Author: Christy Bieber

There’s a lot to consider when preparing for retirement. Your savings and investments are often top of mind, but there are a few key dates that must be figured out as well — specifically, when to retire and when to start collecting Canada Pension Plan (CPP) benefits.

Let’s say, for example, that you and your spouse are nearing full retirement age and have $1.5M saved for your golden years. You’re thinking about retiring soon but you want to ensure that you and your partner are well prepared.

You’ve done some quick calculations: Together you have no debt, average health, no mortgage, annual expenses that total $28,000 and a combined CPP benefit that would provide you over $34,000, annually.

On paper, it looks like you and your spouse are doing quite well, but in order to assess whether you two are ready to retire, let’s get into the numbers.

Understanding your CPP benefits

Canadians can start collecting CPP benefits as early as 60, but anyone who does so will see a reduction in the size of their benefit cheques.

To avoid a reduction, Canadian seniors are encouraged to delay collecting CPP until at least 65, but there are advantages to delaying your claim even further. CPP benefits increase by a certain percentage for every month (0.7%) that you delay your claim — up to 8.4% per year or a maximum increase of 42% if you start collecting at 70 or thereafter. Just be mindful that 70 is the cut off age in order to reap the rewards of an increased CPP.

Since you and your spouse are nearing this golden age, the two of you won’t have to wait long to claim your full benefits — which, as you’ve already calculated, would give you $34K per year. With annual expenses totaling $28K, your benefits would barely be able to cover your living costs, but that could change.

But the good news is that you and your partner won’t have to rely solely on CPP in retirement. With $1.5M in savings, the two of you could settle on a safe withdrawal rate of, say, 3.7% — which would give you an additional $55,500 per year. Coupled with the $34K you’d receive in CPP benefits, that’s an annual income of roughly $89,500.

That’s much more than you would need to cover your $28K in annual expenses. In fact, with so much extra annual income, you and your partner may even consider a more conservative safe withdrawal rate of 2% — which would give you $30,000 per year from your savings.

Add that to your $34K in benefits and you’d have roughly $64K in annual income. That’s more than enough to handle your annual expenses, and a lower safe withdrawal rate will help you stretch your savings even further.

Supplementing your CPP benefits

Delaying CPP benefits until age 70 isn’t always an option for everyone. And while that may seem appealing to you and your partner right now, uncertain economic factors derail your plans quite quickly.

If you and your partner were to retire according to plan — $34K in CPP, coupled with a safe withdrawal rate from your savings — the two of you could retire comfortably. But inflation is likely to drive your annual expenses up in the coming years, and the yearly cost of living adjustment on your benefit cheques doesn’t always keep up with inflation.

The good news is, with CPP you are allowed to work as much as you want without your benefit being affected. This means that if you and your partner were to retire as planned, only to realize that your current income stream savings wasn’t enough to keep you afloat, you could always take on a part-time job without it affecting your benefits.

Since you have the freedom to earn as much money as you can without your benefits being affected, you may decide to claim CPP at 70 to give you some retirement income while also working part-time, earning extra income to supplement your benefits.

This could allow you to lean even less on your retirement savings, which means your savings can stretch a little further. And if you’re using less of your savings in retirement, that money can remain in your investments, allowing you to potentially add more to your retirement funds.

Ultimately, you and your partner will need to decide what works for you, but with a nest egg of $1.5M and $34K in CPP annually, you can likely retire quite comfortably.

Sources

1. Government of Canada: When to start your retirement pension

2. Government of Canada: Canada Pension Plan amounts and the Consumer price index

This article My partner and I have $1.5M in savings, no debt and nearing 70. We’re considering retiring and claiming CPP. Do we have enough to retire comfortably? originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Would you trust a company with your most personal data — your DNA — if it was on the brink of collapse? Millions of 23andMe customers are now facing that unsettling reality as the genetic testing company faces an uncertain future.

The California-based company offers DNA self-testing kits for users to explore their ancestry. It went public in 2021 with a $3.5 billion IPO but has faced significant challenges in recent years. In 2023, a major data breach compromised 6.9 million users’ information, leading to a financial settlement. Since then, the company has struggled, with all independent directors resigning in September and a 40% workforce reduction in November.

On March 23, 2024, 23andMe announced it was "entering a voluntary Chapter 11 restructuring and sale process." While the company assured users their data remained protected and operations would continue, concerns grew, especially after California Attorney General Rob Bonta urged customers to delete their information.

"California has robust privacy laws that allow consumers to take control and request that a company delete their genetic data,” Bonta said. “Given 23andMe’s reported financial distress, I remind Californians to consider invoking their rights and directing 23andMe to delete their data and destroy any samples of genetic material held by the company.”

Bonta isn’t the only attorney general to act. Officials from Arizona, South Carolina and New York have all urged consumers to delete their data, providing instructions to do so by logging in, navigating to the Settings section, choosing the 23andMe data option at the bottom of the page and opening the "Delete Data" section to click "Permanently Delete Data."

However, not all users have been able to successfully remove their information. Here’s what happened when they tried, along with details on the bankruptcy proceedings, their implications for consumers and steps to protect your data.

CEO steps down and stock plummets as 23andMe enters bankruptcy

Sunnyvale’s 23andMe reportedly has $214.7 million in debt compared with $277.4 million in assets. It filed for Chapter 11 bankruptcy in hopes of selling "substantially all of its assets."

Chapter 11 allows struggling businesses to restructure debts while continuing operations, with the goal of facilitating a sale. Board Chair Mark Jensen called bankruptcy "the best path forward," as it could reduce costs and resolve legal and leasehold liabilities. Despite this, the company’s stock lost nearly all its value, now trading below below $1 per share.

As the bankruptcy was announced, CEO and co-founder Anne Wojcicki also stepped down — but not for the reason assumed.

"I am supportive of the company and I intend to be a bidder," Wojcicki stated on social media. "I have resigned as CEO of the company so I can be in the best position to pursue the company as an independent bidder."

The company aims to continue operations, and if Wojcicki successfully acquires the business, it could emerge more financially stable post-restructuring. However, the bankruptcy has severely damaged trust, making recovery an uphill battle for any new owner.

How to protect your personal information

With 23andMe looking for a buyer, many consumers fear their private DNA data and other details will be sold, such as payment information, could be sold. Their concerns are rightly placed.

The company has stated that both it and any future owner must adhere to its privacy policy. However, it also acknowledged that in the event of "bankruptcy, merger, acquisition, reorganization or sale of assets, your personal information may be accessed, sold or transferred as part of that transaction." A new owner could also change the privacy policy going forward.

Sally, many consumers concerned about this issue went to the website to try to delete their data — but so many people tried to take this action at the same time that the computer system struggled to keep up, and consumers got error messages.

"This has been a nightmare," Pauline Long of Alabama told BBC. Long worried 23andMe would retain her data and attempted to delete it, but she had to wait two hours to speak with a customer service agent before successfully closing her account. She remains skeptical that her information was fully erased.

The company claimed the technical issues have been resolved, though users may need to provide additional verification before deletion requests are processed. It also noted "some limited information" would remain. Customers facing issues should contact 23andMe’s Customer Care via [email protected] for help.

If you are concerned about your DNA privacy, follow the deletion steps online, and if you encounter issues trying online first, and then reaching out via email if necessary. This is especially important because, while financial data breaches can be mitigated through measures like credit freezes, there is no comparable sageguard for genetic falling into the wrong hands.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Faced with the rising cost of living, many American retirees are looking to control one of the most fundamental expenses: housing.

Since the pandemic, the cost of housing has remained stubbornly high. According to a recent report, home affordability slipped further in January, as rising prices raised the income needed for a mortgage in 12 of 13 major markets.

Moving is not easy at the best of times, but for retirees, deciding whether to rent or own their home will have a long-term impact on their finances and their lifestyle. To help clarify whether renting or owning is your best option, retirement author and YouTube host Geoff Schmidt advises following what he calls the 5x5x5 rule.

About the 5x5x5 formula

The 5x5x5 rule is a way to gain clarity on your decision to move by breaking down the pros and cons of renting versus owning both short- and long-term. Most importantly, retirees need to consider where they’ll be — not just geographically speaking — 10 years down the road. Here’s a breakdown of each of ‘five’ in the 5x5x5 rule.

5 pros of ownership

The first step in deciding if you want to buy a new home as a retiree is to think about the five big perks of having your own property. For retirees, the pros of owning a home allow you to:

1. Build equity in your home: Each mortgage payment you make brings you closer to owning your house free and clear with no payments. If you can buy a new home or condo outright by selling your current home, you can still build equity in your new dwelling over time.
2. Predictability: If you have a fixed-rate mortgage, your mortgage payments will remain consistent for years and you don’t have to worry about a landlord ever making you move.
3. Tax benefits: While mortgage interest and property taxes are not tax-deductible on a principle residence, you could find tax deductions if you use a portion of your home for a home-based business or to rent out as short-term accommodation or to a long-term tenant.
4. Customization: You don’t need a landlord’s permission to alter and improve your home.
5. Home appreciation: Homes generally increase in value, so you can increase your net worth by owning a property.

5 pros of renting

Renting also has five significant upsides, particularly for retirees who want greater freedom to travel and to make bigger moves — potentially across the country or even abroad. These include:

1. Extreme flexibility: You can leave your property after giving notice and go wherever you want much more easily than with an illiquid home you’d have to sell first.
2. Lower upfront costs: You only have to pay first and last month’s rent and a security deposit to move into a rental, not make a large home down payment.
3. No maintenance concerns: If something breaks, your landlord is responsible for the cost of fixing it and the actual repairs. You don’t have to build up an emergency fund for maintenance.
4. Predictable expenses: For the duration of your lease, your monthly housing costs including utilities will remain consistent, even if the cost of energy goes up, for example.
5. Lack of worry: If you’re in a rental apartment, you won’t have to concern yourself with shovelling snow, mowing grass or other matters of general, external upkeep.

5 variables that help you make the decision whether to rent or buy

The last step in the 5x5x5 rule is to consider specific variables that affect you. These include:

• Financial stability: Considering your current and future Canada Pension Plan (CPP) benefits and retirement income, will renting be more affordable long term, or will owning be more beneficial?
• Lifestyle preferences: Think about quality of life and what matters to you. Maybe your biggest priority is to be close to family. Perhaps you want easy access to amenities like health care and recreation. Do you want more predictability or more flexibility? Which option — buying or renting — comes closest to matching your desires?
• Current and future health: Are you in a position to maintain your home and does it have aging-in-place options?
• Estate planning: Do you want to have a home to leave as an asset to your loved ones?
• Market conditions: Is it a good time to buy a property? What do you think will be happening in the real estate market in the next decade?

By asking yourself these detailed questions about your own personal financial goals and lifestyle preferences, it will be easier to decide whether to own or rent now and in the long term.

@plaacement()

This article Should Canadian retirees own or rent their home? Use this simple ‘5x5x5 rule’ to figure it out originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

McDonald’s is one of the most iconic American brands out there, and it’s done well through times of uncertainty — including during the COVID-19 pandemic, when it was easily able to pivot to delivery and takeout thanks to technology investments it’d been making for years.

That’s why it’s such a troubling sign that the brand has been performing poorly as of late.

"While we anticipated a challenging environment in 2024, our performance so far this year has fallen short of our expectations," CEO Chris Kempczinski said in the company’s third-quarter earnings call, reported TheStreet.

Kempczinski attributes the company’s poor performance, in part, to the fact that "consumers, especially those in the low-income category, were choosing to eat at home more often," and said that this is an industry-wide trend.

However, he also believes part of the problem may be that McDonald’s has "lost its way and ceded an important part of its brand identity to rivals."

Kempczinski’s warnings about McDonald’s are important because of what they say about the economy as a whole. But those who like to eat at McDonald’s should also consider what the statements suggest might happen to the cost of their favorite fast-food meal.

Poor performance at McDonald’s could be a sign of a troubled economy

The downturn at McDonald’s is important for everyone to pay attention to. The drop in sales — especially by people with lower incomes — could mean that people simply do not feel they have the money to eat out right now, even at inexpensive places like McDonald’s.

The data backs this up. A report by PYMNTS revealed that 98% of people who live paycheck to paycheck have changed their behavior to deal with rising prices at restaurants, including eating out less often or “trading down” to lower-cost items on the menu.

This probably isn’t a surprise to most people who have been coping with economic uncertainty in recent years.

In the aftermath of the pandemic, inflation surged to multidecade highs. Food and energy — two essential expenses you can’t escape — saw especially big price increases, and people are feeling the pain.

In fact, the Pew Research Center found that 63% of Americans described inflation as a "very big problem," in 2025, and one that affects their overall perceptions of the economy, with 45% of people saying the economy is only in fair shape and 31% describing it as being in poor shape.

Sadly, the consequences of struggling consumers extend beyond the impact on McDonald’s profits.

"Restaurants are a canary in the coal mine,” Michael Halen, a senior restaurant and food service analyst at Bloomberg Intelligence told Marketplace in 2024.

“Typically, you know, you see a slowdown in consumer discretionary spending in restaurants before you see it in other places.”

If there is a general slowdown in consumer spending, this raises the risk of a recession as reduced demand means companies tend to cut back, which in turn can increase unemployment and lead to further cuts — all of which impedes economic growth.

McDonald’s is focusing on value, so the price to you could soon fall

While McDonald’s problems may indicate a reason to worry about the economy as a whole, there is a little bit of good news. Kempczinski has said the fast-food chain is going to shift its focus back to providing the best value for customers so people will feel like eating there is within reach — even while overall economic conditions aren’t great.

"We have moved with urgency in partnership with our franchisees to improve our value offerings in most of our major markets," Kempczinski said.

Some examples he cited include discounted happy meals in France, three for 3 pounds meal deals in the UK, and coffee for a dollar in Canada.

"As we have said before, we view good value as including both entry-level items and meal bundles at affordable price points," Kempczinski explained.

This includes Every Day Affordable Price Menus that have "compelling entry-level price points" for things like breakfast, as well as on beef and chicken sandwiches for lunch and dinner.

McDonald’s is not the only fast-food chain looking to capture the limited consumer dollars people feel comfortable spending.

Wendy’s has introduced a $3 breakfast meal, while Jack in the Box plans to offer more value items as well.

“Value is going to be something we talk about for the rest of the year,” Jack in the Box CEO Darin Harris told investors in 2024, reported Restaurant Business, when a slowdown in fast-food consumption was starting to emerge.

“We know the competition is doing that. So we will be in the game.”

So, as McDonald’s focuses on showing people it’s still affordable during challenging economic times, more people may once again start stopping in to the Golden Arches for a good deal — even if economic conditions as a whole have them feeling like they don’t have quite enough.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Saving for retirement throughout your career is important, but it doesn’t always happen for everyone — especially if you’ve been through some challenges in your life, like a divorce.

If you’re 57 and working full-time making $170K, you’re earning more than most people in your position. According to Statistics Canada the median annual income was roughly $41,100 for women ages 55 to 64, in 2002. That’s the good news.

The not-so-good news is that only $60K in a Registered Retirement Savings Plan (RRSP), means you’re behind on retirement savings. Most savers would have have about seven times their annual income in savings, at this point, according to Fidelity. For you, that would mean a nest egg of approximately $1.19 million.

Given your circumstances, however, it’s not surprising that you’re falling short in your retirement saving goals. If you have three kids (two of whom plan to live with you) and you help your mom out, plus the other bills you’re paying down monthly, this puts you in a tough position, financially.

If you’ve found yourself in a similar situation, there’s hope. You can catch up on your retirement savings if you’re willing to make a few financial adjustments.

Do the math on tapping into your home equity

If you’re fortunate, you may own your own home and, in a major city like Toronto or Vancouver, chances are the home is worth $1 million or more. In the current market, it’ possible that your still paying down a mortgage. Let’s assume the remaining mortgage is $600,000 mortgage at 3.25%, and your home is worth $1.5 million. While the debt may feel overwhelming, the good news is you own a pretty valuable asset that could potentially help you boost your savings.

However, it all depends on just how much you can downsize given your family’s needs.

The first big thing to decide is whether or not you can immediately downsize your house.

If you could sell a $1.5 million home and use the proceeds to pay off a $600K mortgage, you’d end up with around $900K not including fees and expenses.

Now, you probably don’t want to invest that entire amount, although doing so could go a long way toward getting you caught up. That’s because mortgage rates are much higher now compared to the 3.25% that you’re currently paying.

If you invested the proceeds from your home and borrowed to buy another property, you may not drop your payment much at all. However, you could pay cash for a home, as the average Canadian home value, as of January 2025, is $670,064 according to WOWA. If you bought a home of this value, you could invest around $200K once you account for transaction fees.

Having $260K invested at 57 puts you in a much better place. In the best case scenario, your investments could grow 10% annually on average over the next 10 years, leaving you with $553,220.78 to live on — even if you never contributed another dollar.

At a safe 3.7% withdrawal rate, that would produce around $53,742 to live on each year.

While downsizing your home may not be something you want to do, it could be the simplest and fastest way to get out of your retirement troubles.

Maximize contributions to your retirement plans

Maxing out your contributions to retirement plans could also help you get back on track, especially if you feel you can’t sell the house due to your family’s needs.

At a $170K annual income, you may be able to contribute the max to your RRSP if you watch your budget carefully. That’s $32,490 in 2025 and an additional $2,000 without penalty.

If you invest that much every year for the next decade, on top of the $60K you’re starting with, you could have $924,900 by the time you hit retirement age.

While that’s not much more than if you sold your home, it would still provide around $25,900 in retirement funds to supplement your RRSP. You’d have to cut spending and probably downsize your home anyway at this point to afford to live on that income, but you may be able to make it work.

Delay your retirement start date

Delaying retirement is another option to help you catch up and it could benefit you in a few different ways.

If you waited until 70 to retire, you could have an extra three years to invest and grow your wealth. You could also qualify for delayed retirement credits that increase your Canada Pension Plan checks by $315 per month, to $1775, compared to your standard benefit and could rely on your savings for less time.

Ultimately, you’ll have to decide if you want to cash in on home equity, aggressively invest in your RRSP, delay retirement or choose some combination of all three techniques. The good news is that you do have options and your retirement isn’t doomed — you just need to decide on a path forward.

Speaking with a financial advisor could ultimately be your best bet in making this choice, as your advisor could help you determine which approach makes the most sense given your income, family needs and retirement goals.

Sources

1. Statistics Canada: Income of individuals by age group, sex and income source, Canada, provinces and selected census metropolitan areas (Apr 26, 2024)

2. Fidelity: How much do Canadians need to save per year for retirement?

3. WOWA: Canadian Housing Market Report

This article [I’m 57, divorced and make $170K/year, but only have $60K in an RRSP. I help my mom and kids financially, and don’t feel like I’ll ever be able to retire. Is there any hope?(https://money.ca/retirement/reaching-retirement-with-60k-in-rrsp-and-making-170k-yearly) originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Making the decision to retire is a big deal, and signifies a major lifestyle change is coming. Let’s say you’re just four months away from your planned retirement, odds are you’ve been gearing up for this next stage and getting everything in order to enjoy your life of leisure for a while now.

You’ve got a decent nest egg and you’re ready to really hone your golf game. What happens, though, if a perfect job comes along in this situation?

Let’s say you’re offered a position that’s five minutes from your house, with good benefits, no workplace drama or stress and a good friend who works at the same company and says it’s great.

Oh, and let’s say that the job provides just half of your current pay — but the pay is pretty close to what your retirement income would be.

Should you stick with your plan for retiring in this situation or should you take the lower-paying job that allows you to get out of your current work environment sooner, keep insurance coverage for you and your spouse and delay collecting your retirement benefits to make your money last longer?

Here’s what you should consider as you make this decision.

How will taking the new job impact your retirement savings?

When you take a big pay cut, obviously you’re not going to be able to save as much for retirement as you would at your current job. However, with only four months left to go until you stop working, chances are good that you weren’t going to be adding much to your nest egg anyway.

In fact, by delaying when you start drawing from your retirement accounts, you can end up in a much better place financially.

Your money can stay invested and keep benefitting from compound growth instead of you beginning to make costly withdrawals. You can also delay claiming CPP and keep increasing your monthly benefit until as late as 70 years old, which could more than double. Instead of receiving $800 per month at 60, you will receive $1,775 at 70. That’s a big increase, on top of the fact you’ll also be growing your invested funds.

How much income do you need to live on?

You’ll also need to consider how much income you need to live the lifestyle you’d like to live in retirement. While your new job may provide an income similar to what you’ll earn in retirement, continuing to work rather than being at home can come with added costs.

You may have more commuting expenses, for example, although that should be negligible with the office just five minutes from your house. However, you may also be more likely to buy lunch at work or need costlier work clothing, which can mean you need a little more money.

At the same time, keep in mind that working longer will likely increase the income you eventually have as a retiree. If you have more of a cushion to live on in your later years because you take this new job, you may be better off — especially given uncertainty around the nation’s economic prospects in the near future.

Would retirement make you happier than working?

Your happiness matters when it comes to retirement decisions. If you have been looking forward to retirement and don’t want to spend more years working, then you should likely not put off quitting even if the perfect job comes along. Especially if you already have enough money to retire.

And with 30% of retirees being at risk of becoming socially isolated, it may be prudent to take a new job if it will help you maintain social connections. You can always work on your golf game on the weekends.

You should carefully consider all of these issues as you decide what’s right for you. An unexpected change in circumstances can be shocking when you had plans in place, but it may just end up being a blessing that makes your future retirement a much more enjoyable one.

Sources

1. Government of Canada: Deciding when to start your public pensions

This article I’m 63 years old, have $800K in savings and I was all set to retire in four months — but now I’ve just got a fantastic new job offer. Should I take it or stick to my plan? originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

Faced with the rising cost of living, many American retirees are looking to control one of the most fundamental expenses: housing.

Since the pandemic, the cost of housing has remained stubbornly high. According to a recent report, home affordability slipped further in January, as rising prices raised the income needed for a mortgage in 12 of 13 major markets.

Moving is not easy at the best of times, but for retirees, deciding whether to rent or own their home will have a long-term impact on their finances and their lifestyle. To help clarify whether renting or owning is your best option, retirement author and YouTube host Geoff Schmidt advises following what he calls the 5x5x5 rule.

About the 5x5x5 formula

The 5x5x5 rule is a way to gain clarity on your decision to move by breaking down the pros and cons of renting versus owning both short- and long-term. Most importantly, retirees need to consider where they’ll be — not just geographically speaking — 10 years down the road. Here’s a breakdown of each of ‘five’ in the 5x5x5 rule.

5 pros of ownership

The first step in deciding if you want to buy a new home as a retiree is to think about the five big perks of having your own property. For retirees, the pros of owning a home allow you to:

1. Build equity in your home: Each mortgage payment you make brings you closer to owning your house free and clear with no payments. If you can buy a new home or condo outright by selling your current home, you can still build equity in your new dwelling over time.
2. Predictability: If you have a fixed-rate mortgage, your mortgage payments will remain consistent for years and you don’t have to worry about a landlord ever making you move.
3. Tax benefits: While mortgage interest and property taxes are not tax-deductible on a principle residence, you could find tax deductions if you use a portion of your home for a home-based business or to rent out as short-term accommodation or to a long-term tenant.
4. Customization: You don’t need a landlord’s permission to alter and improve your home.
5. Home appreciation: Homes generally increase in value, so you can increase your net worth by owning a property.

5 pros of renting

Renting also has five significant upsides, particularly for retirees who want greater freedom to travel and to make bigger moves — potentially across the country or even abroad. These include:

1. Extreme flexibility: You can leave your property after giving notice and go wherever you want much more easily than with an illiquid home you’d have to sell first.
2. Lower upfront costs: You only have to pay first and last month’s rent and a security deposit to move into a rental, not make a large home down payment.
3. No maintenance concerns: If something breaks, your landlord is responsible for the cost of fixing it and the actual repairs. You don’t have to build up an emergency fund for maintenance.
4. Predictable expenses: For the duration of your lease, your monthly housing costs including utilities will remain consistent, even if the cost of energy goes up, for example.
5. Lack of worry: If you’re in a rental apartment, you won’t have to concern yourself with shovelling snow, mowing grass or other matters of general, external upkeep.

5 variables that help you make the decision whether to rent or buy

The last step in the 5x5x5 rule is to consider specific variables that affect you. These include:

• Financial stability: Considering your current and future Canada Pension Plan (CPP) benefits and retirement income, will renting be more affordable long term, or will owning be more beneficial?
• Lifestyle preferences: Think about quality of life and what matters to you. Maybe your biggest priority is to be close to family. Perhaps you want easy access to amenities like health care and recreation. Do you want more predictability or more flexibility? Which option — buying or renting — comes closest to matching your desires?
• Current and future health: Are you in a position to maintain your home and does it have aging-in-place options?
• Estate planning: Do you want to have a home to leave as an asset to your loved ones?
• Market conditions: Is it a good time to buy a property? What do you think will be happening in the real estate market in the next decade?

By asking yourself these detailed questions about your own personal financial goals and lifestyle preferences, it will be easier to decide whether to own or rent now and in the long term.

@plaacement()

This article Should Canadian retirees own or rent their home? Use this simple ‘5x5x5 rule’ to figure it out originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

When picturing the traditional idea of retirement, you may think of a lucky person blowing out the candles on a cake, getting a gold watch as a parting gift and heading off to the golf course.

Although, for many, that’s not what retirement looks like — it’s also not what a growing number of future retirees prefer.

Vanguard recently published an article titled "Retirement is changing – Are you prepared?" which addresses how people are changing their mindset about retirement.

While it was written by one of the company’s European executives and is based on a survey of British savers and investors aged 50 to 70, many Canadian retirees will be able to relate.

So, what is the big change Vanguard is talking about? Retirees no longer want to quit working cold turkey. They want to retire gradually for a mix of financial and social reasons.

Unfortunately, while this may be the dream for many, it’s not always the reality.

According to a study from Manulife, 47% of Canadian retirees ended their careers earlier than they had planned. Future workers must be prepared in case it turns out their ideal vision for retirement ends up being just an illusion.

Workers hope retirement will be a more gradual process

The Vanguard report revealed how a majority of future retirees are not interested in just completely stopping work on a set date, with only 24% intending to adopt the cliff-edge view of retirement, working one day and then being retired the next.

Instead, most professionals either plan to scale back hours slowly at their existing job (27%), "mostly" stop work on a set date (21%), or switch to a different job (14%). The reasons cited include: not feeling ready to completely retire, to top up their income and social reasons.

This finding is very similar to that reported by the Government of Canada’s Survey of Older Workers, which said that 47% of retirees would work part time during retirement if they’re able to.

These plans for part-time work mean that life could look very different for tomorrow’s seniors — but it’s also worth noting that making your financial plans based around this dream could lead to problems.

Retirees must be prepared in case a phased-in retirement isn’t the reality

Vanguard has an important warning for those who plan to retire gradually — it’s not always going to happen.

It found that of those who had already retired, only 38% retired gradually, much lower than the 62% of non-retired people who plan to retire gradually. According to the Labour Force Survey of 2023, a record high 15% of adults aged 65 and older in Canada participated in the labour market.

This makes it very important to prepare for the reality that you may not be able to retire gradually as planned and be mindful of the following:

• Saving enough money to support yourself by the traditional retirement age of 62 even if you hope to retire later
• Considering your health status and job skills when deciding whether a phased-in retirement is likely to be possible
• Focusing on finding an "age-friendly" employer who has plenty of older workers on staff and who appears to value experience as much as youth
• Taking good care of your health with exercise and regular preventative care to maximize the chances you’ll be healthy enough to phase into retirement gradually
• Setting realistic expectations for your retirement, which likely means working until 70 is probably not in the cards

Retirement doesn’t have to look like it once did — you can try to set yourself up for the gradual retirement so many dream of but find a way to pivot if those plans do not come into fruition as you may have hoped for.

Sources

1. Vangard: Retirement is changing – Are you prepared? By James Norton (July 1, 2024)

2. Manulife: Manulife Retirement Report Highlights Generational Preparedness and Financial Resilience as Longevity Increases (Oct 22, 2024)

3. Government of Canada: Age-friendly workplaces: Promoting older worker participation

4. The Vanier Insitute of the Family: More older adults are working 25 for pay and retiring later

This article What are the income tax brackets for the 2024 tax year?originally appeared on Money.ca

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

If you have $850,000 saved and are planning to retire at 63, you need to think carefully about whether you have enough money to cover all of your expenses.

When you run the numbers, you may decide that it makes sense to do some consulting work if it’s available to you — especially if you can bring in that income to delay claiming the Canada Pension Plan (CPP) and increase your future monthly benefits.

If you opt to work part-time, you definitely won’t be alone in doing so. Data from Statistics Canada found that of all Canadian-born and immigrant seniors aged 65 to 74, most than 1 in 5 (21%) were employed in 2022. Furthermore, 9% reported working by necessity and 12% reported working by choice. Those working by necessity represented 351,000 individuals that year.

For the 63-year-old the question remains will $850,000 be enough, or will they join the ranks of the un-retired?

Can you survive on an $850,000 nest egg?

There’s no question that $850,000 is a good amount of money and more than what many people have saved. As of 2023, a Statistics Canada report revealed that the median balance in defined contribution plans such as a Registered Retirement Savings Plan (RRSP) for Canadians between the ages of 55 and 64, was $266,000.

For the near-retiree with $850,000 this sounds like great news. Unfortunately, while you have a pretty substantial amount saved, it’s not going to produce as much income as you might think. To make it last, this means you’ll need to limit the amount you take out of your account each year using a safe withdrawal rate.

Using a safe withdrawal rate to protect your retirement nest egg

A popular rule of thumb suggests withdrawing 4% from your balanced portfolio in the first year of retirement and adjusting for inflation each year thereafter. Doing this means there’s a high likelihood that your nest egg will last 20 or 30 years.

Keep in mind that some analysts are suggesting a slight adjustment to the safe withdrawal rate. For instance, Morningstar analysts now recommend a 3.7% withdrawal rate to ensure your money lasts.

On a retirement portfolio of $850,000 this means an annual income of approximately $31,450.

Even if you add CPP benefits to this, that’s probably not enough for you to live comfortably on, which probably means that doing some consulting work could help supplement your retirement income.

Your consulting paycheque would also allow you to draw less from savings and, depending on how much you work and how much you are paid, perhaps even keep growing your nest egg for a while instead of starting to deplete it.

Consulting could help you delay your CPP

There’s another benefit to consulting as well. If you can earn enough to delay claiming your CPP benefits, you will increase the amount of your monthly payments in the future.

While you become eligible for CPP at 60, that’s before your full retirement age (FRA). FRA is 65 for anyone born in 1960 or later.

As a result, If you start to collect CPP before age 65, payments will decrease by 0.6% each month — or by 7.2% per year — up to a maximum reduction of 36% if you start at age 60. This will give you a lot less money to live on.

However, if you wait until after 65 to claim your CPP, payments will increase by 0.7% each month — or by 8.4% per year — up to a maximum increase of 42% if you start at age 70 or later.

Consulting allows you to put off your benefits claim, and increase future CPP payments.

Ultimately, consulting can be a great way to ease into retirement, keep your skills sharp, preserve your savings and grow your retirement income. If you can find good consulting opportunities that pay you a fair rate, you should strongly consider taking them — especially with only $850K saved.

The effort you put into consulting now can make a big impact on your future financial security, and you’ll be very happy you did the work while you could.

Sources

1. Statistics Canada: Employment by choice and necessity among Canadian-born and immigrant seniors, by René Morissette and Feng Hou (Apr 24, 2024)

2. Statistics Canada: Assets and debts held by economic family type, by age group, Canada, provinces and selected census metropolitan areas, Survey of Financial Security (Oct 29, 2024)

This article I’m 63 and plan to retire in 6 months — but I only have $850,000 saved. Is that enough for a comfy income or do I need to consider part-time consulting work?

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

The common lore amongst most financial professionals, as well as everyday folks, is that being in debt is always bad, right? Ken McElroy and Robert Kiyosaki don’t think so.

McElroy, a real estate entrepreneur, and Kiyosaki, a businessman and best-selling author of Rich Dad, Poor Dad, recently made a YouTube video from the comfort of McElroy’s private jet, explaining that they collectively owe $2 billion in debt — and that they’re actually pretty happy about that.

While owing so much might have many people in a panic, these two wealthy individuals have a completely different take on what debt can do for you — here’s what they have to say.

How owing money can help you grow rich

McElroy and Kiyosaki aren’t afraid of debt for a simple reason. It’s helped them to grow rich.

"Our job as entrepreneurs and capitalists is to figure out how do we use debt and create assets that other people reach into their pockets and give [money] to us for?" Kiyosaki says in the video.

The duo explains that when people deposit money and banks pay interest on it, that becomes a liability for the bank. The only way the system works is for the banks to turn around and lend the money to others.

Those who lend this money and use it wisely help balance banks’ books. They can often score tax breaks that help turn that borrowed money into an asset that grows their own wealth.

The key is to do it right and take on debt for the right reasons. "Good debt makes you rich. Bad debt makes you poor," according to Kiyosaki.

Good debt vs. bad debt?

Of course, not all debt is going to help you improve your financial situation. "’Live debt-free’ is good advice if you don’t know how to use debt to get rich. 90% of people use debt to get poor," Kyosaki says.

The key to using debt to get rich is to avoid using debt to buy assets that depreciate over time. Instead, you should find an asset that will appreciate (or go up in value) and, ideally, that people will pay you for.

One way to do that is to look at what banks will use as collateral. If the bank is willing to make the loan not based on your personal guarantee but based on the value of the asset itself, that’s a good sign that the debt is subsidizing a good investment.

In the video, McElroy gives a few examples:

• Buying real estate with a loan and having tenants pay off the debt for you through rental payments while you benefit from property appreciation.
• Starting your own business.
• Financing a $10-million jet with an $8-million loan and claiming a $10-million tax break, as McElroy did under rules introduced in 2017 allowing companies to write off the full value of eligible assets (like planes) in the year of the purchase.

When you can find these or other assets that are going to grow your wealth over time, the duo explain, borrowing just makes good sense. In fact, they even go so far as to argue that a willingness to use debt wisely can make all the difference in whether you end up rich or not.

Poor people "always say ‘I can’t afford it,’ rather than ‘How can I afford it?’" according to Kiyosaki.

If you want to start borrowing on your path to becoming wealthy, you should first consider if you have the right temperament. Both McElroy and Kiyosaki warn that jumping into borrowing is a bad idea if you aren’t willing to develop the specialized knowledge needed to understand when and how debt can be used as a tool to grow your wealth.

If you study and learn, though, then there’s no reason not to leverage debt with the ultimate goal of acquiring assets that make you rich. If you do, you just may end up with a private jet of your own some day.

Sources

1. YouTube: We are $2 Billion in Debt, Here’s What Banks Don’t Want You Know about Money (June 6, 2024)

This article ‘Good debt makes you rich’: Ken McElroy and Robert Kiyosaki are sitting on a combined $2 billion in debt — but they’re not worried. Here’s how borrowing can supercharge your wealth

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.