December 11, 2023

Health Insurance

Follow Your Health Insurance

Do retirees need to pay for private health insurance? Plus, Globe Advisor’s Best of 2022: Top Strategies for RRSPs and TFSAs

Yvonne Payne is a big supporter of having medical insurance in retirement.JENNIFER ROBERTS/The Globe and Mail

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When Yvonne Payne retired at the age of 63 she took a piece of her company with her. The Toronto-based former investment professional felt the group medical insurance package her company was offering was a great deal, providing her with a lower premium than she would pay individually – while offering peace of mind in the retirement years.

“I thought it was important to have in case there were drugs that wouldn’t be covered under OHIP,” she says, referring to the public Ontario Health Insurance Plan. “Most people don’t seem to realize that not everything is covered.”

Now 72, Ms. Payne has no regrets about her decision, paying $2,500 a year for top-tier private medical coverage and $650 for mid-tier dental coverage. She has used the physiotherapy benefit and the dental benefit repeatedly. Recently, a health condition required a new prescription.

Private medical insurance can be a relief for retired Canadians worried about chronic conditions, expensive new medications and delisted provincial health services – especially if their former employer helps defray the costs of premiums by offering them group plan rates. But with many medications and therapies already covered under provincial health programs after 65, those retirees who face steep annual insurance premiums from private providers may question the benefits of purchasing the insurance. With many private health services capped or restricted, they wonder if their insurers will actually offer enough coverage to save them money in the long run.

Read the full article here.

Can Michael and Lisa enjoy their desired lifestyle if Michael steps back from full-time work?

Michael and Lisa earn a combined salary of $350,000. Michael, an account executive, also gets an annual bonus and car allowance. He has substantial registered savings. Lisa, a government employee, has a defined benefit pension plan indexed to inflation that will pay her $126,000 a year at the age of 61.

So it’s fair to say they want to retire early mainly because they can. He is 50, she is 51.

They have a teenager living at home and a house in Ontario with a mortgage balance outstanding.

“I want to retire at 55,” Michael writes in an e-mail. He’d continue to work part-time.

“My wife could retire early, but she would incur a penalty [a lower pension] if she retires before 61,” he adds.

Their retirement spending goal is $100,000 a year after tax, indexed to inflation.

In the latest Financial Facelift, Matthew Sears, a financial planner and associate portfolio manager with CWB Wealth in Toronto, looks at Michael and Lisa’s situation.

What is a good retirement income target?

In the latest Charting Retirement article, Fred Vettese, former chief actuary of Morneau Shepell and author of Retirement Income for Life, looks at how Canadians can establish their best-case scenario retirement income target. Learn more about your spendable income by reading the article here.

In case you missed it

Globe Advisor’s Best of 2022: Top Strategies for RRSPs and TFSAs

Canadians have two key investment vehicles available to put money away tax-efficiently for retirement and other big-ticket purchases: the registered retirement savings plan (RRSP) and the tax-free savings account (TFSA).

Financial advisors have a special role to play in informing investors about each of these tools’ properties and provide strategies to help them take advantage of them for their respective needs. Advisors also need to keep clients abreast of changes to these vehicles as well as mistakes to avoid – not to mention their limitations.

These 10 stories published on Globe Advisor in 2022 focus on some key strategies for making the most of RRSPs and TFSAs.

Read the full article here.

After retiring and becoming a caregiver to her parents, a Toronto woman discovers the rewards of travel

Cynthia McDonagh, 68, retired in 2013 at age 59, after 26 years in various roles at a prominent college in Toronto.

“My last job was as a recruiter, where I drove to different schools to make presentations,” she says, in the latest Tales from the Golden Age feature.

“It was fun, but I thought it was time to step aside for a younger recruiter,” she adds. Also, the driving and late nights were starting to wear her down.

Personally, McDonagh’s mother was in a nursing home, while her father was living alone. “Part of my decision to retire was to be able to spend more time with them.”

After McDonagh’s parents passed away, she didn’t quite know what to do with herself, especially after years of caregiving. But then, her daughter moved to England, and McDonagh went along for a couple of weeks.

“It was the first time I’d ever been to Britain,” she says. “I went back later for three months and had a fabulous time.” McDonagh and her husband also bought a home in Arizona a few years ago. “I have the travel bug now.”

Read the full article here.

Retirement Q&A

Calling all retirees: Are you a retiree interested in discussing what life is like now that you’ve stopped working? Globe Investor is looking for people to participate in its Tales from the Golden Age feature, which discusses the realities of retirement living. If you’re interested in being interviewed for this feature, and agree to use your full name and have a photo taken, please e-mail us a few details about your retirement life so far at: [email protected]

My husband (who has dementia) and I moved from New Brunswick to Nova Scotia in August, 2022, to be closer to our children and we’re hoping for long-term care eventually to be in Nova Scotia. Unfortunately, on a trip to our camp in New Brunswick in November, it became necessary to place my husband in respite care, where he remains and will transition to long-term care at the same facility in New Brunswick. My question is, for income tax purposes is he a resident of New Brunswick or Nova Scotia? Our primary residence is Nova Scotia, we are an economic unit, I do have power of attorney. Thank you.

We asked Megan Greene, tax practice leader, Thiel Greene Chartered Professional Accountants in Moncton, N.B., to answer this one:

The Canadian tax rules indicate it is the province of residence on Dec. 31 of each year that will determine which province will collect the provincial income tax and the effective tax rate of the individual as each province sets their own tax rates and credits. The determination of which province an individual is a resident is based on where their most significant residential ties exist. Significant residential ties include the location of your home and personal property, where your spouse resides and where you have social and financial ties.

In no particular order, consider things such as: what province is your driver’s licence, Medicare cards, memberships, family members and property. Please note that each of these items alone will not determine your residency but should be considered as a collective group. Based on the information in your question, there is not a clear determination of where your significant residential ties are located.

It’s possible that all of your significant residential ties are in Nova Scotia, with the exception of the location of your spouse, whom you’ve indicated is in a care home in New Brunswick or, alternatively, it’s possible that most of the ties are still in New Brunswick.

Do you continue to live on a regular basis in Nova Scotia and maintain that property? You should also review the location of your other personal property as well as your social and financial ties as of Dec. 31, 2022, to better determine which is most likely your province of residence.

The good news is that both Nova Scotia and New Brunswick personal tax rates are similar so there shouldn’t be much of a tax difference. You should enlist a professional tax advisor for more comprehensive advice.

Have a question about money or lifestyle topics for seniors? E-mail us at [email protected] and we will find experts and answer your questions in future newsletters.