Tim  Stobbs from CanadianDreamFree at 45 who met his FIRE (financial independence retire early) goal several months ago recently wrote:

“One particular lesson that has really hit home for me since I early retired is this: FIRE doesn’t change your core personality.  You see I had this lovely fantasy in my head that I would be more active and perhaps start exercising regularly when I left work. I would run or do yoga like every other day.  Of course, I’ve never made working out a priority earlier in life so this really hasn’t changed that much since I retired.” 

That must be why over 12 years since I left my corporate job and a year into semi-retirement my closets could still use a good cleaning and I struggle to make it to the gym three times a week.

That also may explain Why being rich makes people anxious. Kerry Hannon from the New York Times reports in The Toronto Star that multi-millionaire Thomas Gallagher who is retired from his position as vice chairman of Canadian Imperial Bank of Commerce World Markets says, “Emotionally, I don’t come from money; I got very lucky on Wall Street. I have more money than I had ever imagined, but I still worry — do I have enough, if I live longer than I thought?”

And financial anxiety among Canadians is not only surprisingly pervasive and but not limited to the very rich or the very poor.  Rob Carrick in the Globe and Mail discusses a survey by Seymour Management Consulting which reveals that One in two Canadians is a bundle of nerves about money. Low-income people are most stressed, but one in three people with incomes of $100,000 or more are on the list of worriers.

So How do you know when it is the right time to retire? Retire Happy’s Jim Yih says retirement readiness is not tangible. He notes that one of the most significant trends is that more and more people want to work in retirement, plan to work in retirement and/or are being pulled into work in retirement.

“There are more opportunities than ever to work in retirement.  In fact the new terminology that is not so new anymore is the idea of planning a PHASED RETIREMENT or a TRANSITIONAL RETIREMENT. Personally, I think it’s great and I think a lot of people are finding success with this idea,” he comments.

Retired actuary Anna Rappaport identifies the same trend in an opinion piece Moving To The Next Step: Reboot, Rewire, Or Retire? for Forbes. She suggests that while many people may seek to continue working at traditional jobs into their 70s or 80s, others may wish to leave their career positions to build new career paths. People who held senior roles during their careers often find rewarding a period of professional activity with less responsibility, before totally leaving the labor force. Some seek memberships on corporate and/or nonprofit boards. Other people seek volunteer or not-for-profit roles, working in areas that are meaningful to them.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

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.

 

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.

I finally found time to clean out the 700+ emails in my in box and here are some of the gems from both the mainstream media and the blogosphere I found hiding there.

The federal government has announced expanded parental leave and new caregiver benefits that will come into effect December 3rd. Eligible new parents will be able to spread 12 months of employment insurance benefits over 18 months after the birth of a child. However, the government will not increase the actual value of employment insurance benefits for anyone who takes the extended parental leave.

The change in leave rules will automatically give the option of more time off for federally regulated workplaces, which include banks, transport companies, the public service and telecoms, and is likely to spur calls for changes to provincial labour laws to allow the other 92% of Canadian workers outside of Quebec access to similar leave. Anyone on the 35 weeks of parental leave before the new measures officially come into effect won’t be able to switch and take off the extra time.

How do you know when it’s the right time to retire? Retire Happy’s Jim Yih advises boomers considering retirement to have a plan that includes both lifestyle issues and money issues.  He says, “Too often the retirement plan focuses only on the financial issues. You can have all the money in the world but if you don’t know how to spend it or have good people around you or you don’t have your health, what good is the money?”

In the Globe and Mail, Morneau Sobeco actuary Fred Vettese says Few Canadians are destined to hit their retirement income ‘sweet spot’. What is an adequate income level to retire? According to Vettese for most people, it means having enough income to maintain their pre-retirement standard of living for the rest of their lives. “Put another way, spendable income in retirement would be 100% of what it was during one’s working years,” he says. “We’re unlikely to hit the 100% target every time, so let’s consider anything between 85% and 115% to be in the “sweet spot.”

If you sometimes get discouraged reading about “wunderkind” who save millions and retire super early, FIREcracker, writing on Millenial Revolution says Don’t Let Comparisons Derail Your FIRE (financial independence, retire early) Journey. “Don’t compare your beginning with someone’s middle or end. Instead of comparing yourself to other people, look back at your own journey and see how far you’ve come, she says. “And remember, even though there are hordes of people in front of you, there are also hordes behind you. They would switch places with you in an instant.”

And finally, make sure your retirement savings plan includes adequate amounts for health care. Health spending in Canada will likely hit $242 billion in 2017, says a report from the Canadian Institute of Health Information (CIHI). CIHI calculates that health spending in Canada is expected to reach $6,604 per capita this year – or about $200 more per person compared to last year. The report also says total health spending per person is expected to vary across the country, from $7,378 in Newfoundland and Labrador and $7,329 in Alberta to $6,367 in Ontario and $6,321 in British Columbia. The public private split remains fairly constant with 30% covered by private out of pocket payment or private insurance and 70% by the public purse.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

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.

As of August 1, 2017, the Saskatchewan PST tax applies to premiums, fees and charges for most insurance coverage including individual and group insurance such as life, mortgage, disability and supplemental health care (e.g. drugs, dental, vision or hearing care) coverage.

Similarly, PST will also apply to benefits plans including Administrative Services Only (ASO) arrangements, funded and unfunded benefit plans and qualifying trusts.

Individual permanent life insurance policies, including whole and universal life insurance, in effect prior to August 1, 2017, are exempt from PST, including all future premium payments with respect to these policies.

However, new individual permanent life insurance policies effective after July 31, 2017, will be subject to PST. Endorsements added to insurance contracts with an effective date prior to August1, 2017, are also not subject to PST.

Employee premiums under group insurance plans are taxable depending on both the place of employment and residency. An employee must live and work in Saskatchewan for the employee premiums to be taxable.

Taxability of Group Insurance Premiums
Where the employee lives	Where the employee works	Employer premiums	Employee premiums
Saskatchewan	Saskatchewan	Taxable	Taxable
Outside Saskatchewan	Saskatchewan	Taxable	Exempt
Saskatchewan	Outside Saskatchewan	Exempt	Exempt

SOURCE: Aon Hewitt Consulting

Where there is an Administrative Services Only (ASO) agreement (a contract between an employer and a third-party administrator), the premiums or payments to claimants can include dues, assessments, administrative costs and fees paid for the administration of the plan. PST will be collected on these charges and also on the premium or the payment of benefit amounts.

Several other provinces also currently charge retail sales tax on all insurance premiums including Ontario (8%) and Quebec (8%). Manitoba applies 8% RST only to life, disability, critical illness and AD&D premiums.

The polling firm, Insightrix, asked 802 respondents:  “How will your household change its insurance purchasing plans once PST is charged on all insurance premiums?” That question prompted the following responses:

• 20.3%: Reduce insurance coverage (such as downgrading the level of home insurance coverage, purchasing less crop insurance, etc.)
• 13.8%: Stop renewing some policies (such as cancelling a package policy on a vehicle)
• 48.6%: Our household won’t change its insurance purchasing plans;
• 25.4%: Not sure

“Charging the PST on insurance comes with an obvious risk,” says Todd MacKay, the Canadian Taxpayers Federation Prairie Director. “Hitting premiums with the PST will run up insurance costs by hundreds of dollars for families and thousands or tens of thousands of dollars for farmers and small businesses. More than a third of Saskatchewanians say they’ll have to reduce coverage or stop renewing some policies and that means people will have less protection when bad things happen.”

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.

It’s personal finance video time again! This week we present timely videos about extended warranties, the Equifax security breach, the new mortgage stress test and more.

In the wake of the pending demise of Sears, Jacqueline Hansen from CBC Business News reports on what it means for customers with extended warranties.

Rob Carrick outlines the steps Canadian should take to deal with the Equifax security breach which exposed the personal information of tens of thousands of people

Do you think you should be earning more at your job? Bridget Casey from Money After graduation has some hints about how to ask for a raise in her video “How to Negotiate Your Salary | ASK FOR $5,000+ MORE.”

This video from The National explores how the new mortgage stress test for borrowers with uninsured loans is designed to ensure they can withstand higher mortgage rates.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

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.

You have finally paid off the credit card bills incurred on your summer vacation. Black Friday is coming up and you are starting to get serious about Christmas shopping. But before you do, pay yourself first and top up your retirement savings.

Here are some suggestions:

1. Saskatchewan Pension Plan: If you are already a member of SPP, make sure you have contributed the maximum $2,500 for 2017. Also transfer up to $10,000/year into the plan from a Registered Retirement Savings Plan before the end of the year. If you are not a member, it’s never too late to sign up. Historically SPP has had 8% average returns, a 1% or less fund management fee and contributions are tax deductible. Your money will be professionally managed by independent investment firms and you can set up a flexible pension contribution schedule. When you join SPP, you name a beneficiary for your account, which can be changed at any time. If you die before retiring from the Plan, the funds in your account are paid to your named beneficiary. If your beneficiary is your spouse, financially dependent child or grandchild, CRA allows for tax-deferred transfer options.
2. RRSP: Avoid the end of February rush and top up your contributions now, before you are tempted to indulge in excessive holiday spending. Your RRSP contribution limit for 2017 is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $26,010. You may also have unused contribution room carried forward from previous years. If you have a company pension plan or you contribute to SPP, your RRSP contribution limit will be reduced accordingly. Contributions are tax deductible and your RRSP investments are tax sheltered until withdrawn. At that time, 100% of the contributions plus interest are taxable at your incremental rate.
3. Tax free savings account: A TFSA is a flexible investment account that can help you meet both your short- and long-term goals. Contributions are made with after tax dollars. However, investment income in a TFSA — whether you’re earning interest, dividends or capital gains — is not taxed, even when withdrawn. The contribution room for 2017 is $5,500. Contributions can be carried forward, and contribution room since the program’s inception in 2009 has been $52,000. Money withdrawn from a TFSA can also be replaced in the subsequent calendar year.
4. Set up a spousal account: If your spouse is earning much less than you and therefore cannot make significant RRSP contributions, consider setting up a spousal RRSP. A spousal RRSP is simply a plan that you contribute to, but your spouse owns. Making contributions to a spousal RRSP provides you, the contributor, with a tax deduction provided you have sufficient RRSP contribution room, but your spouse will pay tax on the withdrawals from the plan. You may also set up a spousal SPP plan and contribute all or part of your annual maximum $2,500 contribution to your partner’s account. Normally, you can’t contribute to an RRSP in the year after you turn 71 even if you’re still working. But if you have a spouse who is 71 or under, you can contribute to a spousal RRSP and still get a tax break.
5. Find a “side hustle:” If you are having trouble making ends meet but you want to top up your retirement savings, the holiday season is the ideal time to look for a side hustle, or part-time job. For example, major retailers hire additional sales help. December is one of the busiest months for shipping companies. Catering companies need chefs, bartenders and servers. Market research companies need Canadians to join their consumer survey panels. You can rent your empty bedroom or apartment on Air BnB to extended families who visit parents living in small apartments, Friends or neighbours who travel are always looking for reliable dog or cat sitters

If you have not already done so, set up  automatic withdrawal plans with SPP and your RRSP and TFSA providers. In this way, by late November 2018 you will be able to concentrate on the upcoming holiday season, secure in the knowledge that your retirement savings are on autopilot.

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.

We are again going to sample recent material from a series of bloggers who participated in The Canadian Financial Summit in September.

This week headlines across the country blared that CRA has changed their position on allowing diabetics to claim lucrative disability tax credits in certain cases.

On Your Money, Your Life, accountant Evelyn Jacks discusses why these changes are being made and how audit-proofing strategies must be implemented by tax professionals and their diabetic clients.

Andrew Daniels writes at Family Money Plan about how he paid off his mortgage in 6 years. Five of the 28 things he and his wife gave up to quickly pay down his mortgage are noted below:

• Eating out, largely due to food sensitivities and allergies with the added bonus that they saved big bucks.
• For the first five years of the pay down period they gave up travel.
• They went without cell phones for four of the six years of paying off their mortgage
• They opted to repair their old cars as required rather than buying new ones.

Jonathan Chevreau, CEO of the Financial Independence Hub notes in the Financial Post that Only a quarter of Canadians have a rainy day fund, but more than half worry about rising rates.

This is based on a survey of 1,350 voting-age adults by Forum Research Inc. conducted after the Bank of Canada raised its benchmark overnight rate from 0.75% to 1% on Sept. 6, the second increase in three months. That said, 17% believe rate hikes will have some positive aspects: Not surprisingly, debt-free seniors welcome higher returns on GICs and fixed-income investments. Another 38% don’t think it will have an effect either way.

Do you know how long it will take to double the money you have invested? MapleMoney blogger Tom Drake explains the rule of 72 which take into account the impact of compound interest and  allows you to get a quick idea of what you can achieve with your money.

For example, if you were expecting a rate of return of 7% you would divide 72 by 7, which tells you it would take about 10.3 years to double your money at that rate. If you want $50,000, you would need to invest $25,000 today at 7% and let it sit for 10.3 years.

Kyle Prevost explores 5 stupid reasons for not getting life insurance on lowestrates.ca. If your rationale is that you are healthy and never get sick, Prevost says, “Glass half-full thinking is a positive thing, but pretending that your full glass is indestructible is a recipe for disaster.”

And if you have avoided buying life insurance because you have so many other bills you can’t afford it, he says, “You seriously need to ask yourself what sort of situation you’d leave behind if tragedy struck. Those bills that look daunting right now would look downright insurmountable.”

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

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.

When the health or capacity of a loved one deteriorates and the family decides that a nursing home is the best care option, it can be a very traumatic time for both the caregivers and the patient. You want to ensure your parent or friend is placed in a facility where they will get the best possible care in a safe, nurturing environment.

However, depending on the length of waiting lists and where you live, your choices may be very limited. For example, this directory of long-term care providers in Saskatchewan illustrates that in many smaller communities there is only one government-subsidized nursing home. And if a bed becomes available you will likely have to decide whether or not to accept it on very short notice.

Last week we wrote about “What you need to know about residential care for seniors in Saskatchewan” and discussed the difference between retirement homes and nursing homes (special care homes). This week we offer a checklist of things to look for when you are evaluating the suitability of a special care home for your family member.

The Canadian Association of Retired People (CARP) has developed an extensive catalogue of things to look for. Here (in no particular order) are some of my favourites, including questions we asked when my mother recently moved into long-term care.

1. What is covered in the regular monthly fee and what additional charges can be expected?
2. Are residents clean, well-groomed and appropriately dressed?
3. Do they seem happy?
4. How do family members of current and past residents rate the facility?
5. What activities are available for residents?
6. How long have senior staff worked for the residence?
7. Do staff appear to be happy?
8. What is the staff-to-patient ratio of PSWs, RPNs and RNs to residents on each shift?
9. Does the home rotate all staff members or try to keep the person(s) caring for each resident?
10. Are there any limitations on visiting hours?
11. How do family members participate in the care plan?
12. How are care complaints handled and by whom?
13. Do doctors, physiotherapists, denturists, podiatrists regularly come to the residence for patient care?
14. Does a hairdresser and manicurist regularly attend to provide personal care?
15. What resources are available for the care and safety of residents with cognitive impairment?
16. Are religious holidays and birthdays celebrated? How?
17. What are the policies and procedures for ensuring that personal clothes and belongings are not lost or stolen?
18. What is the home’s fall prevention program?
19. Can the resident bring personal furniture, pictures and other knick knacks?
20. What are the policies and procedures for handling a resident who is harmful to himself/herself or other residents?
21. Does the home have a palliative care program?
22. Will the food appeal to your loved one?
23. Can a family member have a meal with their loved one? If so, is there a fee?
24. Are special menus available for people who require soft food or other special diets?
25. Does the menu suit your loved one’s cultural or religious regulations?

Regardless of the answers you get to these and other preliminary questions, once your loved one moves in, it is important for family and friends to visit as often as possible at various times of the day and in the evening both to keep his/her spirits up and monitor the actual care he/she is receiving. In many cases elderly or infirm patients are incapable of advocating for themselves.

Generally we are very happy with the facility we chose for Mom, but we have to stay on top of things. For example:

• When she returned to the residence after she broke her hip we had to encourage staff to get her up and walking so she didn’t totally lose her mobility.
• She is supposed to get her hair done every week and a manicure every two weeks but inexplicably, her name sometimes doesn’t make it onto the list.
• There is lots of staff, but they are rotated and often it seems like the right hand doesn’t know what the left hand is doing!

By understanding the rules and limitations of the special care home where your loved one resides, you can monitor care more effectively and provide additional support as needed.

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.

If you buy a house or re-finance your existing home beginning in 2018, you may need a higher income to qualify for a mortgage.  Borrowers who are renewing mortgages will not have to meet the new stress-test standard as long as they stay with the same bank. However, renewals done with another lender will have to qualify under the revised standards because they require new underwriting.

As Sean Cooper explains in What OSFI’s (Office of the Superintendent of Financial Institutions) Tightened Rules on Uninsured Mortgages Means for Homebuyers on RateSupermarket.ca, under these new rules, buyers with a 20% down payment or more will have to undergo a more rigorous stress test, and qualify based on the highest posted five-year fixed rate – 4.64%, roughly 200 basis points higher than actual mortgage rates.

“Last year, in an effort to cool down hot real estate markets in cities like Toronto and Vancouver, Ottawa introduced new mortgage rules on only insured mortgages – meaning those who put less than 20% down.” Cooper notes. “But since then, the uninsured mortgage market has grown. So, to help reign in this segment of the market, OSFI is now proposing extending the stress test to uninsured mortgages.”

Lowestrates.ca blogger Alexandra Bosanac further clarifies in This is how OSFI’s new mortgage rules will affect Canadian homebuyers that the new OSFI rules will apply to buyers who apply for uninsured mortgages including those with a 20% down payment or more and those buying homes worth $1 million or more. “They will be stress tested to show they can afford a mortgage, either at the five-year average posted rate, or two percentage points higher than the rate their bank or broker offers them (whichever one is higher),” she says.

Bosanac offers an interesting example of how the new rule changes will impact homebuyers. A couple buying a home for $500,000 with a $125,000 down payment would be paying $1,743 a month at the the current lowest variable five-year mortgage rate in mid-October available in Ontario of 1.99%. However, under the new rules, that same couple will be stress tested prior to qualifying to ensure they can pay the mortgage at two percentage points higher — 3.99%. That means they will have to be able to show they can afford to pay a mortgage of $2,165 a month. That’s a difference of $422 a month, or $5,064 a year.

Globe and Mail mortgage columnist Robert McLister offers 10 ways the new mortgage rules will shake up the lending market. He suggests  that unless provincial regulators follow OSFI’s lead (which if history is a guide they won’t), it will be a bonanza for some credit unions because many credit unions will still let you get a mortgage based on your actual (contract) rate, instead of the much higher stress-test rate. He expects to see a rush of buying before the end of the year from people who fear they won’t qualify after January 1.

Furthermore, critics say new mortgage rules will push borrowers to unregulated lenders according to Globe and Mail reporters Janet McFarland and James Bradshaw. They spoke with OSFI superintendent Jeremy Rudin who acknowledged that OSFI is offloading risk to the unregulated lending sector, which doesn’t come under federal control, “That would not be an intended consequence, nor would it be a completely unanticipated consequence,” he told reporters.

Former MP Garth Turner blogging at The Greater Fool anticipates that real estate values will decline across the country as a result of the changes, which means home purchases could be a potential wealth trap, particularly for first time buyers who cannot afford losses.

In After Mom, he notes that in order to avoid paying mortgage insurance, many young buyers borrowed from parents to get over the 20% line so they would not have to pay mortgage insurance. As a result CMHC-insured loans plunged more than 40% at the same time real estate activity rose, the number of borrowers increased and overall mortgage debt swelled.

He concludes, “The average down payment gift from parents to kids in households making $100,000 or more is now over $40,000. Let’s hope Mom has a bunch more money to bail junior out when prices fall, rates rise and that first loan renewal comes round. Stress, baby.”

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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.

Whether you are a member of the “sandwich generation” with young children and older parents or you are a senior yourself, sooner or later you will need to understand the residential care options in Saskatchewan for individuals who can no longer live at home, and how much they cost.  Typically, residential facilities are characterized as either retirement homes or government-subsidized nursing homes. In the discussion below we distinguish between the two, the services provided and how much they cost.

Retirement home/residence 
A retirement home in Saskatchewan is a multi-residence housing facility that provides accommodation and services such as meals and cleaning for older people. Retirement homes in the province are privately owned and operated and not administered by the provincial government. Each facility usually provides a private or semi-private room or complete living suite as well as common living quarters, including a lounge area, a common dining room, recreation rooms, cleaning services, social and/or religious programs and some basic health care services.

The unit can be paid for on a monthly fee basis, like an apartment, or can in some instances be bought the same way as a condominium. Admission, fees and waiting lists for retirement homes are controlled by the homes themselves, not by the government. Admission usually depends on the ability to pay and absence of serious medical conditions that require professional nursing care. Residents are responsible for paying their own fees and government subsidies are not available for accommodation in a retirement residence.

Costs for Retirement Homes*

Type of Accommodation	Provincial Median	Provincial Range	Regina Median	Regina Range	Saskatoon Median	Saskatoon Range
Private Rooms(per month)	$2,475	$1,500 – $5,500	$2,850	$1,800 – $5,500	$2,425	$1,600 – $4,000
1 Bedroom Suites (per month)	$3,415	$1,580 – $4,170	$3,750	$3,500 – $4,100	$3,150	$1,580 – $4,042

*As reported in Long Term Care in Saskatchewan 2016

Government-Subsidized Nursing Homes**
Nursing homes or special care homes, as they are called in Saskatchewan, are residential long term care facilities that provide 24-hour professional nursing care and supervision for people who have complex care needs and can no longer be cared for in their own homes.

These facilities are owned and operated by municipalities, religiously affiliated organizations and private, for-profit organizations. However, nursing home fees are set by the Saskatchewan Ministry of Health.

Admissions to residential long term care facilities are managed by local Regional Health Authorities (RHAs). An intake coordinator or social worker from the RHA conducts an in-home assessment with clients and their families to assess care needs and program options, to coordinate access, explain fees and coordinate placement into long-term care facilities.

A report of the assessment is sent to the Regional Committee, who decides on acceptance. Clients who are eligible for access to a long term care bed generally access the first available bed in the system and then transfer to a facility of choice. A chronological wait list is maintained by the RHA to ensure fair and equitable access to a facility of choice.

Eligibility/Requirements for Admission 
To be eligible for subsidized care services, a client must:

• Be a Canadian citizen or permanent resident over 18 years of age.
• Require ongoing care (usually 24 hour care, seven days a week) due to age, disability, injury from accidents, or long-term illness.
• Hold a valid Saskatchewan Health Services card, or be in the process of establishing permanent residence in Saskatchewan and have applied for a Saskatchewan Health Services card.

Income/Asset Test
The client’s income is assessed by Saskatchewan Health.  Income Tax returns of applicants are reviewed once the Regional Committee has approved the admission of the client into a nursing home. The client’s application is sent by the RHA to the nursing home, which in turn sends it to Saskatchewan Health for income assessment.

A resident pays the standard resident charge ($1,086 at July 1, 2017) plus 57.5% of the portion of their income between $1,413 and $4,200. For married residents, including common law couples, the couple’s income is combined, divided equally and then the above formula is applied.

The resident and spouse (if applicable) are required to provide:

• The most recent year’s Notice of Assessment(s) from CRA, or
• Pages 1 to 3 of Income Tax Return(s) upon admission and annually thereafter.

If income information is not provided, the resident charge will be assessed at the maximum rate.

A resident admitted for temporary care must pay the income-tested resident charge if their stay is more than 60 consecutive days.

Examples of resident charges at various income levels

Monthly Income	Monthly Resident Charge
$1,413	$1,086 (minimum)
$2,000	$1,423
$2,500	$1,711
$3,500	$2,286
$4,200	$2,689 (maximum)

 

Married residents living in separate special care homes 
Married residents who live in separate dwellings for reasons beyond their control may choose to complete an Optional Designation Form.

• With this designation, only the resident’s income is considered when calculating the charge.
• Choosing this designation does not change a couple’s marital status.

Additional charges
In addition to the resident charge, there is an additional cost for prescriptions, medications, incontinence supplies, and certain medical and personal supplies and services.

There is also a $21.25 monthly supply charge for personal hygiene items, such as shampoo, conditioner, soap, denture cream, toothpaste, mouthwash, etc. This charge is adjusted annually based on increases to Old Age Security and Guaranteed Income Supplement benefits

** As reported in Special Care Homes

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.