How can this couple amalgamate their ‘little cash pots’? Plus, the retiree stock market problem | Canada Voices

Arden and Trent moved to Canada from the United States in 2008. She is 65 years old, and he is 59.

“It took several years before we found our feet and I found regular, well-paid work with a good pension,” Arden writes in an e-mail. Trent works part time as an instructor.

Arden works for the federal government, earning $95,000 a year. She’ll be entitled to a defined benefit pension indexed to inflation. Trent earns about $39,000 a year in education.

They live in Quebec, where they rent an apartment. They have relatively modest savings except for an inheritance.

They are busy saving for Arden to retire a few years from now, followed by Trent in a decade, and would “love for someone to look at their agglomeration of little cash pots,” Arden adds.

“But my main issue is that I received an inherited individual retirement account (IRA) from my father that I will need to wind up by 2031,” Arden writes. “What I would like to do is repatriate this fund to Canada and would prefer to do it as soon as possible,” Arden adds. The IRA has a value of about $306,000, but that’s before accounting for the income tax.

Their retirement spending goal is $60,000 a year.

In this Financial Facelift, Ian Calvert, a certified financial planner and portfolio manager at HighView Financial Group in Oakville, Ont., looks at Arden and Trent’s situation.

Want a free financial facelift? E-mail finfacelift@gmail.com. Some details may be changed to protect the privacy of the persons profiled.

An escape hatch for retirees who need to make a RRIF withdrawal, but don’t want to sell fallen stocks

However much the general population of investors feels the pain of stock market declines, retirees feel it more, writes personal finance columnist Rob Carrick.

One reason is that retirees worry they may not have time to wait for a recovery from a stock market crash, while another is that they are required to make minimum withdrawals from their registered retirement income funds. No one wants to sell a hard-hit stock or fund in order to satisfy the rules about RRIF withdrawals. One way around this problem is to keep enough cash in your RRIF to cover at least a couple of years’ worth of RRIF withdrawals.

Use this cash instead of selling stocks or funds you know will recover if left alone. Another option is an in-kind RRIF withdrawal, where you transfer a stock or fund from your RRIF into a non-registered account.

Here’s some information on in-kind RRIF withdrawals from the people at CIBC Investor’s Edge. Consider it a rough guideline for DIY investors managing their own RRIF accounts.

Global investors have ditched U.S. stocks amid market volatility. Should Canadian retirees follow suit?

Global investors sold off U.S. stocks at a record pace in the last two months, according to a new survey. Financial planners say that’s a timely reminder for Canadian investors to assess whether their portfolios are too concentrated on equities south of the border, Meera Raman reports.

The April survey of fund managers released by Bank of America Global Research found that participants were a net 36 per cent underweight U.S. equities, meaning investors are holding a smaller percentage of U.S. securities than usual. That’s a drop of 53 percentage points since February – the biggest two-month decline on record.

While many Canadians have considered selling their U.S. stocks, or already have, financial planners caution against making abrupt changes.

Read the full article here.

In case you missed it

Hard-won victory for RBC retirees reflects a bigger problem with private pension plans

Jim Laughlin might see his Royal Bank pension increase next year – for the first time in almost a quarter-century, Erica Alini and Meera Raman write.

The 77-year-old, a retired asset sales senior manager, has been at the forefront of a long-time grassroots campaign with one goal: To get his former employer to agree to bump up payments for the more than 40,000 retired members of the Royal Bank Pension Plan.

RBC runs one of Canada’s largest private defined-benefit (DB) plans, the coveted, traditional type of pension that provides steady cheques for life. But any increases to those payments or one-off extra disbursements are at the bank’s discretion. And RBC hasn’t implemented any such adjustments since 2014, according to documents reviewed by The Globe and Mail. Even back then, the money went only to a limited group of pensioners.

Late last year, Mr. Laughlin went so far as to send RBC a shareholder proposal submission endorsing annual pension adjustments based on inflation. But the bank rejected it, first because it exceeded an official word limit and then later when it said a shortened version came in after its submission deadline. In January, Mr. Laughlin contacted The Globe about the pensioners’ struggle.

About two months after The Globe reached out to RBC for more information, the bank said that it would roll out a $50-million investment to increase payments globally for some retirees starting in 2026, an initiative it said had been in the works for months.

Read the full article here.

The retiree stock market problem: What else are you going to invest in?

Something scarier than recent stock market declines? Just how worried some retirees have become about their investments, personal finance columnist Rob Carrick says.

So far in the trade war, the net level of damage done to stocks has been modest by the standards of past bear markets. Yet the level of retiree anxiety apparent in interactions with Globe readers is eye-opening. A common theme: I worry I won’t live long enough to see a market rebound – should I sell my stocks?

Staying invested through market downturns is standard advice, but is it always right? This question was presented recently to Daryl Diamond, a veteran financial planner and author of Your Retirement Income Blueprint: A Six-Step Plan to Design and Build a Secure Retirement. “Speaking from our experience with people who stuck to their plan, it was never the wrong decision to stay invested,” he said.

Mr. Diamond’s theory on why retirees are so anxious is that they, and all of us, are experiencing a layering of worries dating back to the 2018 stock market decline. Next came the pandemic, 8-per-cent inflation, rising interest rates and, more recently, the trade war. “It’s been one compounding problem after another,” he said.

Read the full article here.

Retirement Q & A

Q: My partner and I are excited to welcome our first grandchild this year, but we are nervous about how this will affect our children’s finances. What advice do you have for new grandparents when it comes to financial planning and saving for your grandchild’s future?

We asked Carolina Henao, CFP, financial planner, Sun Life, to answer this one.

A: Congratulations on the exciting news of your first grandchild! This is a wonderful milestone, and it is great to see you are thinking ahead about their financial future.

There are several ways you can support your grandchild while also ensuring that your children’s financial well-being remains on track. Here are some areas you can consider:

1. Have an open and honest conversation. It is of extreme importance to have an open discussion with your children before making any financial commitments. You need to understand their priorities, goals and financial situation to be able to provide the support that aligns with their needs and values. 
2. Evaluate an education savings plan. If one of your goals is to help your grandchild pay for postsecondary education, a Registered Education Savings Plan (RESP) is a great and tax efficient way to save for this purpose. Although contributions are done with after-tax dollars, the growth of the investment is tax sheltered. In addition, the government offers the Canada Education Savings Grant (CESG) which provides 20 per cent of the first $2,500 in annual contributions up to a maximum of $7,200 lifetime. This plan allows grandparents to be owners and contributors. 
3. Estate planning: If you are considering leaving a legacy to your grandchild, reviewing and updating your estate plan is a good step. Within your estate plan you have options such as setting up a trust on the child’s behalf, updating beneficiary designations on your life insurance policies, and exploring other gifting strategies during your lifetime. 
4. Support your children’s financial well-being: While focusing on your grandchild’s future, it is equally important to ensure that your children have financial stability. You may be able to offer additional financial support in the form of child care expenses, contributions to an emergency fund or simply gifting funds for specific expenses. 

In summary, while it is wonderful to give, it is fundamental to do it in a way that does not compromise your own financial security. By working with your financial planner, you can ensure that your generosity aligns with your long-term financial plan.

Interested in more stories about retirement? Sixty Five aims to inspire Canadians to live their best lives, confidently and securely. Read more here and sign up for our weekly Retirement newsletter.