Friday, March 6th6.4°C
David Allard

Creating your retirement vision

A vision means different things to different people. To the head of a large corporation, it’s the ability to chart a course that will deliver success (think Steve Jobs and Apple), to a shaman, it’s a dream to be interpreted and the path followed based on that interpretation. In the retirement planning world it’s a personal statement outlining how you want the rest of your life play out.

When you create a vision statement, it’s a marriage of compromise between sometimes competing ends: the things you want for your life and the resources you have available to deliver them with. People sometimes feel that this type of planning tool is only for the wealthy. The truth is it’s an exercise that we should all engage in as we move closer to retirement or even if we are already there. It’s an opportunity to evaluate our lives and look ahead to creating the best future we possibly can.

There are five areas of life that we focus on when helping people to create their visions: financial realities, health, accommodation decisions, lifestyle and social networks.


Financial Realities

We all have different financial situations: some of us are wealthy and some of us are not, there are those who have pensions that will help finance their retirement years and then there those whose only pension will be the combination of government benefits and the income they can draw from their savings and investments. Whatever the combination of income sources you have, you need to understand what they are and what you can realistically expect to have in the future. What assets do you own, what are they worth and are you prepared to part with some of them in order to maintain your lifestyle? How important is your current lifestyle? Was it something that made sense when you were working but in retirement seems excessive? Are you planning to do more with all the extra time on your hands? Are you leaving the workforce, planning to switch careers or slowdown in your current role? The answers to these questions will lay the groundwork for the ones to follow.



If one is fortunate enough to be of sound mind and body, the potential limitations might not be a factor for many years. For others, health challenges might dictate travel plans or lifestyle choices be altered or left behind entirely. The cost of certain types of healthcare can drain resources that were expected to provide for a certain lifestyle. If the health issue is critical enough, it may involve care outside of our provincial systems and require large amounts of capital to fund. How long will we be able to care for ourselves; what types of facilities would we be comfortable with; what can we afford? Answers to these questions will have timing, mobility and financial ramifications.


So where will you live once you retire: the family home, a condo, a gated community or a senior’s residence? Will a downsizing free up capital to create a better lifestyle? Will you travel more and therefore have less time to spend keeping a home and yard? Do health challenges dictate your proximity to health care services - either as an outpatient or as somebody who needs a greater level of care permanently? Do you want to stay living where you are or have you always wanted to live in a different country? Would a place where the cost of living was low make your capital go further, and enable you to enjoy a lifestyle that would otherwise be impossible? Would you like to be closer to family or is that not an issue? While these are bigger decisions, they tend to be determined by the other realities in your life.



Retirement can be an opportunity to do things you’ve always wanted to do; with the time constraints of full time jobs and raising children behind you, your options have increased dramatically. Are there interests that you’ve been waiting to have enough time to be explored? Are there activities you’ve not been able to do as much as you would have liked, but can now focus more energy on? Do you leave the active workforce and live a life of leisure, or is this an opportunity to start a new career? Maybe start a small business or work less but still generate a paycheque for the things that you couldn’t finance from your retirement savings? Are you on the same page as your spouse or partner (if you have one), or do you need to find common ground that you will both feel good about? While important to your happiness level, sometimes these decisions are driven by economic and health considerations.


Social Networks

One of the realities of retirement is that our social networks will change. For many, the people in their lives most are determined by their working life. When we retire, many of those relationships will be challenged, or fade away entirely. As we get older, people will pass on or move for their own retirement reasons; either way, the network of friends and family will slowly shrink unless we make a concerted effort to reach out to new people and create new friendships. If we elect to move somewhere else, it may mean starting over entirely; if we move to a gated community or residence there may be an opportunity to make new friends built in. While not as tangible as the other four areas we’ve discussed, strong social networks are known to be a contributing factor to longevity and mental health.

The steps in creating a vision are as follows:

  1. Think deeply about these five areas, what they mean to you, and what you really want.
  2. Write down as many of them as you can (don’t worry; we’ll eliminate the silly ones next step).
  3. Narrow your list down by eliminating all that are impossible due to financial, health and time constraints.
  4. Narrow it again by choosing only the ones that resonate with you deeply.
  5. Take the remaining statements; use them to write a paragraph describing your life.

This is your vision. It’s not a plan; it’s the foundation you use to build the plan. It’s the framework that will help you answer the when, what and how questions that arise. Like a great corporate vision statement, your vision statement will bring clarity to you as you go through the retirement planning process.

Retirement: Major transition

Retirement is a major transition point for most people. Life expectancies have increased and with that, the amount of time we spend in retirement will only be expected to grow. Aside from the obvious concern of not having enough income to last you through those retirement years, a solid plan for all the other areas that make up your life has never been more important.

A financial plan is a good beginning but there are many other factors that add up to the difference between the life you want and the one you hadn’t really planned on. It’s not that you need to get all the answers right as much as it involves getting a complete picture of where you’re at, what resources you have available to you, what you would like to do in those years ahead, and what challenges might rise up and prevent you from living the life you’ve planned.

The areas we help clients to focus on when doing their planning, whether they’re approaching retirement or are already retired are:

  • Vision – a clear picture of what they really want their lives to be in the next 30-40 years.
  • Healthcare needs –both current and potential.
  • Lifestyle – travel, sports and activities interests – hobbies, associations and groups, and on the ground charitable involvement.
  • Social connections – friends, family, maybe former co-workers.
  • Accommodation needs – current housing, downsizing, and extended care options.
  • Legacy – what you want to leave behind when you’re gone.

Each component will play a major role in the fulfillment and satisfaction you’ll get from your retired years. But they each require time and energy to get real clear about what you want them to look like. Everyone’s situation is different and we all need to be realistic about our personal situations - starting with a detailed picture rather than a vague sense of what the future might hold.

Will you work a few more years to supplement your travel habits while you’re still healthy? Will you move to a country that you’ve always dreamed of – maybe one with a lower cost of living that will stretch out your capital? Do you have elder care responsibilities or dependent children to consider? How active are you? Where do you friends live? Is your family close by or will you need to travel? Are there physical constraints?

There are many things to consider when planning for your future, money may set the parameters around what you can do, but a good life is about more than dollars and cents, it’s about not letting things slip by you because you didn’t take the time to think about them.

If you have questions or comments connect with us at Next week I’ll talk about creating a vision for your retirement.

Taking advantage of TFSA

Canada Revenue Agency (CRA) has announced that the Tax-Free Savings Account (TFSA) contribution limit for 2015 will remain at $5,500.

TFSAs will continue to play a significant role in the savings plans of Canadian residents who are 18 years of age and older, and are designed to help them save for ongoing financial goals such as automobile purchases, vacations or home renovations, including saving for a down payment on a home or additional top up funding for a child’s education needs.

The TFSA (unlike an RRSP) has no upfront tax deduction, but this is balanced with the fact that proceeds are not taxed when the money is withdrawn. Funds withdrawn from the plan are tax-free and the full withdrawal amount can be put back into the TFSA starting the following year. If insufficient contribution room exists, it’s important that the contribution not be made in the same year as the withdrawal as an over-contribution penalty may apply.

Investment income earned within the account is earned tax free, regardless of whether it is interest, dividends or capital gains income. Foreign income with TFSA may be subject to withholding tax, e.g. 15% withholding tax will be applied to US-based securities.

A TFSA will generally be permitted to hold the same investments as an RRSP. However, a TFSA will be prohibited from holding investments in any entities with which the account holder does not deal at arm’s length (i.e. specified shareholders of a private corporation with a 10% or greater interest).

The following list illuminates some other points of consideration and benefits of the Tax-Free Savings Account (TFSA):


1. Any individual (other than a trust) who is resident in Canada and 18 years of age or older (with a valid social insurance number ‘SIN’) will be eligible to establish a TFSA and save up to the maximum allowable amount each year. However, residents from provinces where the age of majority is 19 may delay the opening of TFSAs until they turn 19. But, the accumulation of contribution room will start at age 18 or in 2009 whichever is later, but the contribution room will be adjusted and indexed for inflation in future years. Note that contributions in excess of the maximum allowable contribution will be subject to a penalty tax of 1% per month.

2. When an individual becomes a non-resident, he can still hold a TFSA and maintain its tax-free status in Canada on any earnings or withdrawals. However, any contributions made while a non-resident will be subject to a 1% penalty tax for each month the contribution remains in the account while they are in non-resident status.

3. A one-time tax equal to 50% of the market value is payable by the holder of a TFSA when a non-qualified or prohibited investment is acquired. Furthermore, income earned on a non-qualified or prohibited investment receives no preferential tax treatment.

4. An individual will be permitted to hold more than one TFSA at any given time, though all TFSA accounts are still subject to the single maximum contribution amount in any given year. Any unused contribution room can be carried forward to future years indefinitely.

5. Interest on money borrowed to invest in a TFSA will not be deductible in computing income for tax purposes.

6. Neither income earned in the TFSA nor withdrawals will affect an individual’s eligibility for federal income-tested benefits or credits such as the Canada Child Tax Credit, the Goods and Services Tax Credit and the Age Tax Credit. Nor will such amounts be taken into account in determining other benefits that are based on the individual’s income level such as Old Age Security, the Guaranteed Income Supplement or Employment Insurance benefits.

7. On the breakdown of marriage or a common-law partnership, an amount may be transferred tax-free between spouses or common-law partners without affecting the transferee’s TFSA room. That is, the amount of the transfer will not reduce the receiving spouse’s eligible contribution room, because this transfer will not be considered as a withdrawal, and therefore the transferred amount will not be added back to the transferor’s contribution room at the beginning of the following year. TFSA is of advantage to the receiving spouse.


Planning Opportunities for the TFSA

Combine RRSPs & TFSA for planning purposes

A TFSA is widely seen as a more flexible investment vehicle than an RRSP. However, given the smaller contribution amount, the TFSA should be used as a complementary savings vehicle alongside the RRSP. The addition of the TFSA to an investor’s financial plan can be used for building additional and supplementary retirement income while supplying a cash flow that’s tax free.

Estate Planning

Generally an individual’s TFSA will lose its tax exempt status upon the death of the individual; however an individual will be permitted to name his or her spouse or common-law partner as the successor account holder without losing the tax exempt status. TFSA assets can be transferred to a spouse/common-law upon death regardless of whether the surviving spouse/common-law has available contribution room, and without reducing the survivor’s existing contribution room. A surviving spouse or common-law partner who has not been named as a successor holder can make an exempt contribution without affecting the unused TFSA contribution between the date of death and the end of the calendar year following the year of death, without exceeding the fair market value of the deceased holder’s TFSA at the time of death. Any income earned after the TFSA holder’s death will be taxable to the surviving spouse. A T4 slip will be issued.

Where no successor holder or beneficiary is designated in the TFSA contract or Will, the TFSA property is directed to the deceased holder’s estate and distributed in accordance with the terms of the Will. TFSA assets will be subject to probate fees.

Note that provincial law governs beneficiary designations and all provinces (except Quebec) and territories have amended their legislation to now allow the designation of beneficiaries and successor holders for TFSAs. For Quebec, beneficiary designations must be made through a Will or a marriage contract as the beneficiary designation cannot be made directly through the plan (until it has been amended in that particular province).

Income Splitting Opportunities

A more interesting feature of the TFSA is the income splitting opportunity it provides to single income earning families. Attribution rules (specific tax rules that normally disallow income splitting among family members) do not apply to the TFSA, and as a result, the TFSA can be used to allow a higher-income spouse to split income by contributing to the TFSA of the lower-income or stay-at-home spouse or adult child.

As noted above, the TFSA is a very significant addition to our savings system in Canada and represents a welcome change to how we invest and save. Take the time now to consider using it as part of your overall savings and investment strategy.

Questions or comments?


This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc.(SCI), a member of CIPF. This publication is intended as a general source of information and should not be considered as personal investment, tax or pension advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. This publication and all the information, opinions and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent. Scotiabank refers to The Bank of Nova Scotia and its domestic subsidiaries.

® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod. ScotiaMcLeod is a division of Scotia Capital Inc. ("SCI"). SCI is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund.

Leaving a job: changing careers

Many people, who find themselves out of work and with time on their hands, and money in their pockets due to lay-off, start thinking about a career change.

If you weren’t happy with the direction your career was taking, this can be your opportunity to move into a field you are more interested in. Quite often this may mean retraining or further education. In addition to your severance package, there are a number of other sources of funding to help you make a career transition.

Here are some resources you should consider if you are thinking about a career change:

The Lifelong Learning Plan (LLP)

The LLP is a way to draw on your RRSP savings to fund a full-time return to school. As with the Homebuyer’s Plan, this enables either you or your spouse to essentially borrow from yourself by withdrawing funds from your RRSP(s) and paying it back at a later date. The following link provides a good description of the LLP: Lifelong Learning Plan


Career Counselling and Skills Assistance

The federal government and many provinces provide counselling services to those looking to change careers, and provide information about training and educational programs as well as funding assistance. Here is a link to a Service Canada site providing a broad range on information: Training and Careers


Economic Action Plan

The federal government’s recently released Economic Action Plan also contains a great deal of initiatives and support to financially assist those who find themselves out of work. It also discusses programs to assist workers in retraining and beginning a new career. Information on the Economic Action Plan can be found at: Economic Action Plan.


Questions or comments?


This publication is intended as a general source of information and should not be considered as estate, tax planning, personal investment or tax advice, nor should it be construed as being specific to an individual’s investment objectives, financial situation or particular needs. We recommend that individuals consult with their professional financial or tax advisor before taking any action based upon the information found in this publication. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. While we endeavour to update this information from time to time as needed, information can change without notice and Dynamic Funds® does not accept any responsibility for any loss or damage that results from any information contained herein.

© 2013 1832 Asset Management L.P. – All rights reserved. Reproduction in whole or in part of this content without the written consent of the copyright owner is forbidden. Snapshots™ is a trademark of its owner, used under license.

Read more Navigating Retirement articles

About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

After two decades in the financial services industry, Jeff's experience as an advisor and branch manager define his approach to providing customized financial planning, estate planning, and managed income solutions. Key to this approach is a thorough understanding of the unique challenges and goals that exist in every client's life. He is a partner in Navigation Wealth Management.

Jeff holds the Certified Financial Planning and Chartered Investment Manager designations. He lives in Kelowna with his wife Tanya, and their two (almost adult) enterprising children.


You can contact Jeff by email at [email protected]



The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet presents its columns "as is" and does not warrant the contents.

These articles are for information purposes only. It is recommended that individuals consult with a financial advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

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