Our health is really our greatest asset and maintaining our health is of tremendous importance.
You want to do what you can to ensure that health issues will not jeopardize the enjoyment of your retirement years. There is nothing you can do to completely avoid health problems, but you will try to minimize the problems as much as you can and ensure that problems that occur are dealt with as quickly and efficiently as possible. It is also an important fact that older people require more health care.
Once you retire and lose your workplace health benefits, you cannot necessarily rely on the government to address all of your health issues. You may be faced with large personal costs, particularly in the area of chronic care. Your provincial/territorial health care system covers all medically necessary treatments; however, these programs do not always pay for some health-related issues such as:
- Drugs (Pharmacare) – all provinces and territories currently provide support to seniors for drugs but the degree of coverage varies across the country.
- Dental Care – coverage will be limited to medically required procedures (in a hospital).
- Chronic Care – some provinces offer chronic care but it may be difficult to obtain.
Having health insurance can help protect you from some of the potential costs. Some examples are:
Group Insurance Plans
If you have been a member of a company group insurance plan, your coverage may extend into retirement for certain health-related costs. However, even if the coverage is provided it is usually a reduced amount. Consult with your employer to determine if coverage is available.
Private Health Insurance
You can purchase private health insurance to cover expenses not covered by your provincial/territorial plan.
Critical Illness Insurance (CI)
CI pays you a lump sum if you experience one of a specified list of diseases or afflictions. Standard coverage applies to heart attack, stroke, coronary bypass and cancer although coverage for additional issues is available. The proceeds are not taxable and may be used for any purpose.
Long-Term Care (LTC)
The cost to live in a nursing home can be substantial; $2,500 per month is not uncommon. LTC insurance makes regular payments (monthly) if you require institutional or at-home care. The benefits begin when it can be shown you cannot take care of yourself as defined by the policy.
Powers of Attorney for Personal Care or “Living Wills”
Unless you have completed a Power of Attorney for Property and Personal Care, if you become physically or mentally incapacitated and cannot take care of you own affairs, someone else, typically a family member, will have to approach the court and be appointed as your representative. This can result in several problems. First, where there are several adult children, the decision to name a representative may result in family conflicts and hard feelings. Second, the representatives will be making decisions about your care and future that may not be what you would have intended.
A Power of Attorney (POA) lays out specifically who will be your representative(s) and what powers he or she has. You should seek guidance from a lawyer when completing a Power of Attorney.
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.
Recently Introduced Tax Breaks to Help Families
On October 30, 2014, Prime Minister Stephen Harper revealed income splitting tax breaks for families with children less than 18 years of age. Canadians have been waiting since 2011 for a variety of promised tax breaks.
Family Income Splitting
A new federal non-refundable Family Tax Cut Credit was recently introduced that will create tax savings for families with children less than 18 years of age. To be eligible for this credit an individual must:
- Have a spouse (including common-law partner); and
- Have a child under 18 years of age at the end of the year who resides with the individual or the spouse.
Effective 2014, the family income splitting measures allow a higher income spouse to allocate up to $50,000 of income to the lower income spouse for the express purpose of determining this new federal tax credit. The maximum allowable benefit that can be attained from this transfer is a $2,000 non-refundable federal tax credit. Please note that the Family Tax Cut Credit can only reduce federal income tax at this point and there is currently no reciprocal provincial tax credit.
For separated families, who have joint custody of a child under 18 years old that resides with both parents throughout the year, each family will be eligible to claim the Family Tax Cut Credit providing both parents have a spouse of their own and all other conditions are met.
There is already a common misunderstanding that the Family Tax Cut Credit is similar to the Pension Income Splitting measures, which is not the case. There is no income actually being transferred between spouses. The net income of both spouses remains the same; the only difference will be the additional federal tax credit claimed by the higher income spouse.
As a result, personal tax benefits such as the GST/HST credits, the Canada Child Tax Benefit, age amount and the spouse and common law partner amount, will not change.
Child Care Expenses Deduction
This deduction allows parents, with children under 16 years of age, to reduce their Taxable Income by their child care expenses incurred in order to earn employment or business income as well as to pursue education and perform research.
Effective 2015, the Federal Government has proposed to increase the Child Care Expense Deduction from $7,000 to $8,000 for children under age 7 and from $4,000 to $5,000 for children ages 7 to 16 (and for infirm dependent children over age 16). For children who have a Disability Tax Certificate on file with the CRA, they will now be eligible for an increased credit to $11,000 from $10,000.
Universal Child Care Benefit
Starting in 2015, this monthly benefit will increase by $60 per month from $100 to $160 per month, for each child under the age of 6. Additionally, a new benefit of $60 per month will be available for children from ages 6 through 17.
Please note that due to the increases in the Universal Child Care Benefit, effective 2015, the Child Tax Credit will be eliminated for 2015 and later years. The Child Tax Credit was originally introduced in 2007 and was available for parents with dependent children under 18 who resided with the parent(s) throughout the year.
Child Fitness Tax Credit
As previously announced on October 9, 2014, the Federal Government has also doubled the Child Fitness Tax Credit to $1,000 starting for the 2014 taxation year for families who enroll their children in eligible fitness activities. In addition, this tax credit will be refundable starting in 2015.
Please note that these measures are still subject to parliamentary approval. This publication has been prepared by Scotiabank and is intended as a general source of information. This publication should not be considered as personal investment, tax or legal advice.
We are not tax advisors and we recommend that individuals consult with their tax professionals before taking any action based upon the information found in this publication.
This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc. Scotia Capital Inc. is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. 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. While care and attention is expended to ensure the accuracy of the material in this publication, ScotiaMcLeod does not warrant the accuracy of the material and disclaims any liability with respect to its contents.
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 of ScotiaMcLeod. ScotiaMcLeod is a registered trade mark of The Bank of Nova Scotia. The mark refers to the activities of The Bank of Nova Scotia and certain of its Canadian subsidiaries such as Scotia Capital Inc., The Bank of Nova Scotia Trust Company and 1832 Asset Management.
The Canadian demographic landscape is rapidly shifting as baby boomers and older seniors lead the way in breaking the longevity mold. With increased life expectancy come challenges specific to aging.
There are approximately 500,000 Canadians living with Alzheimer’s disease or other dementia (of which 50,000 are under the age of 60). It is expected that within a generation, as Boomers age, this number will rise to 1 to 1.3 million. Women comprise almost 75% of Canadians with Alzheimer’s disease.
What is dementia?
People often equate memory loss alone with dementia. But dementia is actually used to describe a group of symptoms that affect a person’s intellectual and social abilities to function in their daily lives. It is not a normal part of aging and there are different types of dementia. A person diagnosed with dementia has difficulties in at least two aspects of brain function that can include memory loss, impaired insight and judgement, and language. Personality and behaviour changes can also occur.
Alzheimer’s disease is the most common dementia and in its early stages can be difficult to recognize. It is a progressive and fatal disease as brain cells break down and die. Current statistics suggest that nearly 50% of adults over the age of 85 may have this disease.
Alzheimer’s disease involves:
- Impaired thinking and reasoning
- Difficulty understanding abstract concepts like numbers
- Impaired orientation and spatial relations (lose understanding of time and place)
- Difficulty planning and performing familiar tasks
- Difficulty speaking and writing
This is not only a disease that affects the mind.
Physical changes over time include:
- Loss of balance
- Decreased mobility
- Difficulty swallowing
There is no cure for this devastating disease. Life expectancy after diagnosis of the disease can range from six to twenty years.
Consider the financial obstacles that Alzheimer’s disease can pose.
Memory loss. Bills including insurance premiums need to be paid. Important documents must be protected and safely stored in a place that is remembered. Otherwise, they may be at risk of getting lost or thrown away. Various appointments, financial decisions that need action or passwords may be forgotten.
Abstract concepts. Managing finances requires sophisticated abstract thinking. Imagine not understanding concepts such as: numbers, basic math calculations, percentage, rate of return, compound interest and the value of money (knowing the difference between 5¢, $50 and $5,000).
Familiar tasks. Writing a cheque or doing on-line financial transactions requires performing a series of actions done in a specific sequence.
Impaired Insight and Judgement. There can be serious consequences if your parent does not understand financial decisions or actions and if she/he is no longer capable of making financial and personal care decisions.
Cost of care. As cognitive and physical abilities decline over time, care is needed. Strategies to approach your parent’s immediate and future care needs are essential. The potential financial, physical and emotional toll on caregivers cannot be ignored.
Financial abuse and neglect. Older seniors can be at risk. People living with dementia can be at additional risk, as they may not have the insight to recognize abuse.
Talking to family advisors is an important step in addressing the range of issues that you or an older family member may face when changes in health occur or are anticipated. Are your Powers of Attorney (POA) for property and personal care along with a Will in place and up to date? These are legal decisions that require cognitive capacity. Have the designated POA’s and Executors been introduced to your advisor in advance of any need? Have you had conversations about anticipated care costs?
Now that the children have ‘left the nest’, it is a good time to step back and take stock of your financial situation.
Being on your own will probably cut household costs to some extent, but there may be other outlays as well depending on activities planned and ongoing financial support for children at college/university.
Setting up a new budget that reflects your new situation is a very good idea. Use this Empty Nesters Budget to give you an idea of where you stand.
Returning to Work
In some cases, a spouse has either given up or not started a career in order to stay at home and take care of children. Now that the children are gone, that spouse may be considering returning to or entering the workforce. Not only will this create additional income, but it may also provide personal satisfaction and an enjoyable use of time. Where a return to the workforce is being contemplated, you need to decide on the time and financial implications. The job being considered may require a return to school for a period of time, which will have implications for the family budget as well as a time commitment. The Lifelong Learning Plan (LLP) can be a way to use your RRSP funds to help finance a return to school.
Now would probably be a good time to set up a meeting to review your investment portfolio to ensure that it properly reflects your current circumstances and objectives. As a general rule, your asset mix should become somewhat more conservative as you get older. As well, if you are planning to support or at least subsidize your children’s post secondary education, some thought needs to be given to which investments should be liquidated and when. If you have RESPs in place, they should be reviewed to ensure that the investments are appropriate and decide on the most efficient approach to liquidation.
Your insurance coverage should be an important integrated part of your financial plan that requires regular monitoring. Now that your children have left home, you may want to meet with your insurance agent(s) to review your current coverage.
Automobile – Every parent is well aware of the high cost of insuring a young person to drive. Now that your children are away from home, you should decide whether they need to be covered on your vehicle or vehicles. If your children are out on their own earning an income, it is probably safe to suggest that they can assume the costs of insuring their own vehicle. If they are away from home at college/university, you should decide whether they still require coverage and, if so, for what time period.
Life – Life insurance is typically used to ensure that dependents/survivors are adequately taken care of after the death of the life insured. Now that your children are either out on their own or in college/university, the need for and amount of coverage should probably be revisited.
Some parents may have taken out life insurance on the life of their children. Most child life policies lapse when the child reaches the age of 18 or extend to age 25 if the child is in full-time school. Policy provisions should be reviewed with your Agent.
Continued Support of Children
There has been a trend in recent years for children to either continue living at home with their parents through and after college/university. These so-called ‘boomerang’ children may find themselves at home as a result of unrealized employment opportunities, failed marriages, debt load or perhaps simply convenience. Many parents don’t mind this situation, at least in the short term, since it provides an ongoing family situation. However, this can serve to derail or at least postpone other objectives that parents may have. As a parent, you need to sit down and candidly discuss this with your children. It is probably safe to assume that most parents are more than willing to provide ongoing assistance to their children to help them through rough patches or to get them established, but the reasons for the support need to be analyzed and positive plans established.
Assisting Grandchildren and Registered Education Savings Plans (RESPs)
You may be in the position where your children have children of their own and you want to provide them with financial support for the future. We all appreciate the importance as well as the costs of post-secondary education. One of the most effective ways to finance post-secondary education is through RESPs. As grandparents, you are able to contribute money to an RESP for a grandchild, which will grow tax free until the child attends college/university. There are numerous rules and regulations concerning RESPs. I can provide you with all the necessary details about the nature of RESPs and how they can be established.
Questions or comments? [email protected]
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