benefit was that it was paid to the spouse pursuant to s.48(6) of the Pension Benefits Act. The spouse argued that she received the Pre-Retirement Death Benefit as a “spouse”, and not as a “designated beneficiary”. The Court referred to two decisions, Smallman v. Smallman Estate, 1991 and Quinn v. Carrigan, 2014 ONSC 5682 (CanLII), which cases held that a spouse’s entitlement to a Pre-Retirement Death Benefit flows from marital status, and not by designation, and thus, the benefit cannot be clawed back by virtue of s.72(1)(g) of the Succession Law Reform Act.
The Judge in Cotnam, however, disagreed with those interpretations of the interaction between s.48 of the Pension Benefits Act, and s.72 of the Succession Law Reform Act. The Judge did not agree that “this spousal priority” under the Pension Benefits Act shelters Pre-Retirement Death Benefits paid to a spouse from the “claw back” provisions of the Succession Law Reform Act.
The Judge went on to note that the provisions of the Succession Law Reform Act specifically contemplated a balancing of the assets between spouses and other dependants. To ignore the Pre-Retirement Death Benefit all together would not only be arbitrary, but may unduly skew the “balancing” envisioned under the Succession Law Reform Act. The Judge went on to state that the purposes of the Succession Law Reform Act could easily be thwarted all together if the Pre-Retirement Death Benefit was not deemed to be part of the estate. In many instances, the Pre-Retirement Death Benefit may be the only asset available to the deceased at the time of death.
Thank you for reading.
A lot can change in 100 years. In 1920, the life expectancy at birth for the average Canadian male was 59 years – and only 61 years for women. Fast forward to today and the numbers are remarkably different – nearly 80 years for men and 84 years for women.
And those are just averages. According to the federal government, a 50-year-old man today has a 37.5% chance of living to age 90, and a 50-year-old woman has a 48.8% chance, nearly one in two. Want to know your odds of living to 100? Check out Table 16 here: http://www.osfi-bsif.gc.ca/Eng/oca-bac/as-ea/Pages/mpsspc.aspx#TBL14.
What does it all mean? Well, you could live long enough to see the Toronto Maple Leafs win the cup after all; but, more importantly, it means you need to plan your finances to last a much longer time than generations past. Here are four tips to consider as you make your plans:
- Don’t save it all in one basket: While it can be cost-efficient and convenient to deal with one financial institution, within that one institution, aim to have a mix of investment accounts. Ideally, you’ll have a combination – registered retirement savings plan (RRSP), tax-free savings account (TFSA) and a non-registered account. Because tax and withdrawal rules differ between account types, the mix gives you maximum planning flexibility to manage your income distribution in retirement.
- Invest for growth: Many people will now spend more years in retirement than they did in their careers. With many retirements now spanning 30 years or longer, the need for equity investments in a retirement portfolio can be more important than ever. Yes, equities carry substantially short-term risks, but the higher long-term returns they generate can extend the life of a portfolio and help offset the impact of inflation.
- Consider alternative products: In addition to your investment savings, it pays to explore other products that can help you achieve your financial goals for retirement. For example, permanent life insurance has a cash value that can supplement retirement income and provide a legacy for family members, or cover estate tax liabilities. And life annuities – while not providing income flexibility – offer the benefit that those living into their 90s and beyond love: guaranteed income for as long as you live. Both products are worth discussing with your financial advisor.
- Delay the start of your government benefits: Government benefits – like those from the Canada/Quebec pension plan and Old Age Security (which is only paid in whole or part to those with annual incomes below about $120,000) – are both inflation-protected and, more importantly, paid for life. And if you can afford to delay receiving these benefits until age 70, you’ll get a much bigger payout.
For example, if you start receiving your CPP retirement pension at the age of 70, your pension amount will be 42% more than it would have been if you had taken it at 65. And if you delay receiving your Old Age Security pension to age 70, your monthly pension payment will be 36% more than it would have been at age 65. While these two benefits may not represent huge payouts in the early years of your retirement, they can be an important guaranteed income stream in your later years, when other assets may have been depleted but the need for income remains.
And if you want to make age 100 your goal, BMO outlines some strategies to get you there: https://www.bmo.com/assets/pdfs/gam/BMO-Report-Living-to-100-en.pdf.
Happy living, and thank you for reading!
Life expectancy has unsurprisingly been on the rise over the course of the last several decades. You would think with the superior quality of life many currently experience that there is hope for more people to live up to 100 and beyond. After all, the Guinness World Record for the longest living person is held by Jeanne Calment, who died in 1997 at age 122!
However, Ms. Calment’s status as a supercentenarian is a rarity. Even more exceptional is her living into her 120s. No one else has been verified as doing so. Further, it was recently reported that researchers calculate 115 to likely be the maximum life-span. Without a breakthrough that fixes age-related problems, the new research apparently indicates that living beyond this age is not probable.
Some geneticists disagree, taking the view that as there has been success in extending the life and health of certain laboratory animals, the same may be achievable for humans. With technological advances may come innovations that will meaningfully impact longevity.
The debate about whether this is achievable is expected to continue. Nonetheless, we know that people are generally living longer and, coupled with this, will have more pressure on their financial resources, as well as the increased likelihood of mental decline. So I believe it to be prudent to encourage our clients to seek the appropriate professional advice on how to plan for a longer retirement or an extended work-life, as well as for coping with cognitive impairment. Some suggestions with respect to the latter include:
- appoint your Powers of Attorney(s);
- make a Will;
- designate beneficiaries on your bank and investment accounts;
- have life insurance in place;
- simplifying your finances (e.g. consolidate accounts);
- create an inventory of assets; and
- perhaps most important, communicate with your family.
Thanks for reading and have a great weekend,
We blogged about the Ontario Retirement Pension Plan (“ORPP”) some time ago when it was first proposed and introduced. The ORPP will begin on January 1, 2017, and will be fully implemented by January 1, 2020. According to the Ontario government website with respect to the ORPP, studies show that people are not able to save enough money for retirement and that the Canada Pension Plan (“CPP”) is insufficient, stating that the maximum yearly benefit from CPP in 2015 is $12,780 and the average yearly benefit is $7,000.
Both the ORPP itself and the contribution rates for the ORPP will be phased in from 2017 to 2020, as set out in this article from the National Law Review. For instance, the initial implementation of the ORPP in January 2017 will begin with large employers, at a rate of contribution of 0.8 percent by both the employer and employee (for a total of 1.6 percent). This will then be increased to 1.6 percent each the following year and further increased to 1.9 percent each starting in 2019. Similar phasing will take place as medium-sized employers begin the ORPP in January 2018, small employers in January 2019, and employers with registered plans that do not meet the comparability threshold in January 2020. Ontario’s ORPP website also provides a helpful chart describing the phases that can be viewed here.
Last month, Ontario reached an understanding with the federal government that ORPP premiums will be collected through the existing CPP framework. Ontario also delayed the date to begin collecting premiums from large employers who will be included in the first phase of implementation. Although they will be required to register as of January 2017, they will not be required to remit premiums until January 2018.
Once it has been fully phased-in, the contribution rate will be a combined 3.8 percent of pensionable earnings. For an individual earning $50,000.00 per year, for example, who contributed to ORPP for 40 years and retired at age 65, this results in an ORPP payment of $7,138 per year, in addition to CPP, OAS, and other retirement savings.
It is stated that the ORPP is intended to complement existing retirement savings arrangements, not replace them. For many individuals, there will still be a need to make individual plans with respect to retirement saving and planning. As always, it is important to consider you own individual needs during retirement and consult advisors who can help you make and implement a comprehensive plan.
Thanks for reading.
Last week, Suzana’s blog post discussed longevity planning and Powers of Attorney for Personal Care (POA PC). She mentioned that, while financial and estate plans tend to focus on assets, a longevity plan or a POA PC is important in order to address other issues such as quality of life planning and health care instructions. Long-term care insurance is one instance where these plans overlap.
As life expectancy increases, planning for retirement becomes more important. The possibility that you may have health care or long-term care expenses later in life is becoming increasingly likely. Long-term care could include in-home care or moving into a long-term care facility, both of which come with high costs.
As one article, Do you need long-term care insurance?, posted on MoneySense.ca points out, long-term care insurance is more common in the U.S. than in Canada. However, although some costs for long-term care may be publicly funded in Canada, most such expenses will need to be paid for by the individual. Thus, there are several options to choose from when considering how to fund long-term care:
- Save for retirement in amounts sufficient to cover any expenses which may arise;
- Rely on your children or other family members to contribute financially; or
- Purchase long-term care insurance
To illustrate the importance of thinking about how to fund possible long-term care, consider the example of a couple, one of whom becomes ill and requires long-term care in a facility. After funding this care, the other partner may be left with very few financial resources to pay for their own retirement or long-term care costs further down the road.
However, if you wait too long to purchase long-term care insurance, the premiums may be more expensive than you would like and could turn insurance into a non-viable option. This leads us back to the importance of planning. Whether you decide to purchase insurance, or save to cover any eventual expenses yourself, it is vital to plan ahead and keep in mind that the amount you may require during retirement may be greater than you expect, especially if you or your partner end up requiring care later in life.
Thank you for reading.