10 financial issues for retirees in 2022

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Executive summary

The beginning of January always feels like we’re starting to write a new book. The pages are blank and we can start from scratch. That’s probably why we all make lifestyle and financial resolutions. Everything feels achievable in the new year.

Have you made financial resolutions to go along with your resolution to get more sleep, eat more vegetables, and reduce your time on Tik Tok?

While we can’t encourage you to eat more carrots, the Dri financial Group can help with your financial resolutions. In this article, I’ve outlined the top 10 financial issues for retirees to consider at the start of a new year.

Let’s begin by reviewing the Wills, Powers of Attorney, beneficiaries, and executors, do they still reflect your final wishes? What about existing life insurance policies, do you still need them? Or do you need a different type of insurance coverage?

Don’t forget to maximize your RRSP and TFSA contributions and while we’re contributing, ensure that all registered plans have a designated beneficiary, the goal is to minimize the assets that are settled through your Will.

Next step is to review year-end investment values and compare them to the projected values, are you still on track? Do you need to increase savings and/or reduce spending?

Make 2022 the year you prepare an end-of-life plan, for example, make funeral arrangements, and prepare a plan for the possibility of physical or mental impairments lasting 3-5 years.

Next step, prepare a spending budget (and savings budget if you’re still working). Most people hate preparing a budget but if you use an app called Mint.com, tracking income and expenses is made simple and fast.

Next, set an appointment with your accountant for the first week of March and complete your tax returns early, but more importantly, ask the accountant to provide helpful tax minimization and/or tax deferral opportunities.

And lastly, plan and book your adventures for 2022, make them big and exciting. Life is too short so budget time for relaxation and rejuvenation.

Review our list and circle any areas that need work, then set up an appointment with our team and together we’ll make 2022 a prosperous year.

Powers of Attorney

January 2022

It’s the beginning of a new year and I feel the urge to create a list of financial goals. If you’re like me, I struggle to remember any of my New Year’s resolutions by the time June rolls around. So, let’s hurry and get them done in the first two weeks of January or risk forgetting about them.

To help you stay on track, circle the goals you feel you haven’t addressed and send me the list, I’ll ensure we cover them throughout 2022.

1) Review and if necessary, update your Wills and Powers of Attorney

I know I sound like a broken record when I say, “review your estate documents.” Unfortunately from experience, most people don’t have estate documents, or their estate documents no longer reflect their current wishes.

After losing a spouse and/or starting retirement, a review of your estate documents is crucial. For example, it’s time to reevaluate your:

2) Review existing insurance policies

As life transitions from child raising to retirement or to widowhood, existing insurance policies may no longer apply to your current situation.

For example, a married couple may have purchased a $1,000,000 term policy when their children were young to cover the financial expenses in the event of a premature death. Today, their children are adults and financially independent from their parents — you!

So, what should you do with this policy?

The answer, consider canceling the policy. But before cancelling any insurance policies, let a qualified advisor, such as Dri Financial Group, review your current insurance needs and the terms of any existing insurance policies. The likelihood is that a new or amended policy will suit your current needs more closely.

Don’t forget, in addition to life insurance, there are also policies such as: health insurance, long-term care insurance policy, and also annuities. Although, the latter is a slightly different policy.

3) Review all beneficiaries

Assuming you have already reviewed your beneficiaries in your Will ( see #1), the next step is to make beneficiary designations for your TFSAs, RRSPs and RRIFs.

The essence of a beneficiary designation for any ‘plan’ (read – insurance, TFSA, RRSP, RRIF) is that the funds in the plan pass:

  • directly to the named beneficiary;
  • never fall into or form part of the estate of the deceased and are never controlled by the executor or estate trustee;
  • are not governed by the Will;
  • do not require probate; and
  • no Estate Administration Tax is payable on the value.

Don’t forget, Probate fees in Ontario are 1.5% of assets above $50,000. So, this simple review could save you tens of thousands of dollars.

4) Prepare end of life wishes

End of life planning isn’t the type of activity I would consider doing on a day off. In my opinion it takes time. For me, I want to control as much of my final days as possible. For example, consider the following:

  • Make your home suitable for an aging couple/person.
  • Investigate in home care ( ie personal support workers, meals, house cleaning etc).
  • Investigate long term care facilities ( if needed).
  • Plan your funeral.
  • Select a grave site.

5) Update (or prepare) a retirement income plan

Retirees worry about overspending and workers worry about undersaving, I guess we always have something to worry about.

A retirement income plan is an annual projection of expected portfolio balances. Each year, the projected portfolio balances are compared to the actual portfolio value, the difference may indicate overspending or undersaving

For example, if the retirement income plan projects a portfolio balance of $1,000,000 on December 31st, 2021 and the actual portfolio is valued at $1,100,000, the surplus may suggest that the person is on target with their savings or spending goals. However, if the portfolio is valued at $900,000, the deficit may suggest the investor is not saving enough or is spending too much.

A retirement income plan provides the guardrails to prevent overspending in retirement and undersaving in working years. It also helps to assess all possible retirement income routes, such as a reverse mortgage or a life annuity insurance policy.

6) Prepare a cash flow budget

Just like end-of-life planning, creating, and maintaining a cash flow budget is usually placed at the bottom of the list and usually never gets done.

I have a secret tool to make budgeting easy, it’s called Mint.com. Download the app and with no knowledge of Excel spreadsheets, you’ll be able to quickly track your spending and easily compare your spending to your budget.

7) Maximize RRSPs and TFSAs contributions

A RRSP provides an immediate tax deduction and opportunity for long-term tax-deferred growth. A TFSA provides long-term tax-free growth. The Canadian tax act doesn’t offer many tax-free or tax-deferred growth opportunities so it’s essential to maximize both vehicles every year.

8) Review your RRIF withdrawals

For Canadians over the age of 71, an annual mandatory withdrawal is required from their RRIF, unfortunately the withdrawal is fully taxable.

At the beginning of each year, the RRIF withdrawal is calculated and distributed monthly/ quarterly/annually, as instructed.

Review the minimum amount and the frequency of the payments and assess if the arrangement is appropriate, if not, a higher withdrawal amount or a different frequency may be selected.

9) Prepare your tax returns in March

Most tax slips are available before the end of February but not all, some are due by the end of March. Wait until all your tax slips are available then hire an accountant to prepare the tax returns and provide recommendations to minimize or defer taxes.

Getting the 2021 tax returns completed will be a priority and you may need to see your accountant again in May for more tax advice. Don’t dismiss this important part of their service because you don’t want the only gains in your portfolio to be capital gains.

10) Plan a trip(s)

We all need time to rest and rejuvenate and vacations may be the perfect medicine. For me, cycling trips provide the perfect combination of exercise and sightseeing. I also like to spend time at my holiday home in Miami. What’s your vacation vice?

Financial and personal reflection go hand-in-hand

Financial planning is a perfect time for personal reflection as well. It provides an ideal opportunity to assess your financial independence, your [personal] goals for the future and also, where you are on your own Live Well, Stay Rich, Never Retire journey.

If you’re a business owner, it may signal the time to sell your business, and direct freshly-released funds towards guaranteed retirement income sources. Or alternative ventures that are less demanding on your time?

In January 2020, I had the opportunity to talk with Eric Gilboord is the founder and CEO of Warren Business Development Centre, which assists business owners in maximizing how much their companies are worthwhile finding the right people to purchase them. Listen to my podcast today. Then give me a call about any future business planning needs.

Final thoughts

The beginning of each year provides a great opportunity to reevaluate and to make course adjustments. Take a few minutes and review my top 10 list. Honestly assess which areas need your attention then call my office to book an appointment. We will help you start 2022 in a positive and profitable way.

In fact, if you have any goal in mind — big or small — that requires some financial planning, but you’re struggling with where to start, reach out to our team. We have the expertise and life experiences to help guide you to achieving your goals.

Contact us today to learn more about the options available to you. CLICK HERE.

Learn more:

The process of finding a financial advisor can be overwhelming. It is our job to make that process simpler and easier.

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Its structured framework helps you make an informed decision and feel confident in our team and management practices before we get started.

We offer you a range of services from creating bespoke financial plans and providing investment advice to helping you take advantage of our investment models. If you would like more information on the Wealth Navigator Process or our team, call me any time at 416.355.6370 or email me at richard.dri@scotiawealth.com.
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source https://richarddri.ca/10-financial-issues-for-retirees-in-2022/

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Published by drifinancial

The Dri Financial Group motivates entrepreneurs and their families to enhance their financial life. Our team of experienced entrepreneurs, personalized financial planning tools and proprietary investment strategies are the cornerstone of our program’ s success

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