Category Archives: Interviews

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Interviews

Interview with Lisa Chamzuk: What happens to benefits if retirees return to work?

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Today I’m interviewing Lisa Chamzuk, a partner in the pension and employee benefits group at the Vancouver law firm of Lawson Lundell LLP for savewithspp.com. With an increasing number of employees opting to work beyond age 65, or coming back to work after retirement, many questions arise as to what, if any, pension accrual and healthcare benefits older workers can expect to receive from their employers.

So that’s Lisa and I are going to talk about today. Thank you for joining me, Lisa.

Thank you for having me.

Q: If an employee retires and starts receiving a pension from the company pension plan and decides to come back to the same employer, can this individual accrue additional pension?
A: Generally speaking, no. It depends a little bit on the type of pension plan where the pension accrued and from which the member is collecting  the pension. There is a rule in the Income Tax regulations that prohibits someone who is drawing a pension at the same time as accruing further benefits in that same pension plan. It is something that not all employees know when they decide to   retire.

Q: I presume that this rule applies to a defined benefit pension plan. What about a defined contribution plan?
A: That’s a good question. So, the rule applies only to a defined benefit pension plan. What that means is, if you draw your pension from your employer’s DB plan you can’t then re-accrue in that same DB plan when you return to work. That doesn’t mean that if you had an accrual in a defined contribution plan that you can’t re-accrue in the same way.

Q: And I presume a Group RRSP would be the same thing.
A: Yes, that’s not covered by the rule either. You could come back and accrue under a Group RRSP subject to any age restrictions in the plan document.

Q: So let’s say a retiree is collecting a DB pension and returns to work. Can that person ask to stop receiving pension benefits so that accruals can start again?
A: The ITA doesn’t weight in on that particular issue, but pension standards legislation across the country does. So, if you are working in British Columbia, the pension benefit standards act in our province specifically requires that the plan text say what happens if a retiree returns to work. If the sponsor of the plan chooses, it can give two options to the retiree who is coming back to work. The first is to continue with the pension and not return as an active member in the pension plan. The second option is to suspend receipt of the pension and return as an active member in that pension plan.

Q: What happens if the employee works beyond the age of 71?
A: Well at age 71 we run into the ITA rules again. So, at the age of 71, you must start receiving a pension if you have been accruing in a pension plan. That’s sort of the end of the line in terms of pension accruals. There has been talk about that number increasing. But as of right now, the rule is, when you reach the age of 71 your pension must start. So even if you’ve come back and you begin to re-accrue you have to be aware of the fact that at some point you’re going to be forced to start receiving that pension and you won’t be able to draw your pension at the same time you are accruing. 

Q: What if a retiree takes a job with another employer while collecting a pension from his or her former work place? Can that person start accruing in the new pension plan?
A: Yes, generally speaking, the rule only applies to accruing in and drawing a pension from the same pension plan.

Q: What, if any, alternative arrangements can employers put in place for older employees collecting a pension who are coming back to work?
A:  If the employer wants this particular segment of people to return to work and so is motivated to respond to this particular issue, there are options available. The employer could set up a define contribution plan, for example. An RRSP is another way the employer could go, and it’s possible that employer already has that type of arrangement set up for other reasons. However the age 71 restriction applies to RRSPs as well. 

Q: How common is it for returning, or older employees to be offered a salary position? Wouldn’t it be more typical for employers to bring on an individual as an independent contractor for a specific period?
A: I think that’s probably true, right now. I wouldn’t be surprised if we see a shift over the next 10 years, given what’s happening demographically in the country, if more companies, are looking to retain or draw back older workers into the work force. It is also less likely in a unionized environment. I think someone who was in a union before retirement will probably go back through the union dispatch program to get work. There are generally fewer options in terms of post-retirement pension accrual after that happens because it’s a union-sponsored plan as opposed to an employer-sponsored plan.

Q: What about age-based restrictions in group benefits plans, like life insurance and health benefits? Are they permissible?
A: They are and that’s certainly something that we see fairly regularly. Sometimes you have to pull the policy document to see exactly what those restrictions are. It’s absolutely common for a health benefit policy to create either a cut-off at a certain age
(usually 65) or a scaled benefit once the covered individual reaches a certain age. For example, it’s very typical to see life insurance coverage drop down even if an individual does work past age 65. And, in health benefits, we see that as well. We often see a cut-off at age 65.

Q: There are several cases alleging that allowing employers to have different benefits for employees over 65 is age discrimination. How have the plaintiffs in these cases fared before the courts? And if they’re not successful, why do you think they’re not?
A: This is certainly the litigation of the day. We’re seeing lots of these types of claims. Just by way of background, there used to be provisions in human rights codes across the country that allowed for mandatory retirement. Employers could force individuals to retire and it wasn’t viewed as being discrimination on the basis of age.

When mandatory retirement was eliminated, what did remain in provincial human rights codes was the provision that says that even though you generally can’t discriminate on the basis of age, that doesn’t apply in the context of a bona fide plan text of a group insurance plan or pension plan. Therefore, unless a former employee can demonstrate to the Human Rights Tribunal, and then on review by the courts that the plan itself is not bona fide, they’re not going to be able to make out an age discrimination claim.

To date, that language has been interpreted to mean that it is essentially a legitimate plan. Tribunals have not gone a step further to say employers must be able to show on an actuarial basis why that age cut-off or that reduction at a certain age is required in order for the plan to be sustainable.

Q: Interesting. With the increasing number of older employees in the workplace, do you anticipate a possible legislative response to better protect the rights of returning retirees to accrue benefits comparable to younger employees?
A: It’s a very strong group, politically. They certainly have leverage. What I do expect to see if tinkering with the age restrictions to recognize that people at age 65 are much more capable than, maybe, they were 50 years ago, and may age 71 is too low an age. But what the drafters/legislators are wrestling with is also the need to transition older workers to make room for younger cohorts. 

Q: What, if any, other regulatory issues impacting their compensation package should retirees be aware of if they are considering going back to work?
A: Well, don’t assume that anything that you might have been entitled to when you were in the workforce is a given. Ask specific questions. One thing that could come up depending on the type of employment that the retiree is returning to is, if they’re receiving old age security benefits, there is a the claw back if they earn too high an income. They might have an obligation to re-pay OAS benefits and have those benefits cut-off.

And again, you’d want to get some financial advice to make sure you know exactly what impact the return to work will have on your particular circumstances.

This is all very interesting. Thank you very much for talking to me, Lisa.

Thanks again for having me.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.
Interviews

When is the 4% rule safe? Interview with Ed Rempel

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Today I’m interviewing Ed Rempel for savewithspp.com. Ed has been a Certified Financial Planner for over twenty years, and an accountant for thirty-three years. After building one of the largest financial planning practices in Canada, he partially retired in his fifties to focus on his passion for writing.

On his blog Unconventional Wisdom, Ed recently discussed his very interesting research* which reveals that if you want to withdraw 4% a year from your retirement portfolio without running out of money in 30 years of retirement, you need to hold significantly more equities than bonds in your portfolio. And that’s what we’re going to talk about today. Welcome, Ed.

Thanks a lot Sheryl.

Q: So how do you define a successful retirement for the purposes of your study?
A: For the purpose of the study, I defined a successful retirement as providing a reliable income rising with inflation for 30 years. That means you retire at 65 and your money lasts to age 95.

Q: Many financial planners use the 4% rule, which essentially says that you can withdraw $40,000 a year plus inflation for life from a $1 million portfolio. What do you think?
A: I have 146 years of data on stocks, bonds, cash, and inflation. I looked back at all those years to see what would have happened in the past if people retired that year, with each type of portfolio – e.g 100% bonds, 100% stocks plus various other permutations and combinations. 

I also tested these scenarios with inflation, to see what actually happened in the past. And the surprising result was that the more equities you actually have the safer your portfolio is. My whole blog is about “unconventional wisdom.” I love challenging ideas that most people believe aren’t really true and that’s one of them.

Q: So, to what extent does retirement success link to whether or not retirees follow the common of rule of thumb which suggests that they shouldn’t invest more than 100 minus their age in equities? For example, the portfolio of a 70-year old should include 70% bonds and 30% stocks.
A: We call that the age rule and its one of the things I tested in the study. I found that it actually gives you a significantly lower success rate. If you have 70% bonds at age 70, and the bond allocation is growing as you get older, that’s a very low component of stocks. In these circumstances you will have a much lower retirement success unless you withdraw a lower amount of income each year. 

Q: And what would the lower amount of income be in your view?
A: If you are more comfortable with a conservative 70% bond/30% stock portfolio, I would suggest you use a 3% not a 4% annual withdrawal rate. 

Q: Then what is the stock/bond allocation with the highest success rate, which we defined earlier as having enough money to withdraw 4% annually plus inflation, for thirty years?
A: The highest success rate will result if you are invested 70% or more in stocks. This is a very heavy allocation. And if you plan to withdraw more than 4% (i.e. 5% or 6% annually) the highest success rate will occur if you have 90% or 100% stocks. 

Q: What about bond or GIC investors? What percentage of their accounts can be safely withdrawn so their money will last thirty years?
A: I would suggest bond and GIC investors stick with 2.5%. That’s a little bit more than the interest that they’ll get, so they would be encroaching on their principal.

Q: Many financial advisors tell investors to keep cash equal to two years income, to draw on when their investments are down. Will that improve the possibility that these people won’t run out of money?
A: That is another example of “conventional wisdom” that people subscribe to. And I agree it kind of sounds logical, but my study found that holding two years’ worth of cash will not enhance your chances of making your money last for 30 years. In fact, there were a number of cases where keeping cash actually meant investors ran out of money, when without cash they didn’t.

The only possible benefit would be entirely behavioral. For example, if investments go down some people might get scared and cash them in. However, if they have cash they might leave their investments alone and just spend the cash for a little bit. But in general I don’t recommend this because I like to follow what actually works and I found no actual benefit in holding cash to cover expenses for several years after a market downturn. 

Q: Based on their risk tolerance then, how would you advise clients or readers who are nervous about holding a high percentage of equities in their portfolio?
A: They still need to stay within their risk tolerance. Therefore, even though the study showed a higher amount of equities is safer, and would give them a better retirement, that’s not what I’m recommending that everyone should necessarily do.

Q: So more conservative investors are just going to have to understand they will either need more money to meet their retirement goals or they will have to spend less?
A: Right. Adding bonds gives you a fixed income that reduces volatility that can make you less nervous. But then you have to lower income expectations. 

Q: Say that somebody does go with a higher stock allocation, what about the risk if there’s a stock market crash early in their retirement? How much will it throw out the calculations?
A: In the study I went back to 146 years, and there were a lot of big market crashes in the last 146 years, to see what actually happened. In actual fact that I found that historically this almost never a factor except in one very clear case for people who retired in 1929. It was actually inflation that eroded buying power over the years.

Q: What’s the biggest mistake people can make if there is a market decline?
A: The biggest mistake, in fact, I call it “the big mistake,” is to sell your investments, like sell your equities or switch to more conservative investments, after a market decline. The bottom line is you must be able to stay within your risk tolerance and stay invested in the market, through the inevitable crashes. That’s the only way you’re going to get the retirement income that you want.

Q: My last question, what is your best advice to retired investors, or investors close to retirement, regarding how to structure their portfolios.
A: Well the bottom line is to have a proper retirement income plan. You have to think through what the lifestyle is you want to have and how much money you need to support it. And then look at how you are comfortable investing and come up with a plan that gives you what you need. There will be trade-offs, but once you make a proper retirement income plan, then you can have a sustainable income throughout the rest of your life.

Thank you Ed! It was a pleasure to chat with you today.

Thanks a lot Sheryl.

*For the full report of Rempel’s research discussed above, see How to Reliably Maximize Your Retirement Income – Is the “4% Rule” Safe?

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.
Interviews

Part 2: Always appeal refusal of CPP disability benefits

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For the second part of our series about CPP disability benefits, I interviewed David Brannen, a former occupational therapist turned disability claim lawyer from Moncton, New Brunswick. Brannen is the author of A Beginner’s Guide to Disability Insurance Claims in Canada. He started the national disability claim law firm Resolute Legal to help deserving people win long-term disability payments from insurance companies and the CPP Disability Program, even after a denial or unsuccessful appeal.  Thanks for joining me today David.

I’m delighted to be here, Sheryl

Q: How does the definition of eligibility for CPP disability benefits differ from the definition in an individual or a group disability insurance plan?
A: The easiest way to look at it is that the CPP definition is much harder to meet than most disability insurance policies. CPP disability is focused on the inability to do basically any job in the economy, whereas disability insurance policies look at the ability to do your own job. Then there usually is a second part in an insurance policy that will continue to pay benefits if you’re disabled from doing any job as defined by the insurance policy but that is usually a much less restrictive definition of any job as would be defined for CPP.

Q: So how hard is it to meet the eligibility criteria and get CPP disability benefits? Of the people who apply, how many are successful at the first level?
A: The last data that we had released was an auditor-general’s report back in 2016. The results were pretty shocking and showed that of the 70,000 people who applied in the audit year, about 60% were denied.

Q: Why is the denial rate so high?
A: It’s hard to say. I would assume a number of those people of the 60% simply don’t meet the eligibility from a contribution standpoint so many people have either not made recent contributions or they’ve never paid into CPP at all. But the bulk of people who have met the contribution requirements get denied because they simply don’t have enough information for the case to be approved.

Q: Why should a person receiving LTD benefits — that’s long-term disability benefits — from a private or a group plan apply for CPP disability benefits although if they are successful the LTD benefits will typically be reduced?
A: That is a very good question. The first reason I tell people is look, you really don’t have a choice because after a certain point the insurance company will estimate and start deducting your CPP disability amount even if you’re not receiving it.

The other big one is that receiving a CPP disability benefit will actually result in you eventually getting a higher CPP retirement. The general idea is that it shows that you’ve been out of the workforce for a legitimate reason and it actually does factor into the ultimate CPP retirement pension at the end. Finally, getting the CPP disability benefit is really a safety net. If you suddenly lost your disability benefits you would have still the income coming in from the CPP disability program.

Q: That’s interesting. Now, tell me about the appeal process available to people who are turned down.
A: Okay. It’s a two-step paper appeal process. So once you apply and get a denial, you have 90 days to submit a written appeal requesting a re-consideration. You will send it directly to Service Canada, the same people who declined the original application. The best scenario is that you will supply more information to support your arguments.

If your internal reconsideration is denied, the next level of appeal is to the Social Security Tribunal which is an independent body that is the final decision-maker as to whether or not you are entitlted to a CPP disability benefit.

Q: You just told me in an offline discussion that typically those hearings are held by video conference or telephone.
A: You have the option to do them in person and certainly sometimes the tribunal judges will request an in-person hearing but more and more they are scheduled by video conference and telephone. It enables the Tribunal to actually process the claims more quickly and at less expense to the claimant.

Q: So of the 60% of applicants who are turned down initially, what percentage go on from there to submit a reconsideration appeal and then an appeal to the Social Security Tribunal if they are turned down a second time?
A: One of the big things that really shocked me when I saw the auditor general’s report is that of the 40,000 people denied, about 66% just give up altogether. That means only 33% or about 13,000 people actually file appeal. Then of these 13,000 people, about 35% get approved and about 65% are denied. That leaves you with a pool of like about 8,500 people who get denied after the second appeal.

So you’re already down from 70,000 to 8,500 who are denied at that second level. Again, of those people who get denied on the first appeal, more than half give up. As a result, the number of people that go on to the tribunal hearing is about just over 3,000 people as documented in the most recent report.

Q: How do they do?
A: Actually they do fairly well. Of the 3,000 that go to the final hearing, about just over 60% actually get approved. That shows if you’re one of those people that does persevere to the end, you do have a better than 50% change of winning at the tribunal hearing, all things being equal. It’s the one point where the percentage of approvals kind of flips if you look at it. By the time you make it to the tribunal here is about a 60% approval rate.

Q: So you’ve published a number of online publications to help people and one of them is The CPP Disability Claims Approval Blueprint. What are some of the tips for success on appeal that you offer in blueprint?
A: Number one is meet the claim deadlines. Many people lose and are denied because they just don’t meet the deadlines for appeals. It’s a very unforgiving system. The other thing we tell people is that most claims are denied because there’s just a lack of information. Therefore, we encourage people to just get as much information into the claim file as possible. That means getting your complete doctor’s records going back as far as possible. Any physiotherapy records or medical records you send in are helpful. Most people just send in their most recent family doctor’s records but I can’t emphasize how important it is to have historical records on file.

Finally, the real secret to winning these cases is building a persuasive narrative and story of your case. To build that narrative you need the historical medical records. One of the most powerful stories you can tell is a struggle over time — that you just didn’t decide to stop working one day. You can show you struggled for years at work. You struggled with disability and pain for years and it’s all recorded in the medical records. Once you can show that powerful story all of a sudden the hearing can flip from, “Why aren’t you still trying to work?” to, “Wow, look at what this person’s been through over the last five years.” 

Q: How can a disability lawyer help people who are turned down the first time around?
A: Frequently disability lawyers can help not by necessarily jumping in to represent people but by giving them better information to do a better job representing themselves. The main value a lawyer brings in a case like this is the ability to pinpoint where the information gaps are. The fact that you’re disabled does not win your case. What wins the case is showing that the medical records or the materials you put in demonstrate you’re disabled.

I guess lawyers help most by being able to pinpoint the specific information that’s needed and sometimes they are better able to get the information. Doctors are often not as receptive to having the patient tell them, “Can you please expand on this? We need to know more about that.” But if a lawyer writes to them, they’re more likely to respond to those types of inquiries.

Q: How much does it typically cost for legal services to appeal a CPP disability claim?  After all, disabled people appealing CPP benefit typically haven’t worked for a long time and may be really broke. How much are they putting out and how long is it going to take them to pay this off before they even have a pension in their pocket?
A: I can’t speak for all lawyers or people who practice in this area. We take cases on a no win, no fee basis so that there’s no money is required upfront. You would just pay if an appeal is successful. Anticipating this call, I calculated that our average fee for the last year was about $4,500. That’s based on all cases, including ones where we get a zero because the case is lost.

Typically if we are successful, there is a back payment and the fee would be paid as a percentage of that back-payment (say about $15,000). Like I said, our average for 2016 was around $4,500 of that back-payment. We’d get our fee and our client would keep the remainder and all future payments. 

Q: Okay, that’s great. So is there any other comments or questions that I didn’t ask that you’d like to comment on?
A: Many people, legitimate people I see are denied are for two main reasons. One, they haven’t tried to go do other types of work or they haven’t demonstrated that they really tried to stay in the workforce.  The other one is, for whatever reason not really following through all of the medical recommendations. So if you quit going to physio, if you refused to take a drug, those are kind of things that can also cause a legitimate claim to be denied

***

That’s great! Thank you very much, David. It was a pleasure to chat with you today.

It was my pleasure. Thank you.

David Brannen

 

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.
Interviews

Protect your purse: Interview with author Doris Belland

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Today I’m pleased to be interviewing Doris Belland, author of the new book Protect Your Purse which includes lessons for women about how to avoid financial messes, stop emotional bankruptcies and take charge of their money.

Belland has been digging into women’s financial literacy ever since she ended up nearly $400,000 in debt after her first husband’s death, when she was 32. Persistence, determination, and a singular focus on results led her to climb out of debt in two years and develop a substantial real estate portfolio over the following ten years.

Since then she been president of a local real estate investors’ organization, developed a successful Rent to Own company, and published her first book. Belland also has a blog on her website Your Financial Launchpad and she is using her hard-won financial literacy to help other women rock their finances.

Thanks for talking to me today Doris. It’s my pleasure Sheryl.

Q: Your first husband, Malcolm died after a prolonged illness and you were left with a $400,000 debt. How did that debt accumulate and when did you become aware of the full extent of how much you owed?
A: I’m happy to say that it was not credit card debt. It was acquired as a result of growing our business. Also, a year and a half before Malcolm died, we bought a house. I was aware of the individual amounts owing but I’d never sat down to actually do the math until after Malcolm died. One day I had a moment of clarity and that’s when I tried to figure out the big number and it was a bit of a shock for me.

Q: You were able to climb out of debt in two years. Tell me how you managed to do this so quickly?
A: What we sold at the time were designs that my husband created. I realized after he died he was the engine of the business. I had, at best, a two year runway in order to make sales. That’s how long the existing designs would last.

The only way that I could conceive of paying off $400,000 was by maximizing the sales of the product. I approached our suppliers who I owed a lot of money and I said to them, “Listen, I’m going to pay off every dime that I owe you, but in order for me to do that I need to actually borrow even more. I’m going to take a very aggressive approach and sell everywhere I possibly can.” I called their stores. I offered them preferential pricing. I gave them incentives for higher sales.

I also sold off as many of our other assets as I could. I went through my entire house and said, “If I haven’t used it in two years I’m going to sell it.” The big things along with all of the small things helped me pay that off that debt just over two years.

Q: With the benefit of hindsight, what would you have done differently during your marriage to Malcolm to protect yourself and the family finances?
A: Oh boy! The very first thing, for me, I think is that I would have participated actively in all of the finances, so talk openly about where we were at, what our financial situation was. I walked away from a fully funded PhD to help Malcolm in his business when he became ill. What I should have done is stop and actually analyze the consequences for me, if I walked away from my doctoral program because that was my golden future.

What I say to people now is that they should build thinking time into their lives to look at all of the financial components that come into play and ask themselves, “What if something happens to me, what if something happens to my spouse? What would the consequences be?”

Q: Why did you decide to write a book about your experience?
A: Well, I didn’t. It didn’t come from me. I’m happily remarried and I was sharing some of my stories with my husband Mark and he said, “You have got to write this down. You’ve got to share this with people.” I started with a blog and then realized I wanted to help women avoid what I went through. That became the basis for the book.

Q: One of your first pieces of advice is about the importance of having a will. Why is having a will important even if there are few assets and no children?
A: It makes everything so much easier to transfer assets after death. I really strongly recommend a will for, frankly, absolutely everybody. Even if you don’t have any dependants and if you’re not married, you still have things in your life that you care deeply about. Whatever it is, the will allows you to say, “Here is what I want done with the things that are most valuable to me.” If you are married or you do have a partner it will help protect them and make it so much easier should something happen to you.

Q: Now, you alluded to a joint and survivor ownership of assets. What does that mean and why is that an important thing for women to do?
A: Basically, if your husband dies and you are on title for a property, for example, or your name is on an asset or you’re listed as a beneficiary for an investment, it just means that you immediately still have access to these things. It avoids the costly and sometimes lengthy process of court applications. It just means that now you have far greater control, and again, I go back to the ease of transition. You’re dealing with enough and legal issues are the last thing you need.

Q: I would suggest to you though that retaining bank accounts in one person’s name, particularly the woman’s name could be something that throughout a marriage might be a form of protection, as opposed to having everything in joint ownership.
A: Right. We’re talking about two different things, so the question you posed is, what’s the advantage of having assets in both names? The challenge, of course, is in the event of divorce. In my book, I talk about two different scenarios, one is a scenario where there’s death and one scenario where there is divorce and the woman absolutely needs protection. So having most of the assets in joint ownership for estate purposes doesn’t preclude each partner having their own assets and their own money.

Q: You interviewed over 300 women and told many of their stories in the book which makes it very readable. How did you find your interview subjects and why did you decide to incorporate their stories into your book?
A: Very simply, for me, my story is one data point, I’m one person. But as I thought about it and I started talking to other people I realized a lot of people are going through deaths and divorces and I got curious.

I put out the word through social media and through my own networks. I said, “I’m  interested in talking to any widows or divorcees who would be willing to confidentially speak with me.” Then the floodgates opened up. Friends told friends and next thing I knew I had perfect strangers from other countries reaching out to me.

Q: That’s fascinating. Briefly, what are the top five insights you would like readers to gain from reading your book?
A: Here are the top 5 takeaways I hope my readers come away with:

  1. Don’t assume it can never happen to you.
  2. Build time for thinking in your life.
  3. Ask yourself, what if something happens to me or my spouse?
  4. Sit down regularly to talk to your spouse about money.
  5. Put the key documents in place, i.e. insurance policies, wills etc.

Q: You’ve remarried, you now have two daughters. How difficult was it to reinvest yourself and create a whole new life?
A: I guess the easiest way is if you imagine that you’re traveling at 120 miles per hour and hit a brick wall. That’s pretty much what it felt like. It was very difficult because I had envisioned myself as an academic from the time I was a teenager and then my life changed 180 degrees. It was exceedingly difficult. It took the better part of a decade to reinvest myself; to start over, to get a point where I felt, “Okay, I’m good.”

Q: What’s next for you? What other irons do you have in the fire?
A: Well, I have been a real estate investor for a decade and I thought that really was going to be my future. But this whole process over the last five years, of digging into women’s financial literacy has made me realize that is where my passion is.

*****

Thank you very much, Doris. It was really a pleasure to chat with you today. Thank you so much, Sheryl. I appreciate it.

 

 

 

 

 

You can purchase Protect Your Purse, Shared Lessons for Women: Avoid Financial Messes, Stop Emotional Bankruptcies and Take Charge of Your Money on Amazon for CDN $19.95

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.
Interviews

Ted Koskie: Why you need a Power of Attorney

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By Sheryl Smolkin

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Today I am interviewing Saskatoon lawyer Ted Koskie about everything you need to know about Powers of Attorney in Saskatchewan. In addition to his law degree, Ted has a B.Sc. in Mathematics and Computational Science and previously worked as a systems analyst. He has been practicing law in the province since 1981.

Thanks for joining me today, Ted.

My pleasure, Sheryl.

Q: Now, to start off: what is a power of attorney, exactly?
A: A power of attorney is a document that allows an individual to give someone else the authority to act on his or her behalf. You name another person in that document to do certain things for you. It can be somewhat unrestricted, or it can be rather restricted.

Q: Are there different types of powers of attorney?
A: In Saskatchewan you can appoint an attorney to manage your property. That’s called an individual and property attorney. The other is a personal attorney, who is an individual that can be given authority to make decisions about personal affairs. This could include things about where one might live, or what kind of help one might need, perhaps around their home. The thing to keep in mind is that a personal attorney is not entitled to make healthcare decisions. That is something that is done under a separate piece of legislation.

Q: And what is that document called?
That document is called a Healthcare Directive.

Q: Many people routinely complete power of attorney forms when they make a will. Why is it important for an individual to grant power of attorney at that particular time?
A: Well, it’s usually a time when people are planning for unforeseen circumstances. A will plans for death, and ultimately, we’re planning for something that we simply cannot gauge in terms of time. The important thing, really, is that at the time of drafting a will, usually a determination is made that an individual has capacity to make a will. If the person has the capacity to make a will, they will also have the capacity to make a power of attorney. The difficulty is that if we allow that to wait, this unforeseen, or unplanned, event of incapacity, or otherwise, may come at a time when we just simply aren’t able to make a power of attorney.

Q: Should a power of attorney be made with a lawyer, or can someone just download a form and fill it out?
A: Well, people certainly can download forms, and those are becoming more and more popular on websites. I certainly do not recommend it. I think many times what we see is that people think that the plain, ordinary English is something that is going to be something they can employ to carry out their wishes but that is not always the case. I often use the example of someone hiring an electrician to wire their garage. Yes, we probably could do it on our own, but if one thinks about it, we certainly would be far better served if we hired a qualified person and legal fees for powers of attorney are usually quite inexpensive.

Q: So, what happens if a person becomes incapable of handling his or her own affairs, and has not granted a power of attorney?
A: Well, they really are left with only a couple of alternatives. One is to make an application to the court for a decision maker to be appointed, and the other alternative would be to make an application to the court under what is called the Adult Guardianship and Co-decision-making Act. Another option would be to look at the potential of engaging the public guardian and trustee, and indeed, there is a mechanism as well within the Public Guardian and Trustee Act for that person to also become a decision-maker.

Q: What qualifications does a power of attorney have to have?
A: Well, the power of attorney, ultimately, must be an adult which in Saskatchewan is 18 years of age or older. The person must have capacity, and not have certain disqualifications. The person cannot be, for example, an undischarged bankrupt or have been convicted of a prescribed criminal offense within the prior 10 years. Some examples of prescribed offenses are assault, acts of violence, intimidation, theft, fraud, and breach of trust.

If the person has been convicted within the previous 10 years he/she either must have been pardoned, or must disclose that conviction to the person making the power of attorney, and ultimately, in writing, that grantor must consent.

As well, there’s one other possible ground for disqualification. He/she cannot be providing personal care or healthcare services for remuneration to the person granting a power of attorney.

Q: Can a power of attorney make or modify a will?
A: No, it cannot.

Q: Do financial institutions, and other groups, for example, have to accept the power of attorney at face-value, and let the power of attorney manage the granter’s affairs?
A: Yes. My view is that, yes, they must. There are times when there might be certain things that have been either prescribed or not prescribed within a power of attorney that perhaps a financial institution might question. But on whole, yes, they must.

Often, people, perhaps, think about powers of attorney much like they do wills, where financial institutions would require people to go to the court to get what are called Letters Probate which is a, in a sense, a confirmation of the last will and testament, and the appointment of an executor. There is no similar such requirement for powers of attorney.

Q: What other types of documentation might they typically request, though, before acting on a power of attorney?
A: Well, my experience, generally, has been, firstly, identity. And they may well look for any proof of the grantor’s incapacity. They may also want to be assured that the individual is still alive, because a power of attorney is only valid during the lifetime of an individual. At death, the will takes over.

Q: So, can the power of attorney, for example, change the names on bank account?

A: Well, yes, they can. But there must be actual specific provision made within the power of attorney that allows that to occur. But generally speaking, powers of attorney give a very, very broad power. In fact, it’s unrestricted, unless it actually is restricted.

Q: Does the Saskatchewan power of attorney have to be registered anywhere?
A: No, it does not.

Q: And how can it be revoked?
A: Well, it can be revoked in a variety of ways. Sometimes, the power of attorney will actually have a date specified in it, as to when it actually terminates. The grantor –if indeed, the grantor has capacity — can do a written revocation of the power of attorney. It also ceases either on the POA lacking capacity, dying, resigning, or ceasing to meet the qualifications that the act sets out.

It also ceases if a decision-maker is made under the Adult Guardianship and Co-decision-making Act, or if the Public Guardian is appointed to act. Or, indeed, if there there’s an order that the person is presumed dead.

But another case where the POA will cease to be valid is if the grantor and the attorney are spouses and they cease to co-habit as spouses because they intend to end their relationship.

Q: That’s really interesting.
A: Yes. It’s a protective mechanism that I think is there in place to say, all right, perhaps that is an occasion when one should reassess those types of decisions.

Q: So, is a power of attorney made in Saskatchewan valid in the rest of the country, or outside the country?
A: My view is that in most instances, it will be. However, from time to time, I see that there are idiosyncrasies in various jurisdictions that might have a specific provision that perhaps our power of attorney has not provided for. In Saskatchewan, provision is specifically made within the legislation to say that an extra provincial power of attorney is valid, if indeed it is valid in the place where it has been executed. I think, in most instances, that would be the case with other jurisdictions.

But, there may be some unique provisions. For example, prior to our Power of Attorney Act being enacted, powers of attorney needed to specifically reference land — the actual description of land — in order to be effective. So there might be this type of provision in other jurisdictions.

Q: Is the power of attorney entitled to any form of compensation?
A: Yes. There are really three ways to be compensated. One is if the fee is actually set out in the power of attorney. That is something that I often suggest to people that they do, because then they know what is being charged. And ultimately, if the individual is taking on the task, they’re deemed to have accepted that amount.

The second way is if the courts make an order setting a fee. And there’s a third, and that is the fee is set out in the regulations which actually provide for a monthly fee. So, if you are actually appointed as a property attorney, you’re entitled to charge 2.5% of monies received, and 2.5% of payments made every month.

If you’re a personal attorney, you’re entitled to charge $15 an hour. Basically, the fee comes out of the grantor’s estate. And when there is a fee in place, the attorney needs to provide an annual accounting of their activities as power of attorney.

Q: If someone’s exercising a power of attorney, but other family members or friends think it’s fraudulent, how can they contest it?
A: There really are a couple of options. One is to bring an application to the court. The court always has a supervisory responsibility. The second is to lodge a complaint with the Public Guardian. The Public Guardian can make appropriate inquiries, and indeed, take appropriate measures as well. The third mechanism, really, is the police. A power of attorney is an individual in a position of trust, which is a very high standard of care, and the police will not hesitate to review allegations of fraud.

Q: So, what did I forget? Is there anything else that you think that our readers and our listeners might need to know about powers of attorney that I haven’t asked you about?
A: I think, all too often, that individuals think only of making a will, and do not think about the need for a power of attorney. What they must realize is that a power of attorney allows for decisions to be made about the individual while they are alive. In my view, it is a very important document, because it deals with the person, the human being. A will deals with stuff. Yes, it is important to settle your affairs, but in my view, far more important to take care of the individual who is alive.

Q: That’s great, Ted. Thanks very much for talking to me today.
A: My pleasure.

 

 

 

 

 

T.J. Ted Koskie
Koskie Law

 

Interviews

Burn your mortgage: An interview with author Sean Cooper

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By Sheryl Smolkin

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If you think you can’t possibly afford to buy a home or that paying off your mortgage is a pipe dream, Burn Your Mortgage is the must-read book of the year. Today I’m pleased to be interviewing author Sean Cooper for savewithspp.com.

By day, Sean is a mild-mannered senior pension analyst at a global consulting firm. By night he is a prolific personal finance journalist, who has been featured in major publications, including the Toronto Star, the Globe and Mail and MoneySense. He has also appeared on Global News, CBC, CP24 and CTV News Network.

Thanks for agreeing to chat with us today Sean.

My pleasure, Sheryl.

Q: As a 20 something, why did you decide to buy a house?
A: Well I guess a lot of people strive for home ownership. My parents were my biggest influence. We always owned a home growing up, so I thought that owning a home was kind of the path to financial freedom.

Q: How much did your home cost, and how much was your down payment?
A: I purchased my home in August 2012 for $425,000 dollars. My down payment was $170,000, leaving me with a mortgage of $255,000. I didn’t go out and spend the massive amount the bank approved me for. I could have spent over $500,000 dollars but I found a house with everything that I needed for $425,000 and because of that I was able to pay off my mortgage in three years.

Q: How on earth did you save a down payment of $170,000 dollars? How long did it take you to save it, and how many hours a week did you have to work to do so?
A: Yes, it was definitely a sizable down payment for one person. I pretty much started saving my down payment while I was in university. I was able to graduate debt free from university and while I was there, I was working as a financial journalist. I was also working at the MBA office, and employed part-time at a supermarket. When I got my full-time job I was saving probably 75%-80% of my paycheck. I wasn’t living at home rent free. I was actually paying my mother rent.

Q: Kudos for your determination and stamina. Do you think working three jobs is actually a practical option for most people, particularly if they have young families?
A: No. As I emphasize in the book, that’s how I paid off my mortgage as a financial journalist on top of working at my full time job. While for somebody like me who is single it makes sense, it’s probably not realistic if you have a spouse and children. But there are plenty of things you can do to save money.

Q: Many people again think they would never, never be able to save up enough for a down payment. Can you give a couple of hints or tips that you give readers in your book that will help them escalate their savings?
A: Definitely. First of all, you absolutely have to be realistic with your home buying expectations. You can’t expect to be able to buy the exact same house that you grew up in with three or four bedrooms and two stories. But you can at least get your foot in the door of the real estate market by perhaps buying a condo, or a town house, and building up equity, and hopefully moving up one day. Think about creative living arrangements. Rent a cheaper place than a downtown condo. Find a roommate.

Q: How can prospective home buyers use registered plans like their RRSP or TFSA to beef up their savings and get tax breaks?
A: If you are a first time home buyer, I definitely encourage you to use the home buyers plan. The government allows you to withdraw $25,000 dollars from your RRSP tax-free (it has to be repaid within 15 years). If you are buying with your spouse, that’s $50 000 dollars you can take out together. That’s a great way to get into the housing market. The caution I can offer is when you withdraw the money, make sure that you fill in the correct forms so you are not taxed on the withdrawal. If you’re not a first time home buyer, then I would definitely encourage you to use a Tax Free Savings Account, because it’s very flexible, and although you don’t get a tax refund, the balance in the plan accumulates tax-free.

Q: After shelter, which means mortgage and rent, food is a pretty expensive cost. How can people manage their food costs while still eating a healthy, varied diet?
A: I offer a few tips in my book. First of all, try to buy items like cereal and rice in bulk and on sale. Another tip I offer is to buy in season. I probably wouldn’t buy cherries during the winter  because they would cost me a small fortune. Try to buy apples instead, and during the summer if you enjoy watermelon, definitely buy it then. Try to be smart with your spending, and that way you can cut back on your grocery bill considerably.

Q: I enjoyed the section in your book about love, money, and relationships. Can you share some hints about how couples can manage dating and wedding costs, to free up more money for their house?
A: People like to spend a fair amount on their weddings these days, and there’s nothing wrong with that, but you just have to consider your financial future, and how that’s going to affect it. Also, when it comes to dating, make sure that you and your potential partner are financially compatible and have similar financial goals. For example, one might be a saver while the other is a spender. Sit down and make sure both of you are on the same page financially, and then find common financial goals, and work towards them.

Q: How can prospective home buyers determine how much they can actually afford?
A: If you are ready to start house hunting, I would definitely encourage you to get pre- approved for a mortgage. Basically, the bank will tell you how much money you can afford on a home. That way you don’t waste time looking at houses out of your price range. However, just because the bank says you can spend $800,000 doesn’t necessarily mean you have to spend that much.

Also don’t forget you will have to pay for utilities, property taxes, and home insurance plus repairs and maintenance. Come up with a mock budget ahead of time, and see how that will affect your current lifestyle. I would say if over 50% of your month income is going towards housing, that’s too much.

Try to kind of balance home ownership with your other financial goals, whether they are saving towards retirement, or even going on a vacation. That way all of your money won’t be going towards your house, and you will actually be able to afford to have fun and save towards other goals as well.

Q: You’re living in the basement and you rented the first floor. Why did you decide to do that, instead of vice versa?
A: Well I’m just one person living on my own, and upstairs there are three bedrooms and two bathrooms. I wouldn’t know what to do with all the space, so it made sense to live in the basement, because to be honest I lived in basement apartments for several years before that, so it wasn’t really much of an adjustment. I mean, personally I’d rather rent out the main floor than get a second or third job. It’s all about kind of maximizing all of the space that you have, and looking for extra ways to earn income.

Q: We rented the basement in our first house. Why did you decide to write the book?
A: When I paid off my mortgage, a lot of people reached out to me for home buying advice. In the media, there seems to be a lot of, I guess, negativity surrounding real estate and big cities.

I always hear that the average house costs over a million dollars in Toronto and Vancouver. It seems like for millennials home ownership is really out of reach. I wanted to write a book to really inspire them and show them that home ownership is still a realistic dream, and it is still achievable if you are willing to be smart about your finances.

Q: Congratulations Sean. It’s a great book. I’m sure people reading and listening to this podcast will want to run out and buy it. Where can they get a copy?
A: They can order a copy on Amazon. It will also be available in Chapters and other major book stores across Canada.

Well that’s very exciting. Good luck.

Thanks so much.

 

 

 

 

 

You can purchase Burn Your Mortgage by Sean Cooper on Amazon.

This is an edited transcript of a podcast interview conducted in February 2017.

Interviews

Alexander Fung: Helping parents raise money smart kids

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By Sheryl Smolkin

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Today I’m interviewing Alexander Fung for savewithspp.com. In 2015 Alexander graduated from the Goodman School of Business at Brock University where he studied corporate and personal finance. He has worked as an analyst at Scotiabank and Fidelity Investments Canada. But first and foremost, he is an entrepreneur and app developer whose mission in life is to help parents raise money smart kids.

His app Dollarwise was awarded third place at the Canadian Personal Finance Conference and second place at the International Payment Conference, both held in Toronto.

Thanks for talking to me today Alexander.

Hi, Sheryl, thanks a lot for having me.

Q: You participated in The Founders Institute Program from January to June 2016. Can you tell me about the program and what you learned?
A: The Founder Institute is the world’s largest pre-seed accelerator in the world based in Silicon Valley. The purpose is to validate business ideas and then actually launch a product that helps provide some value to users. I was one of 17 people who graduated in the Toronto cohort out of about 65 companies that entered.

Q: Why do you think that parents often don’t teach their children good money habits?
A: Honestly, it’s a bit of a taboo topic. I know that as I was growing up my mom and dad hardly ever talked to me about money. Theythink kids should just be focused on school and that’s it, but in reality money is crucial in every person’s life – whether you’re saving for a wedding, saving for a vacation or buying presents for parents and family members. Money is such an essential subject to understand.

Q: Why did you decide to develop a tool to help parents and their children improve financial literacy?
A: When I was eight years old. I decided to use my cash allowances to buy myself a video game without my parents’ permission. When they found out, they were absolutely furious. What I learned from that experience was that I made an irrational decision and I should’ve talked to them about it before making the purchase. So, that event really motivated me to study finance and work in the industry.

Q: Let’s say traditionally parents give kids a cash allowance, and require that the money be used in a specific way, i.e. 25% for charity; 50% for expenses like bus fares and lunches; and 25% for fun. In your view, why isn’t this simple approach good enough?
A. The problem with a cash allowance is that it’s really hard to track. For example, a parent says, “Hey John you can’t spend more than $20 on transportation.” But the kid might not comply and parents can’t keep them accountable.

Also, when you use cash allowance sometimes kids lose the money and it’s gone. When it’s misplaced, it’s gone forever really. Whereas if you use a debit card and you lose it, you can call your bank and they can lock it and your money is safe. So it’s that accountability and keeping track of kids’ behaviors that money can’t really provide.

Q: Tell me about Dollarwise and how exactly it works.
A: Dollarwise helps parents to teach their kids good money habits using a debit card and a mobile app. But unlike a traditional bank we want to make it fun and educational. We’re in discussions right now with institutions that have parents and families as clients and/or members, and we want to help them to provide more value to their clients.

Q: But how does Dollarwise itself work? What does it do?
A: It’s an application where parents are able to set up their assigned list of chores for kids to complete, and they can assign dollar values. When the kids open the app they see the list, they can complete tasks, and when their parents verify that the job’s well done, the money can be transferred into the child’s account. The application also allows children to set saving and spending goals for themselves, see where their money goes and see rules established by their parents.

Q: What’s the value proposition for families?
A: Parents are able to save time, build better relationships, and avoid costly mistakes that the kids may make. When I was growing up I got a cash allowance at infrequent intervals and I usually spent it right away.

Q: So let me get this straight then. The parents can enter data about how much they are going to pay for tasks assigned to the child and  how money can be spent. Then the child can go into the same app, and see what their parents want them to do and check off a task once they have done it. Is that correct?
A: Yes. And when the task has been properly completed the real money actually goes into the child’s bank account from the parents’ account.

Q: What’s the value proposition for financial institutions here?
A: We believe Dollarwise will help institutions attract and retain clients at a lower cost.

Q: How does the program help both children and their parents set goals and track how the child spends money?
A:  Let’s say John sees a pair of shoes that he wants at Footlocker, but he doesn’t have enough money. Typically what he would do is keep nagging his parents until they give him money to buy his shoes. Or he can set a goal using the Dollarwise application that records what he is saving for, how much it will cost and how much he is planning to save each week. And his parents are able to open the application to see his goals and monitor how he is doing.

Q: You’ve noted on the website that the children are recognized for having good and consistent behavior with your unique badge and star system. How does that work?
A: Parents can customize some of the badges the app will award based on their children’s individual goals and achievements.

Q: What kind of tools does each child require to use the app?
A: Actually all they need is a debit card. They don’t necessarily need a phone. When they get home they can always log on to the computer or their iPad to see their progress. But parents  usually have phones so they can set the goals, set restrictions and send money to their kids’ accounts.

Q: What kind of debit card are they going to get? Will they get a debit card from a specific financial institution?
A: Absolutely. The original plan was to issue our own debit card, but we learned it is too expensive and doesn’t make economic sense. Institutions will just issue their own debit cards to the kids and to the parents.

Q: Have you tested the program with parents and kids? How do they react?
A: Within six months we’ve tested our app on over 300 parents and kids. After our fourth revision feedback has been a lot more positive. They absolutely love it. Some parents told me that their kids have  asked them if they could do additional chores around the house so they can earn more money to save and buy something they actually want instead of begging their parents for more money  to buy stuff.

Q: If a parent wanted to purchase a program today where could they buy it?
A: Right now we are in the testing phase. If they wanted to sign up they could go to our website at Dollarwise.co and just hit the “subscribe button,” give us their name and email, and someone on our team will follow-up with them.

Q: But if you don’t actually have a relationship with a financial institution yet, how can you issue debit cards?
A: Right now we’re testing the prototype. So they can’t use the application right now, but they get the prototype and they can see how it looks and how it feels.

Q: How much are you going to charge parents?
A: It will be free for parents and kids. Financial institutions will pay us for a white label version of the app to which their own branding can be added.

Well, that sounds really interesting. I wish you luck. Thanks for talking to me today, Andrew.

Thank you so much Sheryl.
***
This is an edited transcript of a podcast interview recorded in December 2016.

Interviews

Why sitting is the new smoking

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By Sheryl Smolkin

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Today I’m interviewing Avinash Maniram, a partner and senior group benefits consultant in the Vancouver office of PBI Actuarial Consultants. Avinash is a frequent speaker on health and wellness topics at educational seminars and industry conferences.

We are going to talk about the health implications of the sedentary lifestyle many of us lead. In particular we’ll learn why “sitting is the new smoking” from a health risk perspective and what we can do about it.

Q: So before we start, let’s look at some vocabulary. How would you define physical activity?

A: Well when we’re looking at physical activity from the perspective of the World Health Organization, we’re referring to undertaking at least 150 minutes of moderate exercise or 75 minutes of more vigorous exercise per week. Moderate exercise includes walking, swimming, mowing the lawn, washing your car or gardening.  Things like running and aerobics are characterized as vigorous exercise.

Q: So what’s the flip side, for example, physical inactivity?
A: Physical inactivity, is really the failure to achieve that guideline of either 150 minutes of moderate exercise or 75 minutes of more vigorous exercise per week.

Q: What would you consider to be a sedentary lifestyle?
A:  A sedentary lifestyle is one that’s involves an excessive amount of sitting throughout the day.

Q: We’ve been hearing a lot in the media lately about the health risks of sitting too much. Is sitting actually that bad and how much is too much?
A: Recently a lot more studies have shown direct correlations between sedentary lifestyles and the incidence of various types of diseases and heart conditions. Research from the University of Toronto indicates that the impact of sitting on a person’s lifestyle or their health really kicks in for those who have been spending at least eight hours a day in a sedentary lifestyle. In fact, the average Canadian adult spends close to 10  hours a day in a sedentary state.

Q: What actually happens to our body when we sit too much?
A: Our circulation system is really developed to operate when we are in motion so when we’re spending too much time in a sedentary state, our muscles are no longer load-bearing.  They begin to atrophy and they become weaker.

Q: You mentioned heart disease but what other health conditions can too much sitting trigger?
A: What the studies have shown is that a sedentary lifestyle can impact the risk of certain types of cancers, most predominantly colon cancer and breast cancer. In the case of cardiovascular disease in Canada, approximately 25% of all cases are directly linked to a sedentary lifestyle. There are also links to diabetes. In addition, the more sedentary your lifestyle, the more prone you are to anxiety and depression.

Q: What about the impact of sitting on mortality rates? By the way, I want you to know that since we’ve started talking I’ve decided I can do this interview standing just as well as I can do it sitting so I got up from my chair.
A: That’s fantastic. Statistics Canada and the Conference Board of Canada did a study which found that if we could lower the proportion of the time that we spend sitting or in the sedentary state by just 10%, that could result in a 30% lower risk of mortality.

Q: Does sedentary behavior also impact productivity?
A: It certainly does. You can imagine if you’re sitting at your desk in the usual crunched, hunched over thinking position, over time,  circulation is impacted and as a result your brain gets less oxygen. So colloquially I guess we would call this “foggy brain. Resulting  poor mental health and sore backs can also have an impact on productivity.

Q: The other thing that really surprised me is that sitting is viewed as an independent risk factor. So even if I’m getting my hundred and fifty minutes a week, that’s not enough if I sit all the time.
A: Absolutely. So much of the mainstream media has been focused on getting those 150 minutes of moderate activity in a week. But if you’re sitting at a desk for eight hours a day and then you head to the gym for one hour afterwards, that doesn’t undo the eight hours of damage caused by sitting. So for every 30 minutes of sitting we should be getting up and walking around for about five minutes. Those periodic intervals of activity do a lot more to reverse the damage done by a sedentary lifestyle.

Q: Are there any guidelines for the kind of activity we should be interspersing throughout the day and how frequently? Can you give me some examples?
A: This is the neat thing. So often when we go to sessions or we read about these things, the solutions often times are so impractical that it puts them out of reach. This is one of the areas where the fixes are actually quite simple. One of the things that we can do is we can set up some mental triggers so when the phone rings, if you’re in the office, instead of taking that call sitting down you can stand up.

If you are in an office tower you can walk up or down the stairs instead of taking the elevator. Another obvious one is limiting the amount of time that you spend watching TV. For those in office settings, instead of sending an e-mail to your colleague across the floor or instead of phoning to ask them a question,  get up and walk over to have that discussion.

Q: What if any guidelines are there for parents with children who want to ensure that their kids are sufficiently active?
A: Well this is one of the biggest challenges that we have right now. If you look at the guidelines for children, they should be getting at least 60 minutes of moderate to vigorous activity per day. The experts also recommend less than two hours of screen time daily.

One suggestion is to replace the video games with outdoor activities. Sometimes you can use it as a bargaining chip. Often I find that when the kids go outside, I end up having to call them back in, because they’ve forgotten about their screens and they’re back to being playful children again.

Q: What about standing or adjustable desks or treadmill desks? How useful are they and how can employees convince their employers to pilot them or make them available?
A: Well on the surface they are very useful because they combat the immediate problem which sitting at the desk for eight hours a day. When you’re trying to sell the idea of an adjustable desk to your employer, try to convince the company that this is the right thing to do. You really just need to point to the health benefits — less time off work and less presenteeism for those who probably should be off work but insist on coming in everyday. The studies have shown that there is really no decrease to productivity with standing desks.

Q: You’ve been doing a lot of work on the impact of sedentary lifestyles. You’ve made some changes in the lives of yourself and your children. You are also a partner in your firm. Are your colleagues getting the message and have you been the catalyst for some of these changes in your own office?
A: We did a presentation on the impact of sedentary living and you could see the light bulbs go off in people’s minds. It’s something that’s really taken our little office by storm.

We see the message is getting through, just judging by the number of associates who have requested standing desks. They are not mandatory by any means but if an associate wants one we will certainly make it happen.

I’ve also noticed a lot more in-person meetings and fewer phone calls and e-mails to discuss work with our colleagues. When I do performance reviews, we go for walk, we go outside to have the discussion. Whenever there are smaller internal meetings, we may get up, buy a water or something and come back to the office and finish up.

Thanks for chatting with me today Avinash on this fascinating topic. My pleasure Sheryl.

1dec-avinash

 

 

 

Avinash Maniram, PBI Actuarial Consultants Ltd.

******
This is the edited version of the transcript of a podcast recorded in November 2016.

Interviews

Michael Drak on Victory Lap Retirement

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By Sheryl Smolkin

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Today I’m interviewing Michael Drak for savewithspp.com.  He is an author, blogger and speaker based in Toronto and co-author of Victory Lap Retirement with Financial Independence Hub CFO Jonathan Chevreau. Thank you for joining me today, Michael.

Thank you Sheryl.

Q: First of all tell me, what made you decide to write this book?
A: The stress at work was affecting my health, and I was reminded of this each morning as I took my blood pressure pill. I began to look into the possibility of retiring and got my hands on every retirement book that I could. I found out that most of them were just filled with numbers and rules of thumb about how much money I would need in order to retire. None of them really told me anything about what I might actually do in retirement. I think Victory Lap Retirement fills that gap.

Q: What exactly does the phrase “victory lap retirement” mean to you? How does it differ from full stop retirement?
A: To me victory lap retirement means freedom. It’s freedom to do what I want to do when I want to do it. In contrast, full stop retirement means pulling back — disengaging, sitting on the sidelines and becoming a spectator. It wouldn’t work for me at this point in my life because I still have a lot of game left in me.

Q: Is victory lap retirement essentially a synonym for an encore career or an encore job?
A: No, not really, because victory lap retirement is all about lifestyle design. The goal is to maximize the quality of your remaining years by creating a low stress, fulfilling lifestyle based on your own unique needs and values. An encore career is really work either paid or unpaid. But it can be an important component of the victory lap lifestyle. Part of my own victory lap contains a component of paid work, which I view as my fun money to fund new experiences for me and my family.

Q: Your coauthor Jonathan Chevreau coined the expression “findependence,” which is a mash up of the word “financial” and “independence.” Why is findependence the cornerstone and prerequisite to victory lap retirement?
A: Having financial freedom is what allows you work and live on your own terms. In other words, you can do what you want to do with your time and energy, not what someone else on whom you are financially dependent says you have to do. In short, “findependence” equals personal freedom and freedom is what life is all about in the end.

Q: How can people calculate how much they’ll need to be findependent and then reach that objective?
A: Findependence is best described on a cash flow basis. This is the way I was trained to think as a banker. It’s the point where your basic non-discretionary living expenses are covered by your passive non-work income. This is the amount of annual cash flow you need to keep a roof over your head, put food on the table and pay for the basic necessities such as heating, electricity, property taxes, etcetera.. Any additional non-discretionary expenses will be covered by the active work income that you generate during your victory lap, which we view as your fun money.

Q: As you’ve noted already, the decision to retire is not simply a financial one. In your book you counsel readers to beware of “sudden retirement syndrome.” What do you mean by this expression, and how can prospective retirees avoid it?
A: I really believe that they should put a label on retirement just like they do on cigarette packaging. Something like “Retirement could be dangerous for your health. Retire at your own risk.” Sudden retirement syndrome (not actually a medical condition) is a very dangerous thing. It’s the shock of withdrawal that occurs when a person suddenly ends their career. Not everyone goes through it, but I went through it, my father suffered from it, and I had a good friend die because  of it. Most people, unfortunately can’t relate to what you’re going through. They really can’t understand why you’re unhappy, especially when you don’t have to go to work anymore.

In my mind, it’s important to have a retirement mentor in your corner to help get you through this period to ensure that you do not do some dumb things like I did. I really believe that investment advisors should expand their offerings to include this service instead of just focusing on the investment piece. In my opinion, assuming you can just fall into retirement and everything will be okay is a disaster waiting to happen.

Q: How far in advance should victor lappers plan their exit from their current jobs or careers?
A: I’m teaching my kids that they should start aiming financial independence as soon as they start working. Victory lap planning is best done probably a few years before achieving financial independence. It’s always important to have an escape plan in place in case of emergency because these days with layoffs and mergers, you really never know what may happen. It really helps to know where you want to go in life and how you plan on getting there.

Q: How important is a social network to a successful victory lap?
A: To maximize happiness in retirement a lot of people are talking and writing books about it these days. Everyone says it’s really important to socialize with family and friends and continuing to work gives you an opportunity to surround yourself with fun, interesting people. Some people, for whatever reason tend to isolate themselves in retirement. They turn sour about life and that’s when bad things usually start to happen for them. Your social network will also provide emotional support and guidance as you work your way into your victory lap.

Q: The three stages of retirement have been described as go go, go slow, and no go. In that context, how long do you think your victory lap might last?
A: I love those descriptions of the stages and I totally agree with them. If things go according to my plan my victory lap will last into the go slow stage. This will be when I’m no longer capable of doing everything that I used to and it’s probably at this point that I would consider moving into a retirement home and letting others take care of me.

Q: Have you ever regretted your decision to leave the corporate world and embark on this new journey?
A: The only thing I really regret is that I didn’t learn about the concept of financial independence earlier in life. I really don’t understand why they don’t teach financial independence in school, and why the financial services industry doesn’t talk about it is puzzling. If I had known about financial independence I would have reached findependence that much earlier andhave left my high stress corporate job much sooner than I did. Life now is so much better on this side of the fence. It’s unbelievable.

Q: If readers are considering embarking on a victory lap retirement but are afraid to cut the ties to their former life, what advice do you have for them?
A: I acknowledge, it’s hard to leave a well paying job late in your career. The key is, if you don’t like your job, it might be better health-wise and also result in increased happiness if you make the change. I came to that conclusion for myself after reading Ernie Zelinski’s book How to Retire Happy, Wild, and Free. If on the other hand, you like what you’re doing, why would you ever retire? People have to get over the fear of taking a calculated risk and making a change for the better.

That’s great. Thank you very much for chatting with me today, Michael.
My pleasure, Sheryl.

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Michael Drak can be reached at michael.drak@yahoo.ca. Victory Lap Retirement is now available for orders online. It can also be purchased for Kindle or Kobo. The paperback edition is available in bookstores, and from either Amazon or Chapters.

This is an edited transcript of a telephone interview conducted in October 2016.

Interviews

Tips from a millennial homeowner

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By Sheryl Smolkin

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Click here to listen

Buying a first home used to be a rite of passage for young people in their 20s and 30s. However, even for many millennials with well-paying jobs, buying property in large cities like Toronto or Vancouver has become an elusive dream.

But in smaller centres across the country purchasing a residence is a more practical and affordable option. Nevertheless, even though the sticker price is lower, owning a house is still a big commitment with many potential pitfalls.

That’s why we decided to chat with Saskatchewan Pension Plan’s Network Technician Stephen Neiszner (age 29) about his first foray into the real estate market in his home town of Kindersley, Saskatchewan

Q: Stephen, Saskatchewan Pension Plan in Kindersley was your first full-time employment after you graduated from college and you’ve worked there ever since. Where did you live before you bought your apartment?
A: I lived in a rented condo across the street from the Saskatchewan Pension Plan office.

Q:  Why did you decide it was time to take the plunge?
A: I was looking on and off for about a year before I found my place. The thing that sparked it off was that the light in my bedroom was leaking and the landlord had no intention of fixing it.

Q:  Tell me about the property you bought and how much it cost.
A: I bought a 1,000 square foot, 2-bedroom condo in a four-plex, with a small yard for $155,000.

Q: How much did you put down on the $150,000 purchase price?
A: My down payment was 13% of the purchase price, which is about $20,000.

Q: How long did it take you to save up that $20,000?
A: I started saving as soon as I moved into Kindersley in 2008.

Q: How much are your monthly mortgage payments? Are there also monthly condo fees?
A: I make payments every two weeks so my monthly mortgage payments are about $620. There are no condo fees, but I put away $100 from each paycheck just in case of any unexpected expenses. I pay for my own utilities.

Q: Are there any common expenses for services like clearing driveways and care of the yard?
A: Each unit takes care of their own section of the yard. We all pitch in to clean the sidewalks as required.

Q: What percentage of your monthly take-home pay do you actually spend on the mortgage?
A: It’s 27%.

Q: Does that leave you with enough money to also save for retirement and for other things?
A: Yes. I put $50 into my RRSPs every paycheck, $200 into my TFSA, and the amount of $100 for taxes and building upkeep goes into a high interest savings account.

Q: Okay. I imagine you’re also invested in Saskatchewan Pension Plans.
A: I am.

Q: Did you opt for a fixed rate of interest or a floating rate on your mortgage?
A: I went with a variable interest rate.

Q: What are the term and amortization period for your mortgage?
A: My mortgage term is 25 years and amortization period is five years.

Q: Are there any prepayment provisions in the mortgage? Do you plan to make lump sum payments to reduce the principal over time?
A: Yes. I am able to pay back as much as 20% of my original mortgage payment each year. In the future, I think it will be possible to make extra payments, but right now I’m still trying to balance my budget.

Q: How long ago did you actually buy your condo?
A: I bought it in December 2015.

Q: Ah, so it’s your first year. Were there any surprises before or after closing? Any expenses you didn’t budget for?
A: I had a large amount in my TFSA that I was able to pull for my closing expenses. The one thing that really got me was the setup fees for the utilities that I wasn’t expecting, which were almost $500.

Q: Wow. What about telephone? Are you all cell?
A: I am all cell.

Q: Have you ever regretted your decision to purchase an apartment?
A: No, not really. I knew there would be challenges and growing pains. To offset some of the costs, I recently acquired a roommate.

Q: That’s interesting. What advice would you have for potential first-time homeowners in their 20s or 30s? What things should they consider before they make the jump?
A: Save. When you think you have enough money, save some more. Don’t rush into anything. I looked at 20 places before I found this one. Ask a lot of questions, not only to your real estate agent, but to your bank, the home inspector, people you know around town, your parents and friends. Just ask questions.

Don’t be afraid to use the RRSP first-time home buyer’s program. I withdrew $10,000 or half my down payment from my RRSP under this plan.  I have 15 years to pay back the interest free loan.

And also remember, budgeting isn’t just about your mortgage. You have to factor in utilities, vehicles, transportation, food, traveling and insurance. You’ll still want to take holidays, I’m sure. And I have to budget for a new water heater within the first year.

Q: That’s great. Thank you, Stephen. It was a pleasure to talk to you today. Enjoy your new home.
A: Thank you, Sheryl.

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This is the edited version of the transcript of a podcast recorded in September 2016.