Older friend's dilemma (how to spend money!) | General financial discussion | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

No permission to create posts
sp_Feed Topic RSS sp_TopicIcon
Older friend's dilemma (how to spend money!)
April 9, 2024
2:32 pm
CAD
Member
Members
Forum Posts: 26
Member Since:
January 25, 2024
sp_UserOfflineSmall Offline

One of my older friends has a big headache and dilemma.
He has pile of money in GIC - what I would call 'live' money.
And he has a pile of money in RRSP.
Plus OAS, CPP and little corporate non indexed pension (~10k/year).

He is telling me there is no way he can use all RRSP/RIFF due to lifestyle he lives. Frugal, does not need Anything as he has everything he needs (furniture, house, etc.).
Biggest headache is GIC as they generate nice interest he can live off as he lives now.

Should he stop doing GIC and put money in no interest account? Keeping it in the shoebox is not a solution as if he decides to put money back into banking system one day somebody might ask 'where all those moneys are coming from???'
Should he starts cleaning up RRSP?
He has spouse only. House paid off long time ago. He hates cruises and does not want to buy Tesla nor Mercedes nor any other easy to steal fancy car.

What you would do in his situation?

April 9, 2024
3:12 pm
AltaRed
BC Interior
Member
Members
Forum Posts: 2922
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

I don't know if this is a serious question or not but almost everyone has an heir (friend or family) or a charitable cause to leave the residual of an estate too.

There is no such thing as too much investment income in that it is better to have more than less. Just keep recycling cash flow that is not spent* into more GICs in a GIC ladder. His heirs will appreciate it.

* Or give cash flow not spent each year as a charitable donation at the end of each year.

April 9, 2024
3:35 pm
Dean
Valhalla Mountains, British Columbia
Member
Members
Forum Posts: 1928
Member Since:
January 12, 2019
sp_UserOfflineSmall Offline

.
It's just another 'First World Problem' ... I got too much money. sf-cry

Meh ... O&O,

    Dean

sf-cool " Live Long, Healthy ... And Prosper! " sf-cool

April 9, 2024
4:12 pm
Bill
Member
Members
Forum Posts: 3935
Member Since:
September 11, 2013
sp_UserOfflineSmall Offline

What's the problem if someone asks him where all the money's coming from? Can't he just say none of your business or else just answer the question?

I don't see this as a serious question. Having lots of money in the bank is never a "big headache" or a "dilemma", and there's no obligation to change your lifestyle as it grows. And, yes, if you want no more income just put it in a chequing account.

April 9, 2024
5:35 pm
AltaRed
BC Interior
Member
Members
Forum Posts: 2922
Member Since:
October 27, 2013
sp_UserOfflineSmall Offline

If this is a serious post, I also wonder if the old man's spouse feels the same way. All I got from post #1 is he and his. Maybe she might want a 'boy toy' and have a good time?

April 10, 2024
4:12 am
dougjp
Member
Members
Forum Posts: 577
Member Since:
January 9, 2011
sp_UserOfflineSmall Offline

It can't be a serious post. But if it was, I'd say the old man won't have to wait long. A high percentage bet a Dentist will arrive shortly to abscond with all those funds, and thereby reduce the supposed anguish they have been causing. sf-surprised

" We may never pass this way again " - Seals & Crofts

April 10, 2024
4:46 am
Alexandre
Member
Members
Forum Posts: 1125
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

CAD said
What you would do in his situation?  

I am in his situation. Except, I have no problem with GICs.

There are two things he must accept in addition to what he has already, to make his life worry free financially:

1. Yes, it could be stressful to pay taxes once a year on interest income collected from GICs over the year, but he must get over it.

2. It does not matter how much money left when he dies, as long as it is more than enough to finance his lifestyle while he lives.

--------------

With this is mind, here is what I do in that same situation:

1. Everything is CDIC insured, does not matter how many accounts with how many FIs I have to keep to achieve that;
2. Cash in the amount of 2 years of my regular (non-emergency) household expenses is in HISA, readily available;
3. The rest is in 1yr GICs.
4. Will not withdraw from RRSP until 71, when it becomes RRIF. After 71 will be taking just mandatory minimum RRIF withdrawal, which I believe banks can automatically do for you (Scotia does). Will treat that RRIF withdrawal just like any other taxable income I happened to receive.

-------------------------

He ... does not want to buy Tesla nor Mercedes nor any other easy to steal fancy car.

Tell him that if he plans to live another 15-20 years and plans to drive, he will have to buy another car.

Does not have to be Tesla, but for seniors who drive less that 200 miles daily, have their garage where they can park and charge a car,- BEV could make more sense than ICE.
No need to get to gas station, less frequent maintenance, "full tank" (fully charged) every morning, zero risk of accidental poisoning himself and house tenants with CO from car parked in garage with running engine senior citizen forgot to turn off.

April 10, 2024
5:43 am
savemoresaveoften
Member
Members
Forum Posts: 2898
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

Alexandre said

I am in his situation. Except, I have no problem with GICs.

There are two things he must accept in addition to what he has already, to make his life worry free financially:

1. Yes, it could be stressful to pay taxes once a year on interest income collected from GICs over the year, but he must get over it.

2. It does not matter how much money left when he dies, as long as it is more than enough to finance his lifestyle while he lives.

--------------

With this is mind, here is what I do in that same situation:

1. Everything is CDIC insured, does not matter how many accounts with how many FIs I have to keep to achieve that;
2. Cash in the amount of 2 years of my regular (non-emergency) household expenses is in HISA, readily available;
3. The rest is in 1yr GICs.
4. Will not withdraw from RRSP until 71, when it becomes RRIF. After 71 will be taking just mandatory minimum RRIF withdrawal, which I believe banks can automatically do for you (Scotia does). Will treat that RRIF withdrawal just like any other taxable income I happened to receive.

-------------------------

He ... does not want to buy Tesla nor Mercedes nor any other easy to steal fancy car.

Tell him that if he plans to live another 15-20 years and plans to drive, he will have to buy another car.

Does not have to be Tesla, but for seniors who drive less that 200 miles daily, have their garage where they can park and charge a car,- BEV could make more sense than ICE.
No need to get to gas station, less frequent maintenance, "full tank" (fully charged) every morning, zero risk of accidental poisoning himself and house tenants with CO from car parked in garage with running engine senior citizen forgot to turn off.  

No where to spend it, no desire to spend it, have more money than needed, yet stress over paying tax on GIC interest income each year ? Its a self inflicted stress, well deserved....

April 10, 2024
7:12 am
Alexandre
Member
Members
Forum Posts: 1125
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

savemoresaveoften said

Stress over paying tax on GIC interest income each year ? Its a self inflicted stress, well deserved....  

Using made up numbers, an example. Imagine someone gives you $5,000 every month in 2023, then comes April 2024 and they want $20,000 back. That could be mentally stressful.

April 10, 2024
7:29 am
dougjp
Member
Members
Forum Posts: 577
Member Since:
January 9, 2011
sp_UserOfflineSmall Offline

Alexandre said

Using made up numbers, an example. Imagine someone gives you $5,000 every month in 2023, then comes April 2024 and they want $20,000 back. That could be mentally stressful.  

Entirely predictable given the massive (percentage wise) interest rate increases. A partial solution if wanted (and sometimes a way to reduce or completely avoid getting into having to pay quarterly tax payments), is to amend tax withholding upwards significantly on available pensions. This changes the mix of where cash for the monthly expenses come from too, to be more realistic.

I doubt this person would ever think or care about tax deferral by waiting to pay.

" We may never pass this way again " - Seals & Crofts

April 10, 2024
9:03 am
cgouimet
Member
Members
Forum Posts: 1477
Member Since:
February 7, 2019
sp_UserOfflineSmall Offline

CAD said
One of my older friends has a big headache and dilemma.
He has pile of money in GIC - what I would call 'live' money.
And he has a pile of money in RRSP.
Plus OAS, CPP and little corporate non indexed pension (~10k/year).

He is telling me there is no way he can use all RRSP/RIFF due to lifestyle he lives. Frugal, does not need Anything as he has everything he needs (furniture, house, etc.).
Biggest headache is GIC as they generate nice interest he can live off as he lives now.

Should he stop doing GIC and put money in no interest account? Keeping it in the shoebox is not a solution as if he decides to put money back into banking system one day somebody might ask 'where all those moneys are coming from???'
Should he starts cleaning up RRSP?
He has spouse only. House paid off long time ago. He hates cruises and does not want to buy Tesla nor Mercedes nor any other easy to steal fancy car.

What you would do in his situation?  

I'm available for adoption ...

CGO
April 10, 2024
9:14 am
Alexandre
Member
Members
Forum Posts: 1125
Member Since:
November 8, 2018
sp_UserOfflineSmall Offline

Alexandre said

With this is mind, here is what I do in that same situation:

1. Everything is CDIC insured, does not matter how many accounts with how many FIs I have to keep to achieve that;
2. Cash in the amount of 2 years of my regular (non-emergency) household expenses is in HISA, readily available;
3. The rest is in 1yr GICs.
4. Will not withdraw from RRSP until 71, when it becomes RRIF. After 71 will be taking just mandatory minimum RRIF withdrawal, which I believe banks can automatically do for you (Scotia does). Will treat that RRIF withdrawal just like any other taxable income I happened to receive.

One more thing that I do but forgot to mention:

5. Maximize TFSA contributions. Allowed lifetime contributions alone are almost $100K now, and while that is not much on a grand scheme of things, this is another $5K-$6K annually shielded from income tax for someone like me.

April 10, 2024
9:33 am
cgouimet
Member
Members
Forum Posts: 1477
Member Since:
February 7, 2019
sp_UserOfflineSmall Offline

Alexandre said

Alexandre said

With this is mind, here is what I do in that same situation:

1. Everything is CDIC insured, does not matter how many accounts with how many FIs I have to keep to achieve that;
2. Cash in the amount of 2 years of my regular (non-emergency) household expenses is in HISA, readily available;
3. The rest is in 1yr GICs.
4. Will not withdraw from RRSP until 71, when it becomes RRIF. After 71 will be taking just mandatory minimum RRIF withdrawal, which I believe banks can automatically do for you (Scotia does). Will treat that RRIF withdrawal just like any other taxable income I happened to receive.

One more thing that I do but forgot to mention:

5. Maximize TFSA contributions. Allowed lifetime contributions alone are almost $100K now, and while that is not much on a grand scheme of things, this is another $5K-$6K annually shielded from income tax for someone like me.  

Assuming regular expenses = Accomodation + Utilities/Services + Groceries + Medical + Dental + Municipal Taxes + Insurance + Transportation etc etc ...

2 Yrs is a lot to keep in HISA's especially if your 1 Yr GIC's are reasonnably laddered unless you have no regular income and you're managing to keep your HISA $ earning close to 1 Yr GIC's.

We keep our HISA's at 90-120 days ...

CGO
April 10, 2024
2:25 pm
savemoresaveoften
Member
Members
Forum Posts: 2898
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

Alexandre said

Using made up numbers, an example. Imagine someone gives you $5,000 every month in 2023, then comes April 2024 and they want $20,000 back. That could be mentally stressful.  

Maybe I am special but I wont feel stressed at all. Why would you be fully knowing its taxable to begin with ?!
I will be more than happy that someone pays me an extra $1666.67 a month and only want it back after 1 year, interest free. Sress out ? No freaking way lol.
Also CRA helps prevent the stress by asking one to pay tax installment once you file a tax return that shows you owe more than $2k in tax a year. CRA relieves your stress lololol

April 10, 2024
2:48 pm
dougjp
Member
Members
Forum Posts: 577
Member Since:
January 9, 2011
sp_UserOfflineSmall Offline

savemoresaveoften said

Also CRA helps prevent the stress by asking one to pay tax installment once you file a tax return that shows you owe more than $2k in tax a year. CRA relieves your stress lololol  

I think the tax installment 'kick in' changed a few years ago from $ 2k owing to $3k owing. I can't seem to find the effective tax year, but its at least 2022 and 2023.

" We may never pass this way again " - Seals & Crofts

April 10, 2024
3:19 pm
Rail Baron
Member
Members
Forum Posts: 277
Member Since:
November 3, 2022
sp_UserOfflineSmall Offline

Two words: genomic medicine.

I have a relative with stage 4 prostate cancer. He is getting genetically sequenced medicine tailored to his DNA in blood transfusions. These train his immune system to destroy the cancer cells that are in his body with almost no side effects. This after surgery, chemo and radiation stopped helping (over a decade). It could completely cure him (success rate >50%).

Cost of each genomic medicine treatment round = USD 125,000. Three rounds of treatment needed.

Add in the travel cost to the Cleveland or Mayo Clinic to get this treatment, and those GICs and RRSP could be depleted in less than one year.

There are going to be more and more custom blended genomic medicines that treat exactly the disease which afflicts one. But the cost of getting that medicine will be six figures per dose.

April 11, 2024
1:18 pm
MattS
Member
Members
Forum Posts: 148
Member Since:
January 11, 2020
sp_UserOfflineSmall Offline

That’s really interesting!! Superior medicinal services like that won’t be ever covered in our generic “free” health system. If one is blessed with that financial position that’s really great!! I do however think I’ll just trust my soul to the Lord and prefer to pass along my life’s work to my sons should they stay deserving before I hand it away to get a few yrs more out of this life.

April 11, 2024
8:33 pm
Rail Baron
Member
Members
Forum Posts: 277
Member Since:
November 3, 2022
sp_UserOfflineSmall Offline

MattS said
That’s really interesting!! Superior medicinal services like that won’t be ever covered in our generic “free” health system. If one is blessed with that financial position that’s really great!! I do however think I’ll just trust my soul to the Lord and prefer to pass along my life’s work to my sons should they stay deserving before I hand it away to get a few yrs more out of this life.  

My relative is 61. He has three sons who aren't married yet. Maybe he wants to live long enough to see them get married, rather than watching from up there (or somewhere else).

April 12, 2024
8:26 am
MattS
Member
Members
Forum Posts: 148
Member Since:
January 11, 2020
sp_UserOfflineSmall Offline

Valid point !!

April 12, 2024
9:44 am
HermanH
Member
Members
Forum Posts: 1177
Member Since:
April 14, 2021
sp_UserOfflineSmall Offline

My mom had a similar mania regarding too much income. She didn't like paying income tax and would do what she could to minimize it. We tried to explain to her that no matter how high the income tax rate was, it was never going to be 100%, so she would always get some money to spend.

No permission to create posts

Please write your comments in the forum.