A PUBLICATION OFA PUBLICATION OF

SUPPLEMENTING YOUR RETIREMENT INCOME

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Comfort Life brings you sound planning strategies and advice to ensure you make the right retirement decisions—whether your retirement is imminent or years away.

"Comfort Life helped me understand my retirement living options and offers a step-by-step approach to find the best one for my needs."

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The Comfort Life Team

R E S I D E N C E F I N D E R

F I N A N C I N G 1 0 1

B E F O R E Y O U M O V E

C A R E O P T I O N S

Canada's Guide to the Best Retirement Communities | www.comfortlife.ca

table of contents4 Introduction

5 Government Sources of Income

6 Home Downsizing

8 Like to Travel? Do It While Saving Money

9 Second Careers

10 Creative Ways to Make Extra Money in Your Retirement

11 Earning Extra Income? Consider the Impact of CPP

12 Single Senior Women Can Achieve Financial Success

17 Additional Resources

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Canada's Guide to the Best Retirement Communities | www.comfortlife.ca 4I N T R O D U C T I O N

Introduction If you are like many retired Canadians, you are probably living on a tight budget, and may be feeling anxiety over your finances. Does your retirement income stream consist primarily of government and private pensions, plus investments? You may be able to supplement those funds with other government sources of income, home downsizing, second careers or creative ways to earn extra cash at home or while traveling.

W I T H F I L E S FR O M K AT H Y B A R T E L A N D PAT I R W I N

5G O V E R N M E N T S O U R C E S O F I N CO M E

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Government Sources of Income

Older adults whose income stream consists of government and private pensions as well as investments made over their working lives may also qualify for other government sources of income or subsidies, such as the guaranteed income supplement, survivor pension, disability allowance or veterans benefits.

• The Guaranteed Income Supplement (GIS) might be applicable if a senior's income is low – the maximum is $638/month. GIS must be applied for annually via the tax return. Qualifying for the GIS is based on income, not assets. Details for all government pensions can be found at the Service Canada website, www.servicecanada.gc.ca.

• Survivor Pension CPP payments that a retired spouse receives will cease upon his or her death. The remaining spouse should apply for the Survivor Pension, via Service Canada, which is a monthly payment based on 60% of the deceased's CPP payment.

• Disability Allowance Health conditions such as macular degeneration may qualify a senior for a disability allowance on their income tax. The senior would require a form T2201 E, found on the Canada Revenue Agency's website, www.cra-grc.gc.ca, to be completed by the doctor. This would allow the senior to write off certain expenses for care, equipment and related medical costs.

• Veterans' Benefits A senior who is an overseas veteran may be eligible for many services such as care, housekeeping, yard work, transportation and, if necessary, burial costs via the Last Post Fund – see www.veterans.gc.ca.

6H O M E D O W N S I Z I N G

Canada's Guide to the Best Retirement Communities | www.comfortlife.ca

Home Downsizing B Y S T E P H E N G A D S D E N

When Jeff and Wendy turned 60 a few years ago, they made the decision to sell their family home in Caledon, Ontario, and move to a condo in an active retirement community just north of Toronto. “It was quite a change,” Jeff recalls. “When we lived in Caledon, our house had a modest mortgage, reasonable property taxes and low maintenance costs. We lived well as a result. We wondered if we could achieve our retirement goals with the assets we had on hand.”

Jeff and Wendy’s concerns revolved around the combined costs of a condo purchase in a retirement community, maintenance fees and many of the traditional costs associated with active retirement living. Jeff wanted to maintain an active, independent lifestyle, enjoying golf, skiing and water sports. Wendy, while active in her own right, preferred to leave fishing activities to others. High on her list of priorities were entertainment and travel, which meant additional housekeeping and security services while they were vacationing away from home. Both Jeff and Wendy also recognized the fact that they might one day need assisted living services that included nursing care, physiotherapy and occasional treatment from a visiting doctor.

Using the net proceeds from the sale of the family home plus $40,000 from savings was enough to purchase the retirement condo. Secondly, Wendy’s spousal Registered Retirement Savings Plan (RRSP) was converted to generate enough cash to offset the monthly income shortfall of $1,000. Thirdly, in three years' time, they will transfer

7H O M E D O W N S I Z I N G

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Registered Retirement Income Fund (RRIF) assets back into Wendy’s spousal RRSP and begin collecting Canada Pension Plan (CPP) and Old Age Security (OAS) benefits at age 65. Jeff will defer taking CPP and OAS benefits for as long as possible to reduce his annual income tax liabilities.

With this plan, at age 65, Wendy’s RRIF would be worth about $70,000 if it earned five per cent per year from age 62 to 65, after withdrawing $1,000 per month from the plan. When it is converted back to an RRSP, these assets would grow on a tax-deferred basis until the end of the year in which she turns age 71, at which point the RRSP must be converted to another RRIF. Wendy’s combined pre-tax CPP and OAS income at age 65 would amount to approximately $1,425 per month (based on 2009 rates).

For Jeff and Wendy, downsizing their home allowed them to fulfill their retirement dreams while still coming in on budget. Downsizing your home might be a difficult option to consider, but it can help you to supplement your income so you can reach your retirement goals.

“ D o w n s i z i n g

y o u r h o m e m i g h t

b e a d i f f i c u l t o p t i o n

t o c o n s i d e r , b u t i t c a n

h e l p y o u t o s u p p l e m e n t

y o u r i n c o m e ”

Canada's Guide to the Best Retirement Communities | www.comfortlife.ca 8L I K E TO T R AV E L? D O I T W H I L E S AV I N G M O N E Y

Like To Travel? Do It While Saving Money

The flip side of making money is saving it and both will help you prepare for the costs of retirement living. One way to save money and have some fun is to travel. If you decide to move to a Holiday retirement community you may be able to stay at one of their residences in the city you're visiting.

If you are still living at home and saving for your eventual move to a retirement community, you could travel the world by house sitting. Whether you're already retired or planning for it, there are many different ways to earn money to supplement your income so that you can do the things you want to do — like traveling.

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Second Careers

People are living longer and healthier lives so it's no surprise that many older adults are already on their second or even third career. Economic uncertainty also makes transitioning to another career a financial necessity for many people.

The good news is that your life experience, skills, talents and connections can provide you with many stimulating second career options.

Popular second career fields include health care, environment, education, government and non-profits.

Here are some tips to get you started on your next career:

• Plan ahead — preferably well before you leave your current position. If you can, start working in your next career while you're still employed at your current one.

• Talk to your current employer to see if they offer retraining and take advantage of any career counseling opportunities.

• Review your current financial situation to see how long you can go without working and how much you'll need to make to finance retirement living in the future.

• Determine your unique skills and talents that will drive your next career —always remembering not to stray far from what you know.

• Be an engaged presence on social media, particularly business platforms like LinkedIn and network both online and in person.

10C R E AT I V E WAY S TO M A K E E X T R A M O N E Y I N YO U R R E T I R E M E N T

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Creative Ways to Make Extra Money in Your Retirement

If you need more ways to make money for retirement be creative. It also helps to look close to home because the best ideas are often there and many of them won't cost very much in effort, financial outlay or preparation time.

There are many low-stress, easy and fun ways to put some extra cash in the bank.

You could rent out your driveway (if you live in a city where parking is difficult), or perhaps rent your basement to a student.

You can also make money from hobbies or interests. Have you ever thought of pet sitting, being a personal shopper or doing sewing alterations for people in your neighbourhood? The sky is really the limit.

11CO N S I D E R T H E I M PAC T O F C P P

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Earning Extra Income? Consider the Impact of CPP

Employment and other income - Although you may begin receiving CPP benefits as early as age 60 even if you continue working, it’s important to consider the new “working beneficiary” obligations and income tax implications. On the positive side, these additional contributions can create additional benefits under the new Post Retirement Benefit. Starting in 2012, people under age 65 who collect CPP benefits while continuing to work will still be required to make CPP contributions. However, the CPP benefit will be taxable as income along with your existing employment and/or other income, and may result in a higher marginal tax rate and, therefore, a higher income tax liability. If so, any financial gain you may have triggered by receiving CPP benefits may be diminished (Chartered Accountants of Ontario).

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Single Senior Women Can Achieve Financial Success B Y P A T I R W I N

The magazine articles, brochures and ads feature slim, fashionable couples enjoying their senior years to the fullest. But are Canadian seniors really so perfectly paired up?

The Stats Say:• Most seniors are married (56 per cent in 2006) and nearly one-third

are widowed.

• In 2006, three-quarters of senior men were married compared to 41.4 per cent of women; 46 per cent of senior women were widowed compared to 12.7 per cent of senior men.

• 15 per cent of single seniors live below the poverty line (versus 1.4 per cent of married seniors).

• Of seniors in poverty, 75 per cent are women.

• The median income of married seniors is $41,400; of single seniors, $20,800.

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Three Common Situations Faced by Senior Women:Olive, 73, always worked and when she retired at 65, she was confident that her pension would make her ‘rich’—but low interest rates have not kept pace with the care costs she racked up after a recent broken hip. Her main concerns are outliving her assets and not having control over what happens to her living arrangements and funds, as she requires an increasing amount of care.

Marianne, 70, married her husband (a fellow teacher) late in life at age 50, but his alcoholism led to their divorce five years ago. Her divorce settlement, based on the sale of their home, went toward her small condo, with the remainder invested ‘in something or other, I’m not sure what.’ Marianne had always envisioned an active retirement, travelling with her husband. But now her ‘couple friends’ forget to include her, and travel plans have been negated by very poor investment returns.

Betty, 78, had a long and happy marriage; Ron was a very traditional man who made all the financial decisions and her nest egg mostly consists of their house. Betty realizes that Ron’s desire to protect her from any financial responsibility was actually a disservice. When he died, she had never written a cheque, changed a fuse or pumped gas, and had a lot to learn. She was also flooded with advice about selling the house, investing and even dating.

Clearly, the number of single senior women is growing (and with so many boomer divorcees on the horizon, that number will only increase). What are their issues and how can they save for a financially secure retirement—especially if they have no children or close family?

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What do the Experts Say?Paul Bourbonniere of Polson Bourbonniere would advise Olive to gather a cohesive support team who can work together to achieve her goals. He would remind Marianne to be sure her will has been updated to replace her ex-husband as beneficiary or executor, and would carefully review her investment portfolio to ensure it reflects her risk tolerance and objectives, which may differ from her ex-husband’s. He would do the same with Betty, being sure her late husband’s investment strategies were now reflecting her personal goals. He would review the options regarding her house with the same view toward risk tolerance, her stage of life, options for longer-term housing and potential care costs.

Mary Robertson of Living Life Cycles agrees that the top concern of senior women is the fear of outliving their assets; she adds that underestimating health care costs is a potential disaster to the very best laid plans. She maintains a fee-based service is the only objective option for an unbiased plan and that people should expect to pay for good advice.

She urges senior women to become financially informed but warns against seminars that are actually sales pitches. Instead, she says, they should consult Service Canada’s retirement calculator, which guides the user through the funds available from public sources, then prompts for other income to derive a valid estimate of available income.

Another resource is Investopedia, a Canadian site offering articles, tutorials, calculators and other tools. Mary suggests using the Financial Planning Standards Council website to find a planner and help develop questions to ask when evaluating the best planner for your needs.

M A R I TA L S TAT U S O F S E N I O R S

4 6% S E N I O R W O M E N W I D O W E D

75% S E N I O R W O M E N L I V I N G

B E LO W P O V E R T Y L I N E

M E D I A N I N C O M E O F S E N I O R S

$ 41 ,4 0 0 M A R R I E D S E N I O R S

$2 0 , 8 0 0 S I N G L E S E N I O R S

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Canada's Guide to the Best Retirement Communities | www.comfortlife.ca

Mary finds that many of her senior female clients are asset-rich but income-poor. To help a client concerned about outliving her assets, she would thoroughly investigate all sources of income and develop a budget of projected costs, a spending plan and an investment strategy that maximizes tax savings. Future care costs can be offset by long-term care insurance, but shop carefully from an expert underwriter such as Sunlife or Manulife. Mary also suggests a variable annuity to provide income but also generate growth. She predicts an increase in new, creative products, driven by the demands of retiring Zoomers.

“Underestimating health care costs is a potential disaster to the very best-laid plans”

Jim Harvey, a CA and former CFO of an insurance company, was so amazed by the lack of financial knowledge demonstrated by even well educated people, that he created Basic Financial Literacy, a seminar service to address the most essential principles (such as budgets, debt, investments, insurance, pensions and retirement) and economic basics (such as inflation and interest). He would ask these women: do you think that nice lady at the bank is giving you advice for free? Think again. She’s getting a commission from the product she sells to you. Get used to low interest rates—governments are more concerned about controlling inflation and encouraging more consumer debt. But, even a low return is better than having funds tied up in a major asset such as a house, if you need the income. Look at your pension. Is it a defined benefit plan? Is it indexed?

There is no reason why a senior woman, regardless of her marital status, needs to retire into poverty. Yes, women traditionally had less earning power and live longer; yes, relying on the government for a comfortable pension may be a fantasy. But you aren’t alone. Ask yourself some of our experts’ questions, check out the websites and gather your courage. Knowledge is power and it is available at all income levels. If you don’t take advantage of it, the only one who will lose out is you.

“ U n d e r e s t i m a t i n g

h e a l t h c a r e c o s t s

i s a p o t e n t i a l d i s a s t e r

t o t h e v e r y b e s t - l a i d

p l a n s ”

16S I N G L E S E N I O R W O M E N C A N AC H I E V E F I N A N C I A L SU CC E S S

Canada's Guide to the Best Retirement Communities | www.comfortlife.ca

Checking Out Your ExpertYour prospective financial advisor may have received rave reviews from your friends, but before you make an appointment, be sure they are:

• Paid on a fee-for-service basis, not commissions based on what they sell

• Using a third-party custodian for investments (not their own coffers); cheques should be made payable to the investment firm, not the advisor

• Governed by the codes of their professional accrediting body, such as the Investment Industry Regulatory Organization of Canada or Mutual Fund Dealers Association

• Registered to provide advice and sell investments with the Canadian Securities Commission at www.canadiansecuritiescommission.com or the Ontario Securities Commission at www.osc.gov.on.ca

• Clear of any issues with regulators:

If they are licensed to sell stocks, ETFs or other individual securities (over and above just mutual funds,) they are regulated by IIROC (Investment Industry Regulatory Organization of Canada) for disciplinary search or information requests.

If they are licensed to primarily sell mutual funds, they are regulated by the MFDA (Mutual Fund Dealers Association) to check for any disciplinary hearings.

And lastly, don’t forget to use the Internet to find what you are looking for. In addition to Google, check out the resources at ComfortLife.ca as well as our Retirement Living and Care Advanced Search.

17Canada's Guide to the Best Retirement Communities | www.comfortlife.ca

Get more information on topics related to Supplementing your Retirement Income at www.comfortlife.ca

Additional Resources:

• New Options Under the CPP Rules

• Tips and Advice for Downsizing Your Home

• The Impact of Care on Your Finances

• Find Affordable Retirement Homes

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