Changing careers later in life requires careful financial planning. Plus: A pension expert explains ‘the truths’ about combined CPP and survivor benefits

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Jason Abbott has seen many of his clients make career changes later in life, choosing to shift gears between the ages of 50 and 75, writes Anna Sharratt in this Investing article. Most launching these “legacy careers” opt for consulting roles, teaching or businesses like interior design. For many, Sharratt reports, it’s a way of extending their ability to earn income and remain productive rather than slowing down.
However, one of Mr. Abbott’s long-standing clients recently made a more dramatic shift. “He sold his house in Toronto, bought a chunk of land and has taken up farming,” says Mr. Abbott, a financial planner and president of WEALTHdesigns.ca Inc. in Toronto. After three years, the client is now turning a profit.
“You never know what interests people have and what situation might come along,” he says.
For many Canadians who are financially self-sufficient, making the transition to a legacy career is primarily a way of exploring a new field, says Teresa Black Hughes, financial advisor, associate portfolio manager and director at RGF Integrated Wealth Management Ltd. in Vancouver.
“For many people that I’ve seen it was a choice – not a ‘have to’ situation,” she says.
For some, it can also be a way of increasing their income if retirement funds are inadequate and a comfortable retirement isn’t in the offing.
Chris Merrick, a fee-only, advice-only financial planner with Merrick Financial Inc. in Toronto, says many clients see legacy careers as a way to move out of a full-time role while retaining control of their hours, where they work and how much work they take on.
“It’s an excellent idea as it helps you move into retirement and can reduce stress,” he says.
But the decision to change careers can lead to significant upheaval: lifestyle adjustments, fluctuations in income and tax implications. As a result, advisors need to let their clients know exactly how a legacy career might affect their lives and their finances.
Read more on the experts’ top considerations for their clients here.
For more from Globe Advisor, visit our homepage.
Elliot and Sally are both first responders. Elliot has retired and Sally would like to join him soon. He is 55 years old, she is 44. They have one child, who is 10.
Elliot’s defined benefit pension pays about $75,800 a year. He earns another $12,000 a year working part time. Sally, who is earning about $100,000 a year now, will be entitled to a defined benefit pension as well.
They have a mortgage-free house in small-town Ontario.
Sally can retire with a full pension at age 55 but she’s thinking of leaving a couple years earlier. Once Sally exits the work force, they plan to travel extensively.
Short term, they want to repay a $49,000 renovation loan, buy a new vehicle and “create a backyard oasis” at a cost of about $50,000, Elliot writes in an e-mail. They also want to provide a safety net for their son, who has mild special needs, he said.
Their retirement spending target is $100,000 a year after tax.
In this Financial Facelift, certified financial planners Gordon Stockman of Efficient Wealth Management and Ahmed Mahiyan of Nextgen Financial Planning Inc., look at Elliot and Sally’s situation.
Want a free financial facelift? E-mail [email protected].
In this Charting Retirement article, Frederick Vettese, former chief actuary of Morneau Shepell and author of the PERC retirement calculator (perc-pro.ca), explores why there might be mixed feelings among retirees about inflation compared to interest rates here.
This is the latest in an ongoing series, Planning for the CPP, in which Globe Advisor explores the decisions behind when to take CPP benefits and reviews different aspects of the beloved and often-debated government-sponsored pension plan.
What are the “combined benefit rules” under the Canada Pension Plan (CPP), and why do you need to worry about them?
The combined benefit rules are a complex set of calculations that apply if you’re receiving both a CPP retirement pension and a CPP survivor’s pension, writes Doug Runchey in this Investing article. Be aware of these rules, he adds, if you’re already receiving the CPP survivor’s pension and want to know when you should start receiving your own CPP retirement pension.
Here are two quotes from the Service Canada website:
Runchey doesn’t think Service Canada is intentionally providing bad information on this subject, but these two statements are, at best, woefully inadequate, he says. And, according to Runchey, it gets even worse if you talk to a Service Canada representative about this issue on the phone or in person. You will likely be told something like: “You should take your own CPP whenever your retirement pension reaches an amount that – when added to your survivor’s pension – would equal the maximum because that’s the most you will receive anyway.”
That’s almost totally false and very bad advice if you follow it, says Runchey.
To learn more, read Runchey’s truths about combined benefits under the CPP here.
Doug Runchey is the owner and operator of DR Pensions Consulting in the Comox Valley region of Vancouver Island. He welcomes Canadians with questions about any information presented in this article to send him an e-mail or to use his firm’s online CPP Calculator here.
After former U.S. president Donald Trump invited Russia to do whatever it wants to NATO allies that don’t spend 2 per cent of their economies on national defence, a poll by the Angus Reid Institute found more than half of Canadians support Ottawa increasing investment to meet the NATO target, says columnist Paul Kershaw, in this personal finance article.
This would either require drawing on our personal finances to pay more taxes, or Ottawa will need to reallocate funds from other priorities.
No matter your preference, Canada will struggle to raise funding for national defence because previous governments failed to plan adequately to pay for aging baby boomers, notes Kershaw. Since the public gives little attention to this failure, and little credit to the Trudeau government for dealing with the problem now, military spending may suffer collateral damage.
It’s hard for Ottawa to find more money for national defence since the Trudeau government already increased annual spending for Old Age Security by $26-billion between 2014 and 2022, and it budgets another $32-billion in annual investment by 2028. Plus, the government is adding $33-billion a year to the Canada Health Transfer – half of which is used by Canadians over the age of 64.
Read the full article here.
Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on Twitter, Facebook and subscribe to Paul’s Hard Truths podcast.
As part of the ongoing series, Planning for the CPP, we invite readers to ask questions about their Canada Pension Plan (CPP) retirement benefits and find experts to answer them.
Q: When should early retirees take the CPP? As an example, if someone retires in their early 50s, should they wait until 60, 65 or 70 to start collecting their CPP benefits?
We asked Ngoc Day, a financial advisor with Macdonald Shymko & Co. Ltd. in Vancouver, to answer this one.
A person can start CPP as early as 60 or as late as 70. If they start CPP benefits before 65, payments will decrease by 0.6 per cent a month (or by 7.2 per cent a year), up to a maximum reduction of 36 per cent if starting at 60. If they start after 65, payments will increase by 0.7 per cent each month (or by 8.4 per cent a year), up to a maximum increase of 42 per cent if starting at age 70.
CPP payments are also indexed, providing inflation protection.
If financially feasible and assuming good health, a person could consider deferring their CPP benefits as late as possible to maximize lifetime CPP benefits with indexation. For example, deferring CPP benefits is a good choice if a retiree has sufficient work pension or that of their spouse to cover expenses and has no health concerns.
However, early collection may make sense in some situations, such as reduced life expectancy due to health concerns or the need for retirement cash flow.
Before making this important choice, individuals need to evaluate their cash flow needs, overall income level and income tax rate, and health status, and weigh the upside of receiving CPP payments early versus the downside of reduced payments for life.
Have a question about money or lifestyle topics for seniors? E-mail us at [email protected] and we will find experts and answer your questions in future newsletters. Interested in more stories about retirement? Sixty Five aims to inspire Canadians to live their best lives, confidently and securely. Sign up for our weekly Retirement Newsletter.