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May 1, 2017

Retirement: New Times New Rules

by Ed Arbuckle

Ed ArbuckleYou have lived about two-thirds of your life raising a family and working. Now you can look back with some pride—the kids are doing well and there is no need to worry about them anymore. Work also went well and you think you have the bucks to retire soon. Life will be different then, as you turn your attention to more leisure time, good health and prosperity. Are you ready for that and whatever else goes with it?

Lives are longer now than they once were so you need to save more retirement funds so you don’t run out of money. If you have something left over when you die, where is the money going to go? Usually, it goes to family members of course, but that involves some thought if children’s marriages are rocky or if one of them is vulnerable and needs a different solution than an outright bequest. You might even want to look to grandchildren and their needs and how best you can help them. Should they be treated equally or should some get a bigger chunk of the pot than others so you can open opportunities for them they might not otherwise be able to afford - anywhere from more education to buying a first home.

As you can see, there are many financial issues to deal with in retirement and they are unique family to family – one size does not fit all. So, let’s deal with a few specific ones.

Pension Options

If you are fortunate enough to be a member of a pension plan there are two important things to consider before you retire.

The first one is whether you take a pension under the plan or transfer pension money to a self- directed retirement account so you can manage the funds yourself. With a pension plan you may lose money if you die after the guarantee period ends but before normal life expectancy. On the other hand, if your money is in a “Locked-in Retirement Account (LIRA) your estate gets to keep what’s left. For most, the pension plan offers better income security and is the better choice. When you add pension income to CPP and OAS, things start looking good.

You also need to consider what length of guarantee period to select under the pension option. It will depend on your health and, if you are married, the expected longevity of your spouse. In any event, opting out of some guaranteed term in exchange for slightly higher pension payments is not a smart decision. Your spouse may insist on a minimum guarantee period depending on the laws in your province of residence.


Until you retire your emphasis is on growing your investments so you have the money to pay the bills in retirement. Maximizing your return over the long term gets a lot of attention before retirement. Whether you have a RRSP or an investment portfolio, you have some flexibility to build assets, even with some speed bumps along the way.

In retirement, emphasis changes from growing your savings to preserving capital because it is now more difficult if not impossible to recover with the shorter timeframe ahead of you. Therefore, investing should become more conservative in retirement so your rate of return will decline accordingly. When calculating how much your investments will earn after retirement don’t count on more than about 5% because you just shouldn’t take the risk.

The Cottage

If you are lucky enough to own a cottage and it has been in the family for a long time, it is likely to be a significant part of your estate and can lead to some difficult issues when you die.

What if one of your children wants it and the others don’t, or worse still what if all of them want it? How do you deal with either of those options? Do all of them have the resources to maintain it? How do you set up a structure with multiple owners all trying to get along? In financial planning, this is one of the big nuts to crack.

Because the capital gain on the cottage could be very high, it might make more sense from a tax standpoint to make it the principal residence, rather than your house. When you sell the property, or die, you want to use tax-planning strategies to maximize the benefits of the principal residence exemption.

Second Marriages

In a second marriage or even in a first one, provincial family law has some rules that you must play by. There is more sensitivity in a second marriage. In Ontario, for example, the surviving spouse can take his or her entitlement under family law equalization rules rather than under the terms of your will. You should seek financial planning and legal advice, as well as discussing the terms of your will with your spouse to come to a solution that meets legal requirements, and that you can both live with.

If your planning is integrated in your wills so much the better. For example, as part of your agreement you might leave certain assets in a spousal trust with a provision that upon the death of the last to die, the remaining assets pass to the children of the first to die. That’s just a sampling of things to sort out in all marriages but especially in second marriages. Your intent and the legal requirements need to mesh in mutual wills to get the desired outcome for their families of both spouses.


When children have a disability such as autism, ADHD or other neuro-cognitive or developmental syndromes, their disabilities may limit the child’s ability to own property or make valid legal decisions. Use of a family trusts may become a necessary choice to resolve ownership and income issues.

The disabled child may be on social assistance and and owning property or having significant income could trigger the forfeiture of assistance benefits according to the provincial laws of their province of residence. You need to consult with family and find out the best way you can contribute funds in your will for the benefit of the disabled child so it fits in with the planning of others in the family. Two very common choices for funds to provide for the needs of a child with disabilities are a Henson trust and a Registered Disability Savings Plan.

You will also need to appoint a guardian if you have a child with a disability.

Family Loans

Too often parents do not spell out the expectations of cash advances to children, whether they are gifts or loans, and whether they will be forgiven upon the death of the parent or deducted from the amount of the child’s inheritance. Put the terms down on paper, have a family meeting to explain what you are doing and why, and avoid resentment from other siblings about preferential treatment.

Family loans from the Mom and Dad bank to allow children to purchase a home are becoming far more common. It was recently reported that in British Columbia family financial assistance was provided in 42% of new home sales. These are big bucks so documentation is a must.


You may have retired, but your grandchildren are probably still in school or some of them are possibly going to university, community college or travelling the world. All of this takes money - most of it which they do not have. If you have the resources, you may want to consider contributing to a RESP or paying tuition while you are alive to enjoy the look on their faces when you do so. There isn’t even anything particularly wrong with helping them to finance a trip around the world if that is what they want to do. Maybe a motorcycle crosses the line.

Wills And Powers Of Attorney

Having current wills and powers of attorney would seem to be a no-brainer, but it is often overlooked. Some of my clients confess to the fact that these documents are out of date or might not even be valid after there has been a divorce and new marriage.

If you are in that boat, take some time to go see a lawyer and get this done. Make sure that beneficiary designations are consistent with your RRSP/RRIF plans and insurance policies. And make sure that you have considered that jointly owned property passes to the co-owner directly and not under the terms of your will. There are lots of traps so get some legal advice.

And think carefully about who should be your executors and attorneys under financial and health powers of attorney. Some of your kids may be better suited to make the decisions than others and should have the casting ballot in case of disagreement.

Spending In Retirement

The many aspects of financial planning in retirement are as unique as faces in a crowd. Do some deep thinking and then work with advisors who know their stuff.

In most cases spending patterns are already set before retirement and will not change much after, so don’t count on a big decrease in cost of living. In most cases that does not happen and any decrease will be modest – studies indicate about 5% on average.

While your spending remains much the same the day before and the day after you retire, that will change as you age and around age 80. At that age, you may experience higher personal care costs, higher costs for medication, attendant care or retirement home care, which can be very expensive. You can’t determine how long you will live or when added costs will kick in as you age so take that into consideration and have a budget reserve.

I wrote an article called Guaranteeing Retirement Income and it is on our website, under Financial Planning Alerts. Have a look because you may find it helpful. And if you want some further advice in areas of retirement other than financial planning, have a look at Donna McCaw’s book, It’s Your Time. It not only covers off financial issues but it also discusses health and wellness, leisure, relationship and transitions. It is a helpful read.

Good luck with your retirement. Use some of these available hours to get your retirement planning in order because you will be in a new paradigm!

J. E. Arbuckle,  J.E. Arbuckle Financial Services Inc.

30 Dupont St. E., Suite 205, Waterloo, Ontario

Phone: 519-884-7087 Fax: 519-884-7087