[Webinar. A retirement less ordinary—plan to live the life  you love. With Jamie Golombek and Lana Robinson. November 15. 1:00 pm to 2:00 pm ET. This event will begin shortly. The CIBC logo is a registered trademark of CIBC. CIBC logo]

>> Peter Campbell: Good morning, or afternoon, to everyone, depending on where you are in the country and are connecting from. Thank you for taking the time to join us today for an important conversation on the topic of retirement planning.

On behalf of CIBC, I'd like to welcome you to this webinar. My name is Peter Campbell, and I will be your host for this event. Now, a few things to note before we get started.

[Disclaimer. The information presented here is for educational an informational purposes only. The inclusion of any specific securities detailed is for illustrative purposes only. No information contained in this presentation is intended to constitute a recommendation by CIBC Investor’s Edge to buy, sell, or hold any stock, option, or securities. The CIBC logo is a registered trademark of CIBC. CIBC logo]

CIBC Investor Services Inc. does not provide investment or tax advice or recommendations. So, everything we share with you today is for education purposes only. We are recording today's session and a link will be emailed to any that registered online.

[Illustration of a laptop showing “Full Screen Control” on the left side and “Q & A Window” on the right side]

To view this webinar in full screen, please click on the expander arrows located on the top right-hand corner of your screen. And, if you have any questions during the presentation, please kindly take a note, and you'll have the opportunity to submit your question after the presentation.

[Photo of Jamie Golombek. Jamie Golombek. As Managing Director, Tax & Estate Planning, with CIBC Financial Planning & Advice, Jamie works closely with CIBC advisors to support their clients and deliver integrated financial planning]

Whether you're preparing for or are already living in retirement, our webinar presentation will take you through important topics and key strategies that span the 3 stages of retirement planning. So, to present this today, we are very excited to have Jamie Golombek and Lana Robinson here to share their expertise in the subject matter.

Jamie is CIBC’s Managing Director of Tax and Estate Planning…

[sneeze from someone in the room where the audio is being recorded]

… and works closely with advisers from across CIBC to support their clients and deliver integrated financial planning and advisory solutions. He is quoted frequently in national media as an expert on taxation, writes a weekly column called “Tax Expert” in the National Post, has appeared as a guest on CNN, CTV News and The National, and has been a regular personal finance guest on The Marilyn Denis Show.

And Lana is Executive Director, Wealth Strategies with CIBC Financial Planning and Advice.

[Photo of Lana Robinson. Lana Robinson. As Executive Director, Wealth Strategies, at CIBC Financial Planning & Advice, Lana helps affluent CIBC clients achieve their financial goals with an emphasis on inter-generational wealth planning]

Lana delivers financial planning and specialized advisory solutions to meet unique needs of CIBC clients and their families in the areas of estate planning, business transition planning, tax optimization, protection planning and philanthropy.

With great pleasure, please join me in welcoming Jamie and Lana for today's presentation.

[Adobe Presenter loading screen]

[Webinar. A retirement less ordinary—plan to live the life you love. With Jamie Golombek and Lana Robinson. November 15. 1:00 pm to 2:00 pm ET]

[2: 57] >> Lana Robinson:Okay, great. Thank you, Peter. And welcome, everyone. So we are here today to celebrate retirement and the good news is, in a recent report, retirees between the ages of 65 and 74 reporting having more fun than any other age group surveyed. And virtually all of them reported enjoying the freedom of a less structured life. They're choosing to live the life they love, but this also means that we need to plan differently and that plan needs to be tailored to what you want your life to look like.

[Agenda. Photo of an older couple wearing backpacks and gazing across the landscape. 1. Setting the stage. A photo of an older couple sharing a pair of binoculars. 2. Taking the leap. A photo of a family with 2 grandparents, their children and their granddaughter. 3. Living the dream]

So let's jump into it. We've got 3 topics that we wanna cover today that span the 3 stages of retirement planning. First, we're gonna set the stage. So you're not yet in retirement. What are some of the things that you need to think about and actions that you can take today? Then we're gonna talk about taking the leap into retirement. What should we be thinking about as we transition into those retirement years? And then once you're there, living the dream. What are some things that you can do to help make sure those years are happy, fun and stress-free? We'll end the presentation with a question-and-answer session where you can ask any questions you may have.

[Photo of an older couple wearing backpacks and gazing across the landscape. Setting the stage]

So, setting the stage. You're thinking about retirement and you still have time to make an impact on your plan. We'll discuss common questions and actions you can take now to be prepared for taking the leap.

[What actions should I be taking today to plan for my retirement?]

[Slide 4. Envision your life in retirement

  • What is my retirement vision?
  • When do I want to retire?
  • How much do I need to achieve that particular goal?

Photo of a hot air balloon. Travel. Photo of hands holding a heart. Philanthropy. Photo of paint brushes. New passions/opportunities. Photo of 2 grandparents with their 2 grandchildren. Family]

So what is your vision for yourselves, for your family and potentially for your community? Take time to consider what do you actually want to do when you retire. Will you travel? Will you work, full-time, part-time? Will you volunteer? What hobbies and interests will you pursue? Will you spend more time with family? Maybe live at the cottage? When do you want to take the leap? So once you've an idea of what your retirement will look like and when you'll be taking the leap, we can start working with you on the numbers.

So, Jamie, how do I know if I'm financially prepared to retire?

[Am I financially prepared to retire? How do I know?]

[4:50] >> Jamie Golombek: Oh, thanks, Lana. 

[Lana laughs]

And thanks everyone for joining us today. That's a great question. It's the number 1 question, uh, that people will ask us when it comes time to retirement planning.

[Slide 6. Map out your retirement income and expenses

  • Your expenses in retirement depends on the lifestyle you want to lead
  • Map out your income sources and expenses now vs. in retirement

If there is a gap:

1. Manage expectations for the future

2. Reduce spending today and accelerate your savings

3. Revisit your investment strategy]

Um, what I say is, start it off with really taking the time to map out, uh, your retirement income and expenses. Because at the end of the day, the amount that you will be spending in retirement will determine, ah, the lifestyle that you want to have in retirement. So you're gonna look at your different sources of the income and your different expenses, both now and in retirement. And, ultimately, if there's a gap, that's where there’s 3 things that you could actually do. The first is managing expectations. The second is reducing spending today to accelerate those savings. And the third is revisiting your investment strategy.

[5:38] [Slide 7. 1. Manage expectations for the future. Photo of an older woman with a backpack sitting on a rock overlooking a fjord. Have a plan. Clearly define your retirement goals by making them:

  • Specific
  • Measurable]

So, let's talk about the first one. Managing expectations for the future.

We always say have a plan. Number 1 thing you should do, have a financial plan. But that financial plan shouldn't be this sort of… uh, sort of something off of the top of your head. It should be a real, concrete and written financial plan that defines your goals. They wanna be specific and they wanna be measurable. “I wanna retire at this specific age, and to be able to have the type of retirement I want and the type of spending I want and the cash flow, I need to have this much money saved up by that point in time, with certain assumptions about rates of return and how we're gonna get there.”

[Slide 8. 2. Reduce spending today and accelerate your savings. 

Reduce your spending today. 

  • Review monthly bills. Look for ways to cut expenses
  • Create a budget to uncover discretionary spending habits

Increase your savings for tomorrow

  • Accelerate your savings through a regular investment plan
  • Redirect extra income into savings
  • Maximize RRSP/TFSA contributions

How to save when dealing with competing priorities?

  • Compare the interest rates on debt vs savings and see where you get a better rate of return
  • Consolidate debt at a better rate]

The second thing you can do is, if you are realizing that you may have a gap because you may not reach that retirement goal or you may not have that dollars in place by the right point of time, uh, what you can do, of course, is reduce your spending. And we say this to clients all the time, look at your monthly bills. Look at the things that you can do to save money today. Most importantly, have a budget. A budget is good for any age. It's good, ah, while you're working, it's good when you're a student, it's also good pre-retirement. And look at ways that you can sort of cut back on those spending. But, more importantly, increase your savings. In other words, are there things that you could be doing to accelerate those savings for retirement through automatic regular investment plan? Um, extra income that you might make, put that into savings. And, of course, taking advantage of all the tax planning opportunities that we often talk to you about. We talk about maximizing things like RRSPs, uh, Tax-Free Savings Accounts. You know, all of these are certainly opportunities to, you know, get some kind of tax advantages while you're saving towards retirement.

Now, people certainly have competing priorities, ah, when it comes to, you know, dealing with savings. And, of course, it's important to look at rates. Ah, look at rates on versus savings versus debt. People ask us all the time, should I pay down my mortgage or should I save for retirement? And, again, it often comes down to the rate. Ah, mortgage rates typically, depending on, you know, where you’re getting your mortgage from, can be below 3%, depending on the term. And if you're investing over the long term in a balanced portfolio, maybe you're getting a higher rate that, maybe it's 5, maybe it's 6%. In most cases that we've seen, and we've done modeling on this, maybe it makes sense that, if you've got very low-rate debt, to not overly aggressively pay that right down if it means that you're not gonna save anything for retirement by taking advantage of the RRSP or, for example, the TFSA, as well.

[Slide 9. 3. Revisit your investment strategy: Determine the right investment mix.

Allocating your assets among cash, fixed income and equities is important based on your investment goals.
 

Asset allocation Cash and cash equivalents Fixed income Equities
Pros
  • Most liquid
  • Low risk

  • Higher return potential
  • Low to medium risk
  • More favourable tax treatment
  • Highest return potential
  • Most favourable tax treatment
Cons
  • Lower return potential
  • Least favourable tax treatment
  • Less liquidity
  • Higher risk
Example
  • Money market instruments
  • Bonds
  • Stocks

Chart showing potential investment risk by preferred investment return. Cash is rated lowest. Fixed income is in the middle. Equities is rated highest.]

Now, a third thing you could do, of course, is revisit your investment strategy. Determine whether you have the right investment mix. And that, of course, is the classic question of asset allocation. Ah, we go from things like cash, which are very, you know, low-risk, very liquid. The problem is, of course, low returns and a low-interest-rate environment right now. And as well, um… you know, you have a very, very high tax rate relative to other types of investment income when it comes to interest on cash and cash equivalents.

Now, with fixed income, things like bonds and, and GICs, and things like that, a little bit higher risk, a higher return potential, but you’ll have some less liquidity on there, in terms of being able to cash it out right away.

And, of course, uh, what with even more higher risk, but higher potential returns, are, of course, equities. And here we're thinking about stocks, we're thinking about mutual funds and more sophisticated products. Um, the nice thing here is they have the highest return potential, um, and the other thing is that you have the most favourable tax treatment. So, for example, if you buy some stocks or funds and you later sell them at a capital gain, we know that in Canada right now, uh, 50% of that capital gain is taxable at your marginal tax rate. In addition, if you invest in Canadian equities or a Canadian fund that produces dividend income, Canadian dividend income is taxed also very favourably, not as favorably as a capital gain, but it's taxed favourably because of the dividend tax credit.

So when you're looking at your investment strategy, obviously you wanna take taxes into account, but at the end of the day, if you have to make a higher rate of return to accomplish your retirement goals by a certain age, you may need to take a little bit more risk rather than earning everything simply in cash or fixed income.

[10:12] [What are some key retirement considerations for business owners?]

So, Lana, I'm gonna turn it over to you. What are some of the key retirement considerations if you are a business owner specifically?

>> Lana Robinson: Sure, thanks, Jamie. So just like retirement planning, it's best to begin preparing for the transition of your business early and to review your plan often. We would recommend starting to plan at least 5 years out from succession, as it may take some time to prepare your successor and your business for transition. Here are some questions to ask yourself as you work through your planning. Would I prefer to keep the business in the family? Do my children want to work in the business? And, if not, do I have a strong management team that can take over as I start to step back from day-to-day involvement? Here are some quest—, uh, so, here are some options to consider if your preference, ahem, is to keep the business.

[Slide 11. Understand your options.

Ask yourself: What will happen to my business once I retire?

  • Should I transfer the business to family?
  • Do my children even want to work in the business?
  • Do I have a strong management team that can take over?

Keep

1. Groom a successor

2. Owner-investor option

3. Hybrid approach

Sell

1. Sell to management

2. Sell 100% to a strategic buyer

3. Sell a stake to a private equity firm]

So, grooming a successor. This involves choosing someone to be, uh, ahem, to be the business’s future owner and operator. Identifying individuals who wanna be included in the business and are a good fit to run it requires a great deal of consideration.

The owner-investor option. Without a suitable successor to take over the business, you may choose to hire an experienced team to run, to run it going forward, again, as you start to step back.

And then there's the hybrid approach. In this option, you may transfer ownership to your family, where some of your family members simply hold the shares and others are actually involved in the day-to-day running of the business. This approach requires careful planning and compromise to help reduce the chance of family conflict.

And, ultimately, you may decide to sell all or a portion of your business. So, selling to management involves seeking shareholders or key people in your organization as successors. You might choose to sell 100% to a strategic buyer or you might choose to sell a stake to a private equity firm. Selling a percentage of your ownership to a private equity firm allows you to realize a portion of the value while decreasing some of your risk and still have the opportunity to participate in the business’s upside.

So, Jamie, what are some tax considerations that business owners should be thinking about?

>> Jamie Golombek: Well, it's a good question and, boy, we probably should have a whole other seminar just on that. Let me just spend a minute on that. So, obviously, if you're a business owner, you wanna be thinking about some of the tax planning you could be doing, but don't think about it the day before you get an offer for your business. It's something you wanna be thinking about, uh, days, months and, I would just suggest, even years ahead. You know, basic stuff like the lifetime capital gains exemption. If your business qualifies, you've qualified from all business corporation shares. You can get $850,000 or so tax-free capital gain on the sale of qualifying shares. That's for you and for each family member that might own shares of the business. There could be an opportunity to do some kind of reorganization before the sale of a business to be able to maximize, and even multiply, the lifetime gains exemption.

Another common strategy that we've seen over the last number of years, of course, is the estate freeze, where you freeze the value of the business and you issue new common shares either to the kids or to management or to a trust and ultimately pass on future ownership, ah, uh, to a future generation or to new owners, while retaining control through preferred voting shares. And that can also be, uh, strategic from a tax perspective, because what you're eventually doing is, you're freezing the value of the company today, crystallizing your tax bill, of course, paying the tax later, perhaps through redemption of shares, and ultimately having any increase in value after that being taxed in the hands of the next, uh, next generation.

>> Lana Robinson: Thanks, Jamie.

[13:43] [Photo of an older couple sharing a pair of binoculars. Taking the leap]

Now we're gonna move into taking the leap. So you've made the decision, you've actually retired and you're now transitioning into living off retirement income. There's much to think about now that you've actually done it. So we'll discuss some common questions and actions you can take as you enter retirement.

[What is the right approach to drawing down income in retirement?]

Jamie, the number 1 question we get from our clients is, what is the right approach to drawing down income in retirement?

>> Jamie Golombek: That is the number 1 question we get, and, uh, there are a number of factors that you really need to consider. 

[Slide 14. Photo of an older woman using a tablet. Factors to consider when creating an income strategy

1. What are your sources of income?

2. How much income will you need and when will you need it?

3. Which sources do you withdraw first?

4. What are some tax considerations?]

Ah, first of all, when you're trying to figure out, what is my retirement income gonna look like, we start off with, what are the sources of income? The second thing we look at is, how much income you're gonna need and, and when you're gonna need it. Is there a lump sum purchase? Are you gonna buy a vacation property when you retire? Are you gonna go on a big trip? Ah, number 3, we get questions on, you know, which sources are you gonna draw first? Like, do I draw down my non-registered account? Do I draw down my RRSP? Do I draw down my TFSA? You know, things like that are certainly an important consideration. And then, of course, number 4 is my favourite: tax considerations.

[Lana laughing]

What are some of the tax considerations on retirement? What are the things that we can do, uh, when it comes to retirement income? 

[Slide 15. Sources of retirement income.

Leave RRSPs, RRIFs and TFSAs as long as possible because they grow tax free. Draw on your non-registered assets first]

So, sources of retirement income. If you sort of look at the main sources that, uh, individuals get, Canadians are getting when they look at their retirement income, of course the most common one is the Canada Pension, Quebec Pension Plan. If you've contributed to the plan as an employee or a self-employed individual, then you can start to draw down on that CPP. You know, you can start at 60, or you can go as late as 70. There's all kinds of debates. When do you take it down? When is the optimal time? But CPP are certainly a big source. I wanna talk about the timing in just a second.

The second source, of course, is OAS: Old Age Security. Again, usually starting at age 65, a guaranteed amount from the government that could be clawed back if your income is too high. Which is a good problem to have, although if you're being clawed back, you don't see that as a good problem.

Company pension. If you're a part of a pension plan, that could be a main part of your income, whether it's defined benefit, defined contribution plan. Sometimes, with early retirement, you can choose to take a slightly smaller pension earlier. That's something that should go into your planning.

For many Canadians that do not have an employer-sponsored pension plan, of course, we rely on the RRSP, which you have to convert to a RRIF by the end of the year you turn 71. There's a minimum amount that you have to take out every year. And, of course, the TFSA, the Tax-Free Savings Account, which is another source of, of, of retirement withdrawal.

And, finally, of course, everything else, non-registered investments and non-registered savings.

We're gonna go into, you know, a little bit of detail on each of these.

[16:30] [Slide 16. Timing of OAS and CPP/QPP

Full OAS pension available at 65, however:

  • OAS can be delayed for up to five years
  • Delaying will increase monthly payment by 0.6% for every month you delay (up to a maximum of 36% at age 70)

Full CPP/QPP pension is available at 65, however:

  • You can receive a reduced amount (up to 36%) starting at 60, or
  • You can receive an increased amount (up to 42% at 70)]

Again, the question I alluded to earlier that we get all the time is, you know, “I have some flexibility on when to take OAS, when to take CPP.” Well, look. Full OAS is available at age 65. Now, you can delay that for up to 5 years, and by delaying so, you actually get an increased payment, uh, by 0.6% for every single month that you delay. If you delay the entire, uh, period of time for 60 months, you can get 36% more OAS at age 70.

CPP, uh, rules are a little bit different. A CPP or QPP, you can actually receive, uh, as early as age 60. You, uh, will take a decrease in the monthly amount, 0.6% for every month for 60 months, that's 36%. However, if you delay CPP as late as age 70, you can actually get 0.7% more every single month for up to 60 months, that's 42% more on the CPP. If I sound excited by that…

[Lana laughing]

… that's because I am. I mean, the general advice that we give is, if you don't need the money… If you need the money, take it as soon as you need it. That goes without saying. But if you do not need the money to live on, to meet your daily expenses, if you are in relatively good health, general advice, if you look at the actuarial advice that's out there right now, I believe the consensus is, you wanna delay that CPP as long as possible, ideally ‘til age 70.

Again, there's a lot of other assumptions in there. We could maybe get into that in the, in the Q and A, uh, you know, in terms of, uh, other sources of income and mortality rates. But if you are in relatively good health, I think if I had to give some advice today, most people would say that, uh, you wanna delay that CPP, uh, as long as possible. Don't forget, though, you've gotta apply by age 70, uh, because you're not gonna get any more of it if you wait beyond that, uh, particular age. Luckily, starting next year, a recent change or, uh, start having the auto-enrollment of CPP. So if you haven't applied by 70, the government will automatically enroll you to be able to get your benefits.

Lana, uh… 

[Lana laughing] 

…let's talk a little bit about the next topic. Let's talk about RRSPs and RRIFs, and when do we do it, should we do it, how do we do it? 

[Lana laughing]

What are our options?

[18:46][Slide 17. Converting RRSP into a RRIF- Two key decisions:

When

  • Can be converted at any age
  • At age 71, an RRSP must be converted into a RRIF, annuity or withdrawn as a lump sum

How Much

  • Withdrawals start the year after you open a RRIF
  • ok will remoMinimum amount in first year: 5.4% (if 72 years old) 
  • Flexible – you can make monthly, quarterly, semi-annual or annual withdrawals
  • No maximum withdrawal limit. Must meet the minimum limit set by the government set each year
  • Witholding tax payable if you withdraw more than the minimum

RRIF investments are tax-sheltered (like an RRSP). The longer you hold them in the RRIF, the more your savings will grow tax-free]

>> Lana Robinson: Thanks, Jamie. So, um, what do we need to know about this? RRSPs can be converted to retirement income at any age. However, you must convert them no later than December of the year in which you turn 71. At that time, you've got a couple of options. You can purchase an annuity that will pay you a guaranteed income for life. You can withdraw the entire amount and have it included in your taxable income that year. Or you can convert your registered retirement savings plans to a retirement income fund, by far the most popular option.

So, payments can start in the following year if you choose to do so. There's a minimum amount that must be withdrawn and this is calculated as a percentage of the fair market value of the fund on January 1st... um, uh, January 1st of that, ahem, that year. Now, they're very flexible. So, in other words, you can take money out either monthly, quarterly, semi-annually or annually and there's no maximum withdrawal limit. Now, this is helpful because if, in any given year, you have an unforeseen cost or an unexpected cost, you can choose to take more out than the minimum.

What you should know, though, is that if you take more out than the minimum, there will be tax, withholding tax, so tax withheld at source, uh, that's calculated based on the amount over and above the minimum that you take out. And you should know that TIFF, RSP, or, pardon me, RRIF investments are tax-sheltered like your RRSP, so the longer you hold them in the RRIF, the more savings that will grow tax-free.

[What are the top three tax strategies I should be considering in retirement?]

So, Jamie, what are the top 3 strategies we should be considering in retirement?

>> Jamie Golombek: Well, I'm glad you asked that question because…

[Lana laughing]

…I, uh, have an answer for you.

[20:30][Slide 19. 1. Minimize your taxable income by changing the source of that income

Different sources of investment income have different tax rates
 

  Keep Tax
Interest Income (100% of income is taxable) 50% 50%
Dividend income 65% 35%
Capital gains (50% of income is taxable) 75% 25%

The first, the first thing, of course, is looking at what we talked about earlier, which is minimizing your taxable income, looking at the sources of that retirement income, specifically the type of investment income.

So if you've got your, uh, non-registered account and you're living off that, and living off that in retirement, you wanna look at the considerations in terms of relative taxation.

Interest income, while very, very secure for GICs and cash and money market funds, is gonna be 100% taxable at your marginal rate.

Then we get dividend income, which is beneficial because of the dividend credit, and, of course, capital gains, which are come from equities, are only 50% taxable.

So, again, if you're looking at tax strategies, you want to pay less tax in retirement. If you wanna look at the investment mix while also taking into account the asset allocation that's right for you from a risk profile. You wanna be able to sleep at night in retirement, not just minimize the amount of tax.

[Slide 20. 2. Pension Income Splitting. Photo of older couple sitting together on the couch.

  • Split pension income between you and your spouse or common-law partner.
  • Split RRIF income for any RRIF withdrawals 50% of it can be taxed on the other spouse/partner’s return.

Note: Individual receiving the RRIF must be 65. Spouse can be any age.

  • Benefits
    • Reducing tax for the couple
    • Protects government benefits]

Number 2, the most common thing that we see when it comes to retirement income planning, of course, tax planning associated with pension splitting. Now, of course, that only works if you've got a common-law spouse or you've got a partner, um, on, or a spouse, common-law partner on, on retirement. But if you do, you could split 50% of your pension income with your spouse or partner. Now, that also includes a withdrawal from an RRIF, not an RRSP, but a RRIF, once you reach the age of 65. Now, that's interesting. That means that some individuals may wish to consider, as a tax tip for today.

[Lana laughing]

You may wish to consider converting a portion of your RRSP to a RRIF before age 71. And the reason for that is, because if we do it at age 65, any withdrawals will be accounted for pension income for the purpose of pension income splitting. As a bonus, you even get to claim the pension income credit potentially once you're 65 on that RRIF withdrawal.

Now, again, most common reasons people do pension splitting. Number 1 is the graduated tax rates. If you've got a spouse or partner in a lower tax bracket than you, by taking 50% of your pension income and moving it over to a lower-income spouse or partner’s return, you're gonna save substantial income tax because of the graduated progressive tax rates. However, another benefit is to protect government benefits and other credits. So things like the Old Age Security, the guaranteed income supplement are all income-tested. If you can reduce your income to below the OAS clawback level by moving some of your pension income to your spouse’s name, you may be able to get higher OAS, Old Age Security. Similarly, the age credit once you're 65 is income-tested. If you can reduce your income, then you could perhaps get more of that age credit.

[Slide 21. 3. Charitable Giving. Photo of hands holding a heart]

And then, finally, charitable giving, if you're philanthropically-inclined, can be a tax-effective way, uh, again, to give to charity to satisfy that philanthropic need, but also to save taxes when it comes to retirement income. And I always say that you should plan to make those donations during your retirement while you have the income, rather than on death as part of the estate plan. In other words, if you can afford to do so, it often makes sense to make those donations while you're alive. Otherwise, we've seen scenarios where there is what we call a wasted donation receipt.

Imagine you die, you've got a portfolio with GICs in it, worth a few hundred thousand bucks, you've got a principal residence worth, let's say, half a million. So in total you've got, uh, a substantial estate, $800,000 and you die. And you wanna give some of it to charity? Great. Give it to charity. Your estate gets a donation receipt. It will not be able to use that receipt to its full advantage, because on the GICs, there's very to very little tax on that. There's a little bit of interest income for the year of death, there's no gains tax or anything like that. And our principal residence, of course, is tax-free. So now you got a receipt, and you can't use it. It would have been better off, if you could afford to do so, to make that charitable gift during your retirement years to reduce the tax on all of your income, your pension income, uh, any consulting income you might have on your RRSP income. It's very strategic to use it during years where you have income and retirement rather than saving it at the end of the day where it might actually be wasted.

And, of course, finally, um, in retirement and even today, if you have appreciated securities that also includes mutual funds, ETFs, individual equities, SEG funds, if you donate them in kind to a registered charity, not only do you get a receipt for the fair market value of those securities, but you pay no capital gains tax whatsoever on that accrued gain. And this can be a very important part of a retirement strategy and a philanthropy strategy. Cause if you're going through your estate, and you're saying, “I've got this extra cash,” I'm gonna get into this topic in just a second, um, “is there an opportunity now to be strategic but also tax-smart about those donations?” And looking at your portfolio, saying, “We've had a great run in the market in the last decade or so, is there an opportunity to make those gifts, let's say during retirement, to the charities that we care about? Get a donation receipt which we can actually use, but also avoid any capital gains tax on those appreciated gains.”

[26:11][Photo of 2 grandparents with their children and 2 grandchildren. Living the dream]

So, Lana, let's move it now to the next area, living the dream.

>> Lana Robinson: Sure. Retirement is meant to be happy and worry-free. A time to travel with your family, maybe take on a new career. However, we know that certain planning issues, if unaddressed, cause, can cause people stress during this time in their life. So let's talk about what can be done to avoid some of those nagging worries so that you can concentrate on living your dream.

In this section, we'll look at some important estate and wealth transfer considerations, like gifting to your children, joint ownership of assets with your adult children, and then some of your estate documentation, wills, executors, powers of attorney and easy trust.

So, how and when do I give to my children? So, this comes up a lot with the families that we work with.

[How and when do I gift to my children?]

[Slide 24. Strategies to protect your wealth when gifting

  • Gift when you’re ready
  • Protect your gift in event of relationship breakdown — make a demand loan, potentially interest free, or a traditional mortgage rather than an outright gift
  • Tax consequences of gifting — cash vs real estate vs securities

Looking to help your children? You’re not alone!

76% of Canadian parents would help their kids move out, get married, or move in with a partner. Yet, 68% either misunderstand or say they don’t know the tax and other financial implications of gifting. Source: CIBC Poll, 2017]

And, uh, so let's talk about some strategies that we can take.

So, this is interesting. According to CIBC polls, 76% of Canadians who help their kids, or who would want to help their kids move out, get married, or maybe move in with a partner. Yet 68% are unsure how to do this effectively. So here's some factors you should consider when you're gifting.

Number 1, gift when you're ready. Canada generally has no rules limiting how much you can give, either in your lifetime or upon your death. And while you can give as much as you wish, be sure to only give amounts that you're certain you're not going to need to support your own lifestyle and your own goals. So, ask yourself, do I have enough money to afford the gift? It's important to consider the effect of the gift, again, on your own retirement plan. So, if you're gifting to help them purchase a first home, you might wanna consider protecting that gift in the event of a marital or relationship breakdown in the future. Rather than an outright gift of cash, you may choose to loan it through a demand loan, potentially interest-free, that can be repaid, or not, during your lifetime and, or forgiven in your will. Alternatively, you might put a mortgage, in the amount of the gift, on the property. But, as always, we would recommend consulting with a lawyer to understand the implications of these strategies.

So, Jamie, what are the tax considerations with respect to gifting that we should be thinking about?

>> Jamie Golombek: Once again, I'm glad you asked that question.

[Lana laughing]

It's one that we get all the time, um. Really, uh, in Canada we're fortunate we don't have a, uh, we don’t have a gift tax. So, the U.S. has a gift tax. They limit the amount you can give to any 1 individual in a year. There's different rules whether you give to a spouse or you give to, uh, somebody else. Um, Canada doesn't have any type of gift tax, gift tax at all. In other words, you can give as much money to whoever you want, whenever you want, tax-free. The gift is not reported on any tax return, not by the gifter and not by the recipient. However, there can still be tax consequence.

Now if you give cash, people love cash, love to give it, love to receive it, but, at the end of the day, cash is easy. No tax consequences. If you're giving something else like a piece of real estate, a rental property, securities, stocks that have gone up in value, then that gift is considered to be a deemed disposition, which means that you have deemed to have dispose of that property at fair market value, and while it's not a gift tax, you would have to pay the normal capital gains tax that you would otherwise pay, if you had disposed of that property, ah, to a third party.

So again, when you're thinking about making the gift, think about the type of gift you wanna give, how much you wanna give, and also some of the considerations that Lana mentioned in terms of being strategic.

[Slide 25. Joint ownership and gifting to adult children

Pros

  • May avoid probate
  • May simplify estate settlement
  • Flexibility for joint owner to do transactions on behalf of the other owner

Photo of hand giving a flower to another hand.

Cons

  • May trigger capital gains at time of registration of joint ownership
  • Loss of control – joint owner can do transactions regardless of the other owner’s wishes/intentions
  • May be subject to creditor or family property claims of joint owner
  • May not clearly indicate intention (e.g. gift or solely probate fee savings)
  • May lose other tax benefits (e.g. principal residence exemption)]

Now, some people say, “Well, instead of making a gift, why don't I just put everything into joint names? And I can do this with my spouse and I can do it with the kids and...” I-I-I would be very, very careful with this. Look, people are putting everything into joint. Number 1 reason in provinces like Ontario, like B.C., like Nova Scotia, for example, at a very high probate fees, ah, they wanna put it in joint name to go outside the estate by right of survivorship. Which basically means that you avoid, you know, maybe one-and-a-half percent, depending on the province, uh, tax on the value of that property on death. Again, it's not an estate tax, it's a probate fee, and, again, every province has different rates and some provinces don't have any probate at all. So, that's the number 1 reason we put things into joint names. It simplifies estate settlement. It has us go outside the estate and even gives the joint owner flexibility in terms of transacting on the account. The dangers of the joint account cannot be overemphasized.

Now, let me just caution you, I have no problem with using a joint account with your spouse or with your common-law partner. I have a much bigger concern when you make an account joint with an adult child. Because technically speaking, if you add someone other than your spouse to your account, at the time you add them to your account, it is a technical disposition. You’re giving the right, uh, of survivorship, then theoretically you've disposed of 50% of the account.

Do people report it? I don't know, good question. But technically speaking, that is a disposition of an interest in the account. You’d have to argue that there was no real change in beneficial ownership, but it's certainly a gray area. The more biggest concern that I have with this joint account issue when you're giving an account joint with adult children, is the loss of control. Because the joint order can do transactions on the account without the other owner’s permission. In most joint ownerships, the default is that either person can sign on the account. You set up the account today with your adult child, a week later you get in a fight with the adult child, they come in and they wipe out your account. And you can't sue your child, you gave them access to your account. So what are you supposed to do?

Now, there are some situations where you require 2 signatures to get money out of a joint account. I would argue that that's even worse. And I’ll just tell you a quick story. You know, years ago I was in Vancouver giving a presentation on this topic in which case someone stood up and told me this story. They had a client who was 90 years old and they had made, years ago, they had made their principal residence joint with their adult —

[Audio temporarily cutting out]

— child who's now in his 70s, or early or late 60s, I guess. And, uh, ultimately, um, what happened was that the mother, who was 90, wanted to sell her home, but the son didn't feel that the timing was right with the Vancouver real estate market, and actually refused to sign the sales agreement with the real estate agent, basically forbidding his mother from selling her own home because he was on joint title on that home. So again, they may prevent you from using your own money, which is a problem.

Again, to other issues with creditor claims or family law claim, you make an account joint with your child, your child now goes bankrupt, your child has creditors, your child gets divorced and there's now a claim potentially on the joint account.

So again, very, very careful. Other issues, things like, you know, tax benefits. If you have a principal residence that you're now making your child a joint owner of, they have their own principal residence, well, you can only have 1. So now you get into real issues here. So again, if I had to summarize it. I would say joint ownership is great with spouses, but I wouldn't do it in any other way. If you wanna make an account accessible to a child, get a power of attorney.

[Wills, Executors, POAs and Trusts — What are they and why are they important in retirement planning?]

Which is a great segue into our next topic about wills, executors, powers of attorney and trust. Lana, why don't you to take us through some of that stuff?

>> Lana Robinson: Thank you, Jamie. So, um, other than, you know, gifting and joint ownership, other concerns, uh, that come up around this time are around your estate plan and your estate documentation. So questions like who should make decisions on my behalf if I become unable to do so? If I have young children or other dependents, who'll take care of them? And ultimately, if you have excess –

[Audio temporarily cutting out]

— money at the end of the day, where should it go and who should manage my estate?

[Slide 27. What’s involved in planning a will

Did you know… 51% of Canadians do not have a will1

A will is a written legal document outlining your intentions for the management and transfer of estate assets.

Pitfalls of dying without a will

  • The provincial laws of intestacy will determine how your estate is distributed
  • Potentially excessive taxation
  • Potential legal challenges
  • Unnecessary family friction and stress
  • Additional costs and delays

Planning a will involves:

  • Naming beneficiaries
  • Naming executors and/or trustees
  • Naming guardians for minor children
  • Pre-planning direct transfer of assets
  • Setting up testamentary trusts

So let's move on to wills. Let's start with the wills. So a will is simply —

[Audio temporarily cutting out]

— a legal document that expresses your wishes as to how you want your property be, to be distributed on death. And here's fi — here’s a startling statistic to me. 51% of Canadians do not have a will. So, again, this is startling to me because I don't, I'm not sure that people fully appreciate, ah, the implications of not having a will. And I think sometimes people assume that their property will automatically go to their spouse on death, but absent a valid will, this is not the case.

When you die intestate, or without a will, um, who will receive it in the family, what percentage they'll receive of your property, is all determined by, uh, the government of the province or the territory in which you live. So they have the formula, and that's, that’s what would be applied to your estate. So not only is there no ability to do any tax planning, but it also means that minor children and bene — minor children or other beneficiaries, will receive their full allotment upon reaching the age of majority with absolutely no restrictions.

So what are some of the key decisions that you need to make to go ahead and either update your will or put a will in place? So number 1, who are your beneficiaries? Um, who do you want to receive your estate? Is that your children? That could be extended family. It could even be charities. Who will take care of any minor children or dependents that you have in your care now? Whether you might want to have an outright distribution, uh, to your beneficiaries, the beneficiaries of your estate property, or a more controlled distribution through a trust.

[Slide 28. Factors to consider when selecting an executor. Photo of a middle-aged woman smiling at an older man and showing where he should sign on a legal document.

  • Experience
  • Reliability
  • Time and willingness
  • Jurisdiction
  • Age]

And perhaps most importantly, who will be your executor, or your liquidator depending on the province that you live in, that will manage your estate on your behalf and on behalf of your beneficiaries?

So what should we be thinking about when selecting an, an executor? So, selecting the right person to act as your estate representative, whether that's your executor, or your liquidator, as we said, these are different, uh, different, uh, names for these roles in different provinces across the country. Ahem. So, as I said, people often sometimes think their estates are simple, and it’s a simple process, but this may not always be true. The type of assets that you own and the nature of the relationships among your beneficiaries can create unexpected complexities. Settling an estate can also be difficult and time-consuming. It requires neutrality and may expose estate representatives to personal liabilities if they make a mistake. So, to address these challenges, you may benefit from appointing a professional or a professional with a family member to act as co-estate representatives. The family member, of course, will, will be understanding, sensitive to the unique family circumstances. While the expert, whether it's a trust company, a lawyer or an accountant, have the skills and knowledge needed to settle a complex or a large estate, while remaining impartial.

So, there's a couple of things, as I said, to consider. Uh, such as one's experience, their reliability, their capability and also their willingness to do it. It's important to revisit this on a regular basis. And residency. So often family members, we're not living in the same cities or provinces and sometimes even country. So jurisdiction is important. There may be additional requirements or costs associated with acting as an executor in another jurisdiction. And one of the most important, uh, considerations is age of the executor. Because you're... if, if you're choosing a friend or a sibling, or someone that's close in age with you, which is not uncommon, it could be a problem if they're unable and unable — to, ah, sorry, unable to act on your behalf when you need them. So you may wanna consider appointing someone a little bit younger. And in some cases you may even wanna appoint a trust company, which of course will always be around.

[Slide 29. The role of Powers of Attorney

A Power of Attorney is a designated individual to handle your affairs if you no longer are able to do so due to mental or physical incapacity.

Benefits: Can save time and avoid confusion later
 

Type*  Purpose
Financial Power of Attorney or Power of Attorney for Property For financial matters
Power of Attorney for Personal Care  For health matters such as medical decisions for you when you are no longer able to

1 Other documents may serve the purpose of these POAs outside of Ontario]

So next, ahem, we're gonna focus on the rules of a Power of Attorney. So, um, the good news is, you know, we're living longer. Uh, however, our last years will often involve some level of incapacity. So these are really important legal documents, again, called by different names across the country. So, uh, whether that's, uh, um, enduring Power of Attorney or Power of Attorney for Property, Power of Attorney for, for, uh, Healthcare Representative Agreement, um, lots of different names in the different provinces. But the main point is that they all serve the same goal, which is to appoint a person, or persons, to act on your behalf for your financial affairs and for your healthcare, in the event that you're unable to do so. So, as with choosing an executor, you're gonna want to consider their ability, their, their ability and their willingness to act as attorney. What jurisdiction do they live in again, and, you know, their age.

The other important consideration is that we recommend you advise the, the person that you want to appoint, to ensure that they're willing to do so, and, uh, again, review regularly as you grow older and ensure that they're still able to act. But, also, we recommend that you make your wishes clear at that time, particularly with respect to healthcare wishes. As this could provide tremendous peace of mind to your loved ones, if they're acting on your behalf during what's often a difficult and emotional time.

[Slide 30. Trusts: What are the benefits?

Benefits

  • Provide ongoing support and protection for dependents
  • May provide support for disabled dependents without compromising government benefits
  • Help protect inherited assets in the event of a relationship breakdown or from claims by third parties
  • Allows you to control when and how money is passed on

Common types of trusts

1. Testamentary Trust

Only comes into effect upon death

2. Inter-vivos Trust

Set up and takes effect during your lifetime]

Jamie, will you take a few minutes to talk about the benefits of trust as part of your wealth transfer plan?

[39:50] >> Jamie Golombek: Sure. So people ask us all the time, should I have a trust, should I have more than 1 trust, should I have multiple trusts? Everybody wants a trust, but what is a trust really…

[Lana laughing]

…and at the end of the day, you have to understand, trust is not a legal entity. A trust is not like a corporation. What a trust really is, is a relationship. It's a relationship that separates the beneficial enjoyment of property from the legal ownership of that property. And I often say that use a trust when you don't trust somebody.

So, you know, when will we use a trust? Well, there's really two types of trusts, right? There's the testamentary trust, which is the more common one. When we set up in a will as part of our will, it comes into effect on death. Then we have what we call the inter vivos trust, or family trust, that’s set up while you are alive and is effective immediately upon setting it up. And the benefits, of course, is that we may use a trust to provide ongoing support and protection for certain dependents after we're gone. If you've got minor beneficiaries, if you've got young kids, you don't wanna give them... have them get all the money on the day they reach the age of majority. I mean, frankly, we've got clients that wouldn't give money to the kids on the day the kids turns 40…

[Lana laughing]

…so if you want any control at all of when the kids get the money, you might wanna have a, a trust vehicle for young kids or grandkids, nieces, nephews, in your will.

We can, uh, use certain types of specialized trust to provide for, uh, uh, disability, uh, people with disabilities, particularly a dependents. We have things called Henson trusts that again allows them to protect certain government benefits that otherwise will be clawed back. We can also, uh, use trusts to protect inherited assets. So if there's a relationship breakdown or a third-party claim, there may be some opportunities there and it really gives you the control and flexibility to determine, um, how your money is passed on if you set up a trust as part of your estate.

[Slide 31. Share your plan

Communicating your intentions gives your loved ones the confidence that they are fulfilling your wishes

1. Document who will be responsible for carrying out your wishes

2. Tell those involved their responsibilities

3. Communicate the what, why and how of your plan

4. Introduce your advisor(s) to your executor, power of attorney and beneficiaries. Your advisor(s) can be a key person to help pul things together]

Well, we're almost done. Uh, one of the hardest things I would say, to sort of summarize, is that, uh, it's very important after we've done all this planning to share your plan. Number 1, document who's gonna be responsible for carrying out your last... your, your wishes. Number 2, tell those involved what their responsibilities are. Three, communicate the what, why and how of your plan. Now, I'll just stop here for a second. That's one of the hardest things to do. Like I've always said, you should always communicate your plan. In other words, if you're gonna do anything weird as part of your estate plan… what I mean by weird is, not treat your kids perfectly equally, which is valid, by the way, depending on the situation. Um, it's a good idea to tell them in advance. Because, at the end the day, we've seen families destroyed and siblings don't talk to each other for years over a misunderstanding of why Mom gave you 60% and me only 40%. So I think that's a good idea. You don't have to tell the kids how much you have and all that, but I think it's a good idea to have the communication and discussion of what you're thinking and why you're thinking of it.

[42:33][Slide 32. 5 key takeaways. Photo of group of 5 smiling senior adults on a beach.

1. Envision your life in retirement and identify how much that vision will cost

2. Review your sources of retirement income and understand how taxes affect your retirement income

3. Consider tax planning opportunities

4. Update your estate plan

5. Communicate your plan with family and seek advice from professionals (financial advisor, lawyer and accountant)]

Of course, finally number 4, um, I would introduce your advisors to your executor, your Power of Attorney, because, really, your advisor can be a key person to help pull all these things together. So the fee, the 5 takeaways for me, uh, in terms of this seminar, because we're about to get into the questions, are, number 1, envision your life in retirement. Identify how much that vision is gonna cost. Number 2, look at all your sources of retirement income and understand how income taxes could affect those retirement income sources. Number 3, consider tax-planning opportunities, like pension income splitting and investment income strategies, uh, charitable giving. Number 4, update your estate plan. And, of course, number 5, communicate your plan with family and seek advice from professionals.

[Adobe Presenter loading screen]

[Question & Answer
We encourage you to submit your questions. Please note that not all questions can be answered because of time constraints.]

So, with that, we're right on time. We're about to move into the Q and A. Let's get some explanation on how we're gonna do that.

>> Peter Campbell: Oh, thank you, Jamie and Lana, for your insightful presentation. While Jamie and Lana are reviewing some of the questions, I wanted our audience, who joined in later, to know that you can type your questions in the Q and A panel located on the right-hand side of your screen. If you wish to listen to this webinar again, a link will be emailed to everyone that registered for this webinar. Also, I'd like to request the audience to ask questions more explicit to today's topics and to avoid questions that are specific to a security or company.

Well, looks like we have some great questions coming in. So I'm gonna pass this over to Jamie and Lana now.

>> Jamie Golombek: So, Lana, uh, we've talked about all this, we're just gonna, uh, look at some of these questions. We've got questions in terms of, like, getting copies. Yes, we're going to send a link out with, with all the, uh, the, the, recast for all the, um... I'm sorry, the replay of all the stuff that will have all the slides in them.

[44:30] Lana, one of the questions we often get, uh, concerns tax planning and, um, for splitting the income, we're getting a question on, is it just done during tax preparation or is it done actually physically?

>> Lana Robinson: Oh, um, so, that's a great question. And, and the answer is it’s a schedule you fill out when you, when you file your income tax, so you don't have to literally split your income. It's an elected... it’s, uh, an election on filing.

>> Jamie Golombek: Yeah. So that's specifically on the pension income splitting. There's a simple form that you file with the tax assurance signed by both spouses that allows you to do the pension income splitting at the time of filing the return. There are, of course, other income splitting strategies they may wanna do, like prescribed rate loans and things like that. That, of course, do involve, uh, some more complex, uh, planning. So, good question.

There are lots of other questions. Let's see what else, uh, we have.

[45:23] >> Lana Robinson: So, um, what are the implications on estate planning or powers of attorney if you have children from a previous marriage?

Well, this is a fantastic question. Um, so, with respect to estate planning, there are, uh, strategies that you can employ, uh, to ensure that children from a first marriage and children from a second marriage are equally, uh, taken care of, and one of those things is a trust. So, Jamie, you, you talk about when you might want to choose to use a spousal trust, can you go into a little bit more detail?

>>Jamie Golombek: Yeah, for sure. So one of the issues that we often see, particularly in the case of a second marriage and protecting kids from the first marriage, is the use of a testamentary spousal trust. And effectively what you're doing is, instead of on your death giving all your money to your spouse or partner, which is your second spouse or partner, what you could do is leave, uh, some of that money in a trust available to the kids of the first marriage. In that way when you die, not all of your money goes to your new spouse, which they can then do whatever they want with and maybe choose to leave nothing, uh, to the kids in the first marriage. So what we often suggest is using a Testamentary Trust as part of the will so that you can have some of those assets make sure that they go directly to the kids of that first marriage, rather than going to, uh, all of it to the second spouse. Obviously you still have to make, you know, uh, appropriate, uh, support obligations, if necessary, for that second spouse and division of property and things like that. But I think those are some of the, uh, the important, um, considerations…

>> Lana Robinson:

…considerations…

>> Jamie Golombek:

…yeah.

[46:52] >> Lana Robinson: So, so, Jamie, Rick's asking us, as a couple without children, what are your thoughts on using the equity in your home as retirement income?

>> Jamie Golombek: Yeah, so, so, we're obviously speaking, in most cases, of a reverse mortgage, and they’re out there, they're available. I call it last resort. Um, in other words, it’s, uh, certainly something you can do, the problem is the interest rates are very, very high. If you have no other source of money and you really wanna stay in your home, yeah, it could be a great way to stay in your home. In other words, you're not concerned about the value of your estate at the end of the day, and, uh, you really wanna stay there and you want a source of income for retirement, then absolutely, a reverse mortgage, uh, can certainly work.

So we've got a lot of, uh, questions, gonna go through some of them.

[47:40] Um, actually, a good question from, uh, from Cynthia. Do we need an accountant to assist us with tax planning, et cetera, and as advisors are hesitant to give specific advice of when to spend RRSPs?

I think that's something that a financial advisor, a good financial advisor should be able to do. Uh, if you look at a financial plan and you get a retirement plan, they sort of should be able to go in there and look at the different buckets of retirement. Lana, you have experience working with clients on that. Is that something you've seen often as part of a retirement plan…

>> Lana Robinson: Absolute —

>> Jamie Golombek: … or do they need to go to their accountant?

>> Lana Robinson: They don't necessarily need to go to the accountant. I think certainly we can run, uh, retirement income scenarios for you. So, understanding the various sources of your savings and run various, uh, scenarios to see what is the most effective way to draw your income down through those, uh, vehicles in retirement. But, uh, the other benefit you may want to speak to your account about, other strategies or other specific tax strategies, but in terms of determining what your income flow could look like, advisors can absolutely help you do that.

[48:42] >> Jamie Golombek: So, uh, one of the questions that came up, uh, from Mary is, uh, really relevant to this whole issue of joint ownership. And I'm happy to, uh, handle this one.

If I add a child to the title of a current rental property, when I die, will they be able to enjoy the full benefit of that property, or would they need to pay tax on it upon my death?

Well, I think, technically speaking, if you add the child to a title, right away, there's a disposition of 50% of it. I'm not saying that people report it. People say, well, it's only been done for estate planning purposes. But any event, certainly when you die, there is a disposition. Is it the other 50%? If you haven't reported the disposition when you added them, it's probably the entire 100%. So, in other words, just by adding someone joint onto account doesn't change the tax situation. So, in other words, if it's a true joint ownership, and you add them, there's a disposition of 50% on death, a disposition of the other 50% when you die. If you haven't reported it at the time that you add them, as most people probably do not, then there'll be a full disposition and capital gains tax payable potentially on the increase in value on, on the date of death.

Just gonna scroll down to see, um, some of these other questions.

[49:54] ]>> Lana Robinson: So, um, Jamie, here's a good question. How does this work out if I become a non-resident of Canada for tax purposes in my retirement?

>> Jamie Golombek: Yeah. So it’s a great question. So, I mean, in, in most cases you don't have to worry too much about Canadian tax. So, in other words, if you become a non-resident of Canada, at the time you become non-resident there's a disposition of any property you have. Principal residence, of course, would be tax-free. But the good news is you can keep your RRSPs, your RRIFs and your TFSAs, all in Canada. As a non-resident of Canada, you can take all that money out of the TFSA tax-free, no problem. Um, with the RRSPs and RRIFs, there's a non-resident withholding debt. I'll generalize and say that typically the rate on that’s about 25%.

So, again, it is a strategy that some people have used to be able to become a non-resident. They physically move out of Canada, they cease all their residential ties, they stop becoming a paying taxpayer. They leave their RRSP and RRIF here, and, when they take the money out, the withholding tax could be as typically around 25%. In some cases, though, it can be as low as —

[Audio temporarily cutting out]

— 15% on, on the minimum amount, twice the minimum amount. And there's rules governing in which country and, and the, uh, tax treaty.

So Lana, here's a question that people ask, sort of a general question… 

>> Lana Robinson: … mm-hmm…

[51:08] >> Jamie Golombek: …all the time. You know, is there an average amount that an average middle-class Canadian should have…

[Lana laughing]

…in retirement? With RRSPs and TFSAs, uh, what's, what’s the number?

>> Lana Robinson: What's the number?

>> Jamie Golombek: How much should everyone have?

[Lana laughing]

Tell us right now.

>> Lana Robinson: And it's a great question, Jamie, because we do get it all the time.

[Audio temporarily cutting out]

And there, there're some norms out there, things like, well, 70% of your, you know, pre-retirement income is what you should be looking at. But the, the fact of the matter is it’s very much dependent on how, on what you want your retirement lifestyle to be. Uh, what does that look like? How much are you going to spend? Going back to the vision question, what do you actually wanna do in retirement? So it's very much determined by you, um, as opposed to any typical average amount.

[51:50] >> Jamie Golombek: So, a similar type of question just came in from Paula, a very interesting question. What's the typical amortization period for withdrawing down on your investments? Is it 20 years, is it 25 years?

>> Lana Robinson: Great question.

>> Jamie Golombek: So, ha, ha, it depends on how long you plan to live.

[Lana laughing]

Like, I would say most of our clients, I mean, we’re plan, unless we know of some imminent health problem, we're planning for most clients into their 90s…

>> Lana Robinson: 95 on average.

>> Jamie Golombek: …just, just to be sure. Uh, we wanna make sure you've got, like, a 90% chance of not dying and running out of money. So, you know, what is the optimal period? Again, it’s, it’s very personal, it depends on when you start withdrawing the money. If you retire at age 50, it might have a long time of amortization. If you retire at age 80, it might have a shorter time. So, family history, that's why, you know, discussions with advisors are, you know, certainly, certainly, ah, certainly worthwhile.

[52:40] Oh, so, Tim's asking a good question, uh, in terms of, um, we talk about splitting income from a RRIF. Can it be done with a LIF? A locked-in fund?

Absolutely. So once you turn 65, any withdrawals out of that can be, uh, split 50%, uh, with a spouse or partner. So that's certainly, certainly good.

[52:58] >> Lana Robinson: Um, so, Bernadine is asking us, is it possible to write a promissory note to your children and what are the tax implications of these notes? That's a great question.

>> Jamie Golombek: Yeah, so it all depends on what the money is being used for. So, again, you can loan your kids money and have them make a legally binding promissory note to pay you back. If they either use that money to buy a home, if they use that money to renovate, to go on a vacation, any kind of personal use, you don't have to charge them interest. There's no tax implications whatsoever. However, if you are charging them interest on that loan, then, of course, you'd have to include that interest income in your tax return. Whether or not they could deduct the interest paid to you would depend on whether or not they're using the proceeds of that loan for investments or to, to start a business. So, it is possible, we do see it done, but it can be, as Lana said, earlier, um, a strategy?

>> Lana Robinson: Mmhmm.

>> Jamie Golombek: Right? Like if, if someone's buying a home, we often recommend…

>> Lana Robinson: …they put a promissory note in place, that's right. 

>> Jamie Golombek: That’s right.

>> Lana Robinson: So what you're, what you're trying to accomplish in that case is, uh, is protecting that gift in the event that there's a relationship breakdown down the road.

>> Jamie Golombek: Right. So lots of, uh, lots of questions coming up still, um. Maybe we'll take a couple more, we still have a couple of minutes left.

[54:18] Um, if you enroll full-time education program, post-retirement... This is a good question… 

>> Lana Robinson: That’s a great question.

>> Jamie Golombek: …because you see this all the time, right? 

>> Lana Robinson: Yeah.

>> Jamie Golombek: Clients are retiring, um, and they think, what am I gonna do now? Uh, go back to school, right? Go back…

>> Lana Robinson: Mmhmm.

>> Jamie Golombek: …to university and stuff like that. You know, are there tax benefits in doing so? I would say, absolutely. I mean, you get a tuition credit just like everybody else.

>> Lana Robinson: Yeah.

>> Jamie Golombek: So, if you're enrolling in a post-secondary course, eligible for tuition fees, you would typically get, uh, a tuition slip from the university and that can be used to, uh, to reduce your income tax at the end of the year. So that's certainly a... certainly a possibility. Alright.

Uh… 

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[54:58] Well, lots and lots of good questions here. Here. So, Bruce is asking a good question. We'll both chip in on this one, and then we'll sort of wrap it up. We have over 100 questions, so it's just impossible for us to, uh, ask to answer all of them. But Bruce is asking, is there a tax benefit to delay starting RRIF income and using non-registered savings to supplement retirement income? What about clawbacks and the impact of clawbacks?

>> Lana Robinson: Yeah, that's a great question. So, delay starting RRIF income. Well, as we already talked about, we know you have to do it at age 71, but if you choose to do it beforehand and use your RRSPs, going back to what Jamie was talking about earlier, um, I do think it makes sense to use your non-, uh, registered savings first, uh, and then go to your retirement savings afterwards. And so that's because of the, the, um, tax sheltering, the tax sheltering in the RRSP and also this issue of clawback, Jamie.

>> Jamie Golombek: Yeah, I would agree 100%. I mean, eh, to the extent possible, everyone's situation is different, depending on tax brackets and life expectancy and health and all that other good stuff. But at the end of the day, I would generally delay my RRIF withdrawal to age 72. That's the first year you've gotta withdraw. And the reason I say that is because the money is growing in a completely tax-sheltered environment. Once you take the money out, look, if you've gotta take it out to spend it, take it out whenever you need it. Right? But if you don't need to spend it, I would leave it in there as long as possible. You're enjoying the tax-free compounding. Why would you forcibly take that money out early and, therefore, pay tax? Now, some people say, well, if I'm in a low bracket, should I take more out every year? Maybe. But, again, it's very hard to justify the loss of the tax-free compounding inside of the RRIF. So, in other words, I think, as a general rule, without knowing your specifics, our advice is, yeah, leave the money in the RRIF, TFSA , as long as possible.

>> Lana Robinson: Mmhmm.

Uh, last resort, take the minimum amount every year and then try to rely on non-registered investing for that retirement income.

And with that, I think we're out of time for questions.

>> Peter Campbell: Well, thank you very much, Jamie and Lana. It looks like that's all the time we have for today.

I'm sure I speak on behalf of the entire audience that, uh, I thoroughly enjoyed listening to your insights and thank you both, for such a wonderful presentation.

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>> Lana Robinson: Well, thank you for attending today.

[Thank you. Thank you for joining today’s webinar. When it’s available, you will receive a link to the replay of this webinar by email]

>> Peter Campbell: Thank you very much. 

On behalf of CIBC, I would like to thank the audience for attending today. Should you have any questions or comments, please visit either the CIBC Investors Edge website or CIBC.com.