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Risk tolerance and investment balance
January 11, 2018
12:05 pm
Top It Up
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Bill said

I believe if you wait until age 70 (keep working!) CPP max is $1610 and OAS is $798, not including any supplements.  

Geez, wait until 70 ... when's the fun start?

Rick said

Isn't the $641 so low because the majority begin drawing CPP at 60?  

Well you know, back when individuals were getting between 5-10% return on their GICs and CSBs, actuarials were advising those that didn't even need to draw CPP at 60, to draw the reduced amount anyway, and invest those monthly amounts on their own which ended up beating out those waiting until 65 to draw.

January 11, 2018
12:21 pm
Bill
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Rick, how do you inherit debt!?

January 11, 2018
12:39 pm
toto
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Personally I'm in Ricks situation. Happy with gics and no risk. Fortunately I got Oakens 3.5 rate and grabbed motives 3 percent. Excited about rates increasing and what this year will bring. For that reason I'm keeping some money on sidelines too. This could be our year fellow bloggers!

January 11, 2018
1:07 pm
JenE
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Top It Up said
Further complicating the current low returns on GIC/HISA accounts for retirement planning, are the abysmal statistics of OAS and CPP payout amounts to individuals. The fixed OAS rate is $585 per month, and while the maximum CPP payment is $1,134 per month, Canadians only received an average of $641 per month.

You do the math.  

Every month, with a big smile, I say to my husband, “The Government have paid us again, sweetheart”. We are so fortunate here in Canada. Count your blessings.

January 11, 2018
3:25 pm
Rick
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Bill said
Rick, how do you inherit debt!?  

Die owing money?

January 11, 2018
4:05 pm
Doug
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While it's true most people don't receive the maximum CPP payable, I think relying on averages skews things. For instance, many households have two people. Often, one of the spouses took time out of the workforce (usually it's the wife/mom but not always). As a result, right there, you've got 1 out of 2 people likely not to get the maximum CPP. In all but a few years since 1975, my dad has paid the maximum into CPP and I would be surprised if he didn't get the maximum CPP. For my mom, based on the CPP's own CPP estimator in My Service Canada Account, I expect her to receive $600 on the low end and $800 on high end, closer to the average. I'm already at ~$400 if I didn't earn anything else in CPP eligibility and retired at my normal retirement age of 65 and I've only worked about 12 years full-time, a few more part-time. 🙂

In this way, it would seem CPP is somewhat front end-loaded, perhaps?

Cheers,
Doug

January 11, 2018
4:10 pm
Doug
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Rick said

Die owing money?  

There's a way around that. Part of me thought of that as a way of "sticking it to 'the man," whoever "the man" is when I die. You have to trust your heirs but in the years preceding, give away everything in advance, set yourself up in a small, older one-bedroom apartment (or the freehold free and clear house you transferred to them beforehand) that you can afford on OAS and CPP and your approved unsecured credit facilities that you kept prior to your retirement. For any "fun" stuff, like vacations, use the unsecured credit facilities. If you're living in your home that your kids now own, either pay them a token amount for rent or don't pay rent at all. When you die, no assets and only liabilities = screwed creditors (and the federal government, should you owe any tax). sf-cool

My conscience probably wouldn't let me do it, though.

Cheers,
Doug

January 11, 2018
4:33 pm
Rick
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Doug said
While it's true most people don't receive the maximum CPP payable, I think relying on averages skews things. For instance, many households have two people. Often, one of the spouses took time out of the workforce (usually it's the wife/mom but not always). As a result, right there, you've got 1 out of 2 people likely not to get the maximum CPP.
Doug  

Wife is in that situation. She took about 6 years off to raise the kids when they were small. She can apply, when she applies for CPP, to have those years not count in calculating her rate. One spouse can apply per kid with proof. Makes a difference in final rate.

January 11, 2018
6:43 pm
Top It Up
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Yet another reason to explore equities as part of an investment portfolio (and that may add some of that POP to your holdings) is the favourable taxation regime on both dividends and capital gains vs. straight interest investment income - that is until the Commie/Pinko Liberals get in the way of middle income earners trying to build for their retirements.

January 11, 2018
7:29 pm
Bill
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Rick, I agree, you certainly can die in debt. And if there's not enough to pay creditors from the estate of a deceased person then so be it, but any beneficiaries do not "inherit" the remaining debt. But I don't think you meant that anyway.

Doug, I'm not sure it's a good idea to give all your money away in the last few years of life because those years may be exactly when you need care with daily living, either at home or in a nursing home. Often children are busy with their own lives or live too far away to provide your daily care needs in your last years. I'd rather keep it and blow $100K or so a year in my last few years buying the best care I can get. If my heirs end up with less or even nothing, sucks for them.

January 12, 2018
9:44 am
Doug
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Bill said
Rick, I agree, you certainly can die in debt. And if there's not enough to pay creditors from the estate of a deceased person then so be it, but any beneficiaries do not "inherit" the remaining debt. But I don't think you meant that anyway.

Doug, I'm not sure it's a good idea to give all your money away in the last few years of life because those years may be exactly when you need care with daily living, either at home or in a nursing home. Often children are busy with their own lives or live too far away to provide your daily care needs in your last years. I'd rather keep it and blow $100K or so a year in my last few years buying the best care I can get. If my heirs end up with less or even nothing, sucks for them.  

Depends on how old I am...if I'm anywhere older than age 85, I don't want to spent even 5 years in a residential care home setting let alone 10 or 15 years, potentially. If it got that bad, I'd probably have had instructions drawn up directing a family member, friend or some other responsible person to ensure I'm given access to a lethal dose of cyanide that I can either drink straight or add to my morning apple juice, but that's just me and I'm half a century from that now. 🙂

Even if I did want to live in a nursing home, it's actually cheaper to be a low income senior in a publicly-subsidized facility as they generally take, what, 90-95% (heck, they can take all of it for all I care!) of your regular pension income (i.e., CPP, OAS, GIS and any private pensions or RRIFs, if applicable, which wouldn't in the case of someone divesting themselves of all their assets a few years ago). sf-cool

Cheers,
Doug

January 12, 2018
1:08 pm
Rick
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Bill said
Rick, I agree, you certainly can die in debt. And if there's not enough to pay creditors from the estate of a deceased person then so be it, but any beneficiaries do not "inherit" the remaining debt. But I don't think you meant that anyway.
 

Thanx Bill. I meant that I've seen people that expect an inheritance to complete their retirement or home purchase plan only to find that grandma left it all to charity, her cats, or there was significantly less , nothing, or even debt in the estate. I keep telling my mom to travel, buy a new car, treat herself...I'm not counting an inheritance to fulfill my financial goals.

January 12, 2018
1:15 pm
Rick
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Doug said
Even if I did want to live in a nursing home, it's actually cheaper to be a low income senior in a publicly-subsidized facility as they generally take, what, 90-95% (heck, they can take all of it for all I care!) of your regular pension income (i.e., CPP, OAS, GIS and any private pensions or RRIFs, if applicable, which wouldn't in the case of someone divesting themselves of all their assets a few years ago). sf-cool
Cheers,
Doug  

Am I correct in assuming that TFSA money is NOT considered income when calculating how much money the carehome/govt leaves you after paying for your nursing home stay?

January 12, 2018
1:23 pm
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Rick said
Am I correct in assuming that TFSA money is NOT considered income when calculating how much money the carehome/govt leaves you after paying for your nursing home stay?  

When I was POA for a couple of elderly individuals, both in VCH care homes in BC - Line 236 of the T1 General was used as a basis in determining the monthly rate paid.

January 12, 2018
1:28 pm
Bill
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Rick, I've no idea how what you are required to pay for subsidized care is calculated, province by province, but in general TFSA money/earnings is not income, it appears nowhere on your income tax return.

Does a person with no assets earning $40,000/yr pay the same as a person earning the same but who has $2 million in other assets? In other words, aside from income do they take into account or do they ignore the value of other assets that can be liquidated? I've no experience in this.

January 13, 2018
5:24 pm
Doug
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Rick said
Am I correct in assuming that TFSA money is NOT considered income when calculating how much money the carehome/govt leaves you after paying for your nursing home stay?  

TFSA income would not be taxed in anyway or affect OAS clawback, that's correct. It would be the "etc." to which I was referring, if that's what you meant. 🙂

Edit: Think I misinterpreted what you're asking but yes, if they look at your Adjusted Net Income or Net Income, as applicable, or even your Total or Taxable Income, then you would not count it. Do they look, though, at your total investment assets, not just income? I don't think they do, at least in B.C., but I could be wrong. For things like welfare/disability assistance, though, they absolutely do.

Yes, in B.C., I believe they just look at income:
https://www.interiorhealth.ca/YourCare/HousingHealth/ResidentialCare/Pages/Costs.aspx

An important consideration, though: my grandma's been assessed several times by a case worker, with various cognitive and memory test-type questions asked as well. Each time they just continue to recommend in-home community care and provide a "daily rate" for such services. Since my aunt moved to Kelowna, we no longer need the IHA in-home, twice-weekly bathing assistance. She's got dementia and, apparently, now qualifies for the DTC but that's still not enough. So, she lives in a private senior's residence with twice-daily meals (called supportive housing, one step below independent and two steps below residential care) and that's it. Cost for that is up to $2900 per month now. Goes up about $100 every month. Fortunately, she's got a great survivor's pension from my grandpa, who passed away in 1978 five years before I was born, that's at least $2000 per month from his days in a senior managerial role with Alberta Treasury Branches (factoring in another ~$1200 in combined OAS+CPP+CPP survivor's pension-is it true you only get one CPP survivor's pension if you are a widow/widower? if so, that seems wrong! and, do they take the higher of the two CPP survivor's pension or the more recent one?). Still, if she "keeps on ticking" and Revera keeps raising their prices, eventually her limited savings will have to be tapped so I'm hoping I can eventually talk my dad and his siblings into moving her into a nearby, different private residence for cheaper and basically play "musical chairs" every few years, taking advantage of lower rents. 🙂

Cheers,
Doug

January 13, 2018
7:22 pm
Loonie
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I sympathize with your grandma's situation, Doug. Yes, she could run out of funds potentially, creating a crisis for your family. Moving her around regularly is not an answer as old people become more disoriented the more often they are moved. plus, you'll never win that price war.
People are living longer in various levels of supportive housing, but don't necessarily have any more money with which to do it. A great many would have been better to have stayed in their own homes or condos as long as they possibly could. The whole situation is a nightmare. Been there, several times, with elderly relatives. Am totally fed up, and still actively dealing with these issues.

The question about CPP is EXTREMELY complicated, worse than you can imagine. The government changed it a few years back, during previous government. Survivor pensions have been slashed dramatically unless the survivor was born before 1934. Only one widowhood counts and it would be the more recent one, I think. In no case can survivor pension exceed one person's maximum pension, but in most cases it is a lot less. It's almost impossible to figure out what a survivor pension would be unless survivor born before 1934. You'll have to google if you want more. I did post about this a while ago but little response. I don't know if people don't realize what they're in for, don't think it applies to them, or don't care.
I really can't answer further questions about his because it's largely indecipherable.

January 14, 2018
6:59 am
Bill
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TopItUp, I guess using line 236 is good news for those older folks who might not have much income but have a million dollar house they sell when they go into a nursing home.

Here`s the link to the government info re survivors cpp rules, including if you`re widowed more than once:

https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-survivor-pension.html

January 14, 2018
7:10 am
Top It Up
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Bill said
TopItUp, I guess using line 236 is good news for those older folks who might not have much income but have a million dollar house they sell when they go into a nursing home.  

Well, if the senior goes into a home due to mental incapacitation, THAT million dollar home sale will start to show up as investment income and Line 236 will reflect that as will the monthly bed rate at the government care facility - the calculation is a yearly thing AND there is a maximum monthly rate at the care facility.

For one of the individuals I was POA for - THEIR monthly bed rate jumped 84% after the condo sale and the funds were invested.

The "good" news is because the individual can claim the monthly care facility rate as an expense federal/provincial taxation is minimal.

January 14, 2018
7:24 am
Bill
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I see. After taxes on the investment income and the increased bed rate payable maybe just throw the million bucks in the safety deposit box.

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