Category Archives: baby boomers

Retiring with a mortgage? Why you might want to think twice about that

When it comes to opining on seniors carrying debt into retirement, I’ll state upfront my personal bias that anyone with credit-card debt — or even mortgage debt — has no business fantasizing about retirement. To me, it’s simple: if you have debt of any kind, you keep working until it’s all discharged. As I have written elsewhere, I believe the foundation of financial independence is a paid-for home.

That said, I recognize there’s a large segment of the population not fortunate enough to have a paid-for home, corporate pensions or financial assets like RRSPs and TFSAs. I personally know seniors who still rent and have no financial safety net. Some may have to resort to payday loans just to get by until the next month’s government-issued Canada Pension Plan, Old Age Security or Guaranteed Income Supplement cheques arrive.

Doug Hoyes, president of Kitchener-based bankruptcy trustees Hoyes Michalos & Associates Inc., profiles senior debtors every two years in his Joe Debtor study. The data are shocking. He defines seniors as 60 or older, so many are baby boomers either in retirement or on the cusp of it. (The oldest boomers, born in 1946, are now 70, while the youngest boomers, born in 1964, are 52 and presumably still working full-time.)

Senior debtors make up 10 per cent of Hoyes’ 2015 study, up from eight per cent four years ago and owe an average of $69,031 in unsecured debt, higher than any other age group. Nine per cent borrow against their income — often pension income — by resorting to payday loans.

Payday loans are, in my opinion, almost usury — defined as debt instruments charging more than 60 per cent in interest a year. However, because the loans are only a few weeks in length (literally, until the next payday), the lenders can charge up to $21 for every $100 borrowed in Ontario, which if paid over a year would be interest of 546 per cent, Hoyes says.

Fifty three per cent of these senior debtors live alone and often cite illness or injury as a cause of their financial troubles. Among bankrupt seniors, nine per cent had payday loans. In some cases, their adult children are making financial demands and they’re too embarrassed to admit they have few alternative resources.

At the other extreme are the fortunate, wealthy boomers with paid-for homes, large defined-benefit pensions and maxed-out registered and even non-registered (taxable) investments. For them, says Emeritus Retirement Solutions president Doug Dahmer, the biggest expense will be tax, something that must be planned for well in advance. In this case, borrowing may turn out to be tax efficient.

Then there are the rest of us: perhaps with no large company pensions, modest financial assets and a home with only some equity in it, which may be a tempting source of future funds in retirement or semi-retirement.

This middle group is often torn between paying down the mortgage before retiring, or capitalizing on low interest rates to take a chance on building their financial nest eggs in the stock market.

Last July a CIBC poll found that, on average, Canadians expect to be debt free by age 56, although some are indebted well into their sixties. Even in the 45-plus cohort, more than 68 per cent are in debt, including 31 per cent who still have mortgages. In 2013, CIBC found 59 per cent of retirees were in debt.

But this may not be necessarily a bad thing, argues CIBC Wealth tax guru, Jamie Golombek. “There’s no harm in having debt if it’s for an appreciating asset. If you’re in your home for the long term and borrowing at low interest rates, it’s not a big problem. The problem is when you run out of cash flow to service the debt.”

Interest rates are near 60-year lows: posted five-year mortgage rates are under three per cent at most financial institutions (and under four per cent for 10 years). Of course, unless you lock in, there’s no guarantee rates won’t rise to more uncomfortable levels.

In a paper he wrote for CIBC last year (Mortgages or Margaritas), Golombek suggested the zeal to pay down debt could put some people’s retirements at risk. It was written in response to another CIBC poll that found 72 per cent of Canadians prefer debt repayment over saving for retirement. He found that if you can get 6 per cent annual returns in a balanced portfolio of investments, the net benefit was almost double that of paying down debt.

Back in 2012, BMO Financial Group tackled the same issue, noting that rising home prices meant real estate formed a disproportionate amount of couples’ net worths. This tempts some to tap into their home equity in retirement in order to overcome their past failure to save. As boomers become net sellers of homes instead of driving up prices, BMO said home prices could fall by one per cent per year. Downsizing, renting or moving to a small town are all ways to access some of the equity in your home.

Still, Hoyes has seen enough senior debt to argue against taking on more. “Low interest rates are great as long as you can make payments, but what if you lose your job, get sick or divorce? The fact moderate interest rates are only three per cent is irrelevant if there’s no money coming in. When your income becomes fixed, your expenses have to become fixed, but it’s hard: you can’t control the price of gas or car insurance.”

Personally, I like to have enough Findependence that you reach what Dahmer terms the “Work optional” stage. It’s about being in control of your days, Hoyes says, “If you have debt when you retire you are not in control of your day.”

And of course, medical expenses can creep up. It’s not as bad here as in the United States, where medical costs can have catastrophic consequences, but “In Canada medical expenses are insidious,” Hoyes says, “It’s a lesser amount, but creeps away and boomers are more likely to get whacked.”

One option, if available, is to work part-time in retirement. An analysis by Toronto-based ETF Capital Management found that if a retiree earns just $1,000 a month extra in consulting income or a part-time job, a nest egg’s depletion slows dramatically. For couples, if both partners earn that much, the financial picture is rosier still.

This may or may not be “optional” work. BMO found 29 per cent of Canadians expect to delay retirement and work part-time in retirement because of savings shortfalls. For them, BMO says, tapping home equity constitutes “Plan B,” one that 41 per cent of Canadians are considering.

But avoid reverse mortgages, Dahmer counsels. He says it’s more cost efficient to use a secured line of credit against the house. Draw funds only if needed, but set it up while you’re still working and the bank thinks you’re a good credit risk.

Dahmer thinks flexible use of debt through a line of credit is a sound strategy for smoothing spending in peak years, especially if your main income is from registered assets. “You’re far better off paying 2.5 to 3.5 per cent in interest for a few years than forcing yourself from a 33 per cent to 42 per cent marginal tax bracket, not to mention Old Age Security being clawed back.”

The savings can be in the hundreds of thousands: “Retirement is the one time in life that strategic tax planning can make a significant difference. That’s because of the many different places you can source cash flow from, each with its own distinctive tax implications.”

Source : Financial Post Jonathan Chevreau | March 22, 2016 | Last Updated: Mar 23 6:56 AM ET

Jonathan Chevreau is the founder of the Financial Independence Hub 

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What to know about getting a U.S. mortgage

Obtaining financing for a U.S. purchase, such as these condos in North Miami, with a mortgage is more attractive now that the loonie has sunk value. (Janice Pinto/The Globe and Mail)

Although Canadians and Americans share the same continent, live across from one another on the world’s longest undefended border and speak, mainly, the same language, there is one undeniable geographical advantage that the United States possesses in abundance: year-round warm weather locales.

This has led many Canadians to think about buying a property in a U.S. hot spot.

The bad news for those buying now includes the precipitous dive in the loonie compared with the U.S. greenback and a rise in home prices in the United States since the market bottom of 2010-11.

With affordability tilting away from Canadian buyers of U.S. property, it has made the traditional all-cash purchase (the way four-fifths of Canadians have paid in the past) less attractive and made taking out a mortgage to finance a purchase a much more desirable option, says Alain Forget, director of sales and business development with RBC Bank, a subsidiary of the Royal Bank of Canada.

“It is not a great time for Canadians to pay cash for a U.S. home,” says Mr. Forget, who is based in Fort Lauderdale, Fla.

“In the past, many Canadians have used cash to buy their U.S. home. However that means using the equity in your Canadian home, cashing out investments or using your savings. With any of these options you’ll have to exchange your Canadian dollars for U.S. dollars, significantly reducing the cash you have to buy your U.S. home.”

Obtaining financing for a purchase with a mortgage means that buyers are not exchanging weak loonies for expensive greenbacks. Mortgages are also attractive given the low interest-rate environment and a Canadian dollar that will remain weak “at least through 2017.”

For Canadians seeking a mortgage in the United States, there are a number of key differences to consider.

– It takes longer. It can take just a few days to apply for and obtain a mortgage in Canada. In the United States, it might take 45 to 60 days to complete the process.

– More documents are required. Getting a U.S. mortgage requires different documentation than in Canada because of different regulatory requirements. For most U.S. mortgages, more than 10 documents are required compared to less than five in Canada, according to RBC.

– There are more fees. Buyers can expect to pay 3 to 5 per cent in fees because of third-party expenses such as property appraisal, titles and certain insurance requirements.

– Interest is calculated differently. U.S. fixed-rate mortgages are compounded monthly whereas in Canada they can be compounded semi-annually for a fixed-rate mortgage and monthly or at the payment frequency for a variable-rate mortgage.

– Down payments are bigger. A down payment of at least 20 per cent of the value of the home is now the U.S. standard. It can fluctuate, however, based on whether the home is a primary residence, second home or an investment property.

– Amortization is longer. Now extinct in Canada, the 30-year mortgage is alive and well in the United States, with the option of locking in rates over that span, a situation all but unheard of in Canada.

“U.S. mortgage products provide much longer rate terms including up to 30 years at very low rates,” says Miles Zimbaluk, director of business development with Canada to Arizona, an organization that helps Canadians who are visiting or living in the Southwest state.

“In Canada, you can obtain a 25-year term rate but rates are much higher, persuading people to nearly always choose one- to five-year term rates.”

He notes that the Canadian buyers are in the main getting younger, which means that more of them are likely to be seeking mortgages rather than putting down cash for purchases.

“We still see a lot of retiree snowbirds buying in Arizona but we are also seeing a lot of younger buyers,” says the mortgage broker, whose company assists Canadian buyers to get in touch with realtors, mortgage lenders and brokers.

“Many are buying vacation homes younger in life either as an investment to take advantage of the still lower priced U.S. real estate, or because they can use the property today and work remotely and enjoy more time abroad before retirement.”

Calgary-based executive Evelyn Studer, who owns three properties in Phoenix, paid cash in every case, although for her most recent purchase, she was turned down for a U.S. mortgage because it was a rental property. “But I could get a mortgage or home equity line of credit on the one house I will be using” as her residence in that state.

So she obtained a U.S. home equity line of credit, which she used to build a pool and make other improvements to her property.

“That was actually a very simple process and not much different than getting a home equity line of credit here in Canada. They just needed a letter of guarantee from my company regarding my present employment amount and title, my last two years tax returns and some financial information on my assets and liabilities.”

Source: Globe and Mail  PAUL BRENT Special to The Globe and Mail Published Friday, Mar. 18, 2016

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Fixing Your Credit After a Bankruptcy to Apply for a Mortgage

When I first started working with Charlie (not his real name) in 2005, his bankruptcy had just been discharged, meaning his remaining debt was cleared. His credit score was 526, and he didn’t think he had a chance to even get a credit card.

Charlie’s bankruptcy filing was needed after a difficult divorce and a medical emergency. In fact, a a majority of people who seek bankruptcy protection do so after a medical emergency, difficult divorce, job loss; or some combination of the three.

It didn’t take long for him to realize that his financial life was not over. Within a couple of months, he’d gotten more than a dozen credit card and other loan offers. After the discharge of a Chapter 7 bankruptcy, you’re considered an even better risk than someone who still has a mountain of debt because you can’t file for bankruptcy for at least eight years. In reality, you can get a credit card immediately after your bankruptcy discharge.

Many people think, That’s exactly what got me into trouble in the first place, so I’m going to avoid plastic in my life forever. That’s a huge mistake if you want to buy a house. You need to rebuild yourcredit score, and the best way to do that is to show that you can manage credit wisely. A credit card history that shows you can pay your bills on-time every month is one of the best ways to rebuild that history.

With my help, Charlie’s credit score was back to 646 in about 2½ years, which is enough to qualify for an FHA and VA loan even in today’s rough mortgage marketplace. When we checked his score in January 2011 it was back up to 727; now he can qualify for some of the best interest rates.

The key is to work on three pieces of the puzzle at the same time immediately after the bankruptcy: Clean up your credit report, begin rebuilding a positive credit history and start saving. Now that you don’t have credit bills to pay any more, start putting as much of that money aside as you can to save toward the downpayment on your next home. The more money you can put down, the better you will look to a mortgage banker.

Fix Your Credit Report

The last thing you probably want to do after a bankruptcy is to review your credit report and see all the damage that you did. Get over it. The quicker you clean up that report, the faster you will be able to improve your credit score. You can get a credit report for free from each of the credit reporting agencies at AnnualCreditReport.com. By federal law you are entitled to one free report each year.

When you get that report, review it and note any errors you see on the report. For example, you may find accounts that are not yours or lenders who reported late payments that are not accurate. The credit reporting agency will send you instructions about how to make corrections. Follow those instructions carefully and make your corrections. Send any proof you have that the account reported is incorrect. The credit reporting agencies tend to believe your creditors rather than you, so the more proof you can send the better.

In addition to making corrections, also inform the credit reporting agency of your bankruptcy and note any accounts on that report that were discharged by the bankruptcy. The credit report agency will then note the bankruptcy, and that will start the clock for the debt to be removed from your credit history. Most negative credit accounts can stay on your report for seven years from the last date of activity. A Chapter 7 bankruptcy stays on your credit report for ten years.

But as a negative mark ages on your credit report its impact on your credit score becomes less and less significant, which is why you can rebuild your credit score even before the bankruptcy drops off.

You may find that you have to go through the correction process several times. Each time the credit reporting agency fixes a report, they will send you a corrected copy. Check it again for any errors and report any remaining errors until your credit report is accurate and all your discharged accounts are noted.

Rebuild Your Credit History

While you’re working with the credit reporting agencies to clean up your credit report, you should also be working on rebuilding your credit history by opening one or two credit accounts to begin positive reporting on your credit report. Each time you pay a bill on time that will be a positive mark and will help to minimize the negative marks.

You’ll likely have to start with a secured credit card. These cards usually require an annual fee and charge higher interest rates. While they’re not the best deal out there, they may be your only choice right after a bankruptcy. After about six to 12 months of using a secured credit card on time, you should be able to get an unsecured card with better terms.

You also may be able to get a retail credit card. Don’t go overboard with getting new credit now that you can. Stick to one or two credit accounts to show you can use credit wisely and pay it on time.

Monitor Your Credit Score

As you’re rebuilding your credit score, you may want to monitor your progress. If your score continues to go up, you’re on the right track. But if you find that your score goes down in any quarter, think about your credit activities. Did you charge a large item? Did you open a new account? That way you’ll learn what does positively and negatively impact your credit score so you can be sure you have the best score before applying for that mortgage in the future.

Six months before applying for a mortgage, don’t take on any new debt and risk ruining all the work you did to rebuild your credit score. Keep your credit accounts active but your balances low to get the best credit score.

Source: AOL Real Estate – Lita Epstein Mar 4th 2011 

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What do you do when your parents are living in poverty — in a million-dollar home

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A million-dollar home but a property in a state of neglect and a bare-bones lifestyle that doesn’t fit your wealth.

In today’s housing market where the average price detached home is now $1 million in Toronto and $1.8 million in Vancouver, it’s becoming increasingly common to see seniors living in poverty even though they have enough home equity to lift themselves out of it. Across the country, the average price of a home reached a record $442,857 in 2015 — much of that wealth an untapped resource.

“I’ve seen people who are eating cat food but they own a $1.5 million home,” says David Batori, the broker of record with Toronto-based Re/Max Hallmark Batori Group Inc.”Some of these seniors just don’t have any idea what their home is worth because they bought it so many years ago. Maybe even for as little as a few thousand dollars.”

With some local bidding wars making national news for the high prices homes are attracting, it may seem hard to believe that residents of Canada’s two largest markets don’t know what their homes are worth. But it’s not uncommon for some Canadian seniors to be unaware of the value of their location — a situation that causes many adult children to step in and do something about the imbalance.

Wayne Korol says his 76-year-old mother, who had been diagnosed with dementia, was facing some difficult financial decisions but had the luxury of living in the same home for past 38 years in West Vancouver — an area where prices have soared to an average of about $2.5 million.

“She had credit lines and was living off of them, but the rules changed and she couldn’t (get more credit),” said Korol, whose mother needs care 24 hours a day. “She could have moved, but mom had always said she wanted to stay in her home as long as she could. She loves her property, lives and breathes it. There is a beautiful view of Vancouver from every window.”

Some of these seniors just don’t have any idea what their home is worth because they bought it so many years ago. Maybe even for as little as a few thousand dollars.

He became what is called the committee of person for his mother, essentially, a person appointed to make personal, medical, legal or financial decisions for someone who is mentally incapable of making those decisions for themself. It was something the two had discussed long before she became ill.

“The beauty is mom is where she wants to be and we are able to support her with own resources, so the burden on the rest of us is not as great. She’s really happy,” said Korol, who set up a reverse mortgage on the property for extra cash while retaining the right for his mother to stay in the house.

Korol obtained that mortgage through HomEquity Bank, the largest provider of reverse mortgages in the country.

The Financial Post asked Yvonne Ziomecki, senior vice-president of HomEquity, about what can be done to strike a balance between property wealth and an improved lifestyle.

Q Why is the financial health of parents any business of their adult children?

A I think it’s important because children do have emotional and financial obligations when it comes to their parents. It will depend on family circumstances and some families are comfortable discussing money under any circumstances.

Q What level of involvement should there be?

A If the parents are capable of managing their finances and they seem to be okay, you don’t need to be very involved at all.

Q How do you make that call of when to get involved?

A If you are starting to see some signs, like showing up at the house and seeing disrepair, unpaid bills in unopened envelopes or other neglect. If they used to give money to grandchildren and then all of a sudden it stops — are they forgetting or do they not have any money? It doesn’t have to do with age. You need to stay close to parents geographically.

Q What do you do if you live in another city?

A My parents live in a different country altogether but I have a younger sister and we sort of tag team the conversations (with our parents). I try to talk to them on the phone. You can be close to your parents even if you are not in the same location by spending time on the phone. Sometimes you can pick things up in their voice long distance you can’t pick up in person. (But) it’s not as easy as dropping by and seeing a stack of unpaid bills.

Q Is the issue usually a lack of money or just forgetfulness when it comes to neglecting issues like home repair and bills?

A I think people are afraid to talk about money. It starts with small money issues and they think they can manage and it becomes worse and worse and they are embarrassed to tell their children that maybe they mismanaged something.

Q How often do adult children have to help their parents?

A It happens quite a bit that they are the ones who end up going to the bank for loan. If the parents actually own the house, they can get a reverse mortgage, draw money from the house and lift that burden from their children. We recently had two sons who were drawing $3,000 per month for the medical needs of their parents. They wanted an increase. Their banker said ‘Why? Mom lives in a $1-million-plus home, just use a product to access that (wealth).’

Q What about getting legal control of your parents’ assets?

A I personally preach it’s never too early to get a power of attorney for medical and financial matters. Don’t do one of those do-it-at-home, go see a lawyer. It’s not that expensive. It can cost $200.

Q Is there resistance from parents to setting up a power of attorney?

A It may just be a generation thing or (parents) trust children will just work things out. But it’s not that simple. Money is often a big cause of family feuds and falling out in the family. Even if the parents only have two children and it should be straight forward, it’s not always the case. This has to be done when you still have your mental health.

Q How do you make sure your children don’t financially abuse you and protect yourself?

A Absolutely we see adult children financially abuse their parents, we see that. They add themselves to titles, they take money, loans against the home. There are government agencies you can complain to. But how do you protect yourself in advance? You have to have a broad network of friends and family members you are in contact with. If you are depending on just one person, that relationship could become abusive.

Q What about the relationship between elderly parents or partners? Are they always in agreement?

A The first issue is, is there clarity about finances between spouses. If there is, then it’s easier to be open and involve their children. If they are hiding things — spending habits, savings or other relationships — they are not going to want children to be involved. They don’t want anyone to see what’s going on.

Q Is there a good time of the year to discuss any of this?

A Tax time. It’s a very good time because you can ask if they have all their documents. Do they need any help? Do you want me come over one day and sort through it. Then you can discuss if they are overwhelmed or confused about everything (financially).

Source: Financial Post Garry Marr | March 1, 2016 

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5 surreal wonders to explore near Toronto

Bruce Peninsula Grotto

Ontario is a province packed with natural wonders and surreal places to explore. Alas, for many of us, the drive way north to Thunder Bay and beyond is too daunting for a mere weekend trip. Fortunately, there are some out-of-this-world places within a reasonable drive of Toronto. From waterfalls to grottos, there’s plenty to astound within a short trip of the city.

Here are five surreal wonders to explore near Toronto.

The Grotto at Bruce Peninsula Park
It takes a bit of work to access the Grotto at Bruce Peninsula Park, but is it ever worth it. Carved out over Millenia by the waves of Georgian Bay, the cave is one of the most beautiful places in the country. Sunlight illuminates the interior water, which takes on an impossibly cerulean tone. Go early in the morning to avoid the crowds.

natural wonders torontoCheltenham Badlands
Access to the Badlands themselves was restricted last spring as a plan is hatched to protect this natural wonder while also allowing the public to enjoy it as much as possible. Even though you can’t walk on them for the foreseeable future, the drive around the Badlands remains breathtaking. At less than an hour from Toronto, it still very much worth the trip.

Tews Falls

Tews Falls
The Hamilton area is blessed with numerous dramatic waterfalls, but my top choice is always Tews Falls. Not only is it just 10 metres shy of the height of Niagara Falls, the dome-like setting makes for a surreal setting that feels more Amazonian than it does Hamiltonian. You can also check out the nearby Webster Falls while in the area.

Bon Echo Park

Bon Echo Provincal Park
The Mazinaw Pictographs are located on a soaring 100 metre cliff at Bon Echo Provinicial park that’s stunning enough in its own right. Close exploration reveals over 260 pictographs spread across the rock face, which make it one of the largest collections of its kind in Ontario. There’s also a dedication to Walt Whitman carved into the rock almost a century ago.

Bonnechere cavesBonnechere Caves
Ontario isn’t exactly short on caves, but few match Bonnechere for pure aesthetics. This is a photographer’s playground, with layered rock walls shaped by millions of years of erosion. The cave system is quite extensive, which allows you to explore the fossilized passageways for hours.

Source: BlogTo.com Derek Flack / FEBRUARY 26, 2016

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Architecture for the ages

Architects Janna Levitt and Dean Goodman designed a house that could easily shift to accommodate children, future renters and, one day, their golden years.

Architects Janna Levitt and Dean Goodman designed a house that could easily shift to accommodate children, future renters and, one day, their golden years.

Young adults are getting squeezed out of the housing market. Their parents, meanwhile, want to downsize without leaving familiar neighbourhoods. The solution couldn’t be simpler to a growing group of designers: Rethink (and rebuild) the family home to suit several generations for the long haul.

When a strange young man entered her bedroom, Kelly Rossiter wasn’t entirely surprised. “He had had a bit too much to drink,” says Rossiter, who lives in Toronto, “and had gotten lost on the way to the front door.”

On the way, that is, from a party at her daughter’s place; Rossiter and her husband Lloyd Alter live below their daughter Emma, now 28, in a 1913 house that’s been split into two apartments. The door that links the suites in their home is usually left unsecured. “But after that night, I began locking the door whenever she had a party,” Rossiter says.

That incursion was a “rare hiccup” for the three family members, who occupy the same house that Alter, 63, and Rossiter, 57, have inhabited since 1984. Recently, instead of trading it for a condo in another area, they hired David Colussi of Workshop Architecture to divide the rambling building into a duplex. Now they live in a suite in the first floor and basement; Emma is upstairs with her fiancé and a roommate.

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.

 

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.

 

Like a growing number of Canadians approaching retirement, Alter and Rossiter have taken a creative approach to the architecture of the “empty nest.” Rapidly rising housing prices – particularly in Toronto and Vancouver – are squeezing the middle-class expectation of home ownership for young adults. At the same time, their parents, people such as Alter and Rossiter, are not always eager to move into apartment living or to give up on the advantages of a familiar neighbourhood.

Rather than moving house, why not reshape our houses to fit us?

Such adaptability can be built into a house’s architecture. One example is the Grange Triple Double, a house by Williamson Chong Architects: Their clients, a Toronto couple in their 30s with a young son, decided to move in with the husband’s parents. They built a bespoke house that would accommodate them all together with rental income – and then change, multiple times, as the family’s needs evolve through the decades.

“The ingredients for this kind of house,” explains partner Betsy Williamson of Williamson Chong, “are spaces that are discrete yet flexible.”

The Triple Double, at about 3,200 square feet plus basement, sits on a corner; it is a three-bedroom, three-bath home which spills across three levels – and abuts rental space located on the ground floor and in the basement. The tenant space can be configured as one or two apartments; half or all of it can also be joined to the main house with the removal of cabinets or wall sections. In addition, one of the house’s bedrooms can be closed off as a semi-private area for the older residents. In time, the architects imagine that the house could take many different configurations; for instance, one or both of the grandparents might move into the main floor rental space.

The Grange Triple Double, a house by Williamson Chong Architects, was designed and built to change, multiple times, as the owners' needs evolve through the decades.

 

The Grange Triple Double, a house by Williamson Chong Architects, was designed and built to change, multiple times, as the owners' needs evolve through the decades.

 

The Grange Triple Double, a house by Williamson Chong Architects, was designed and built to change, multiple times, as the owners’ needs evolve through the decades.

 

From the architects’ point of view, such adaptability is fairly easy to design. The house’s heating and ventilation systems can be separately controlled in each of three potential units; extra sound insulation provides a buffer of privacy. But the biggest consideration is, as Williamson explains it, a matter of space. “You need rooms,” she says. “You need rooms that are closed off that can be opened up to each other.”

This logic can be applied to houses that don’t have the scale or the unusual geometry of the Triple Double project. Janna Levitt and Dean Goodman of LGAArchitectural Partners, who are married and have two children, designed their own house a decade ago, when they were in their early 50s. “When we moved in, we had teenagers,” Goodman explains, “so we tried to figure out, what kind of house would work for that age of our family and what would work after that?”

‘It’s important to think about what you’re building for,’ Goodman says, ‘not just right now, but in the longer term. And how much longer?’

‘It’s important to think about what you’re building for,’ Goodman says, ‘not just right now, but in the longer term. And how much longer?’

 

‘It’s important to think about what you’re building for,’ Goodman says, ‘not just right now, but in the longer term. And how much longer?’

 

The first need was privacy: Their kids wanted their own space, and they got it in the basement, which is high (the windows start three feet off the ground) and has two bedrooms, a bathroom and a living room, plus generous windows.

That basement has room and the plumbing rough-ins for a kitchen; it also has a space for a front door and staircase which is, for now, buried under soil in the garden. (“We thought, if we give the kids their own door when they are 14 or 15 years old, we’ll never see them,” Goodman explains.) Now the kids have moved out, and the couple is preparing to rent that space out, providing a source of income.

And the upper levels, with about 1,600 square feet, two bedrooms, are still larger than the average Canadian house of 50 years ago. Goodman says he and Levitt are happy to reduce their ecological footprint, and simply don’t need any more space.

There is a lesson in this: Design matters. Levitt and Goodman are excellent architects, and their house is efficiently planned to be comfortable and adaptable despite its relatively modest size. “It’s important to think about what you’re building for,” Goodman says, “not just right now, but in the longer term. And how much longer?”

The upper levels of Levitt and Goodman's house, with about 1,600 square feet, are still larger than the average Canadian house of 50 years ago.

The upper levels of Levitt and Goodman's house, with about 1,600 square feet, are still larger than the average Canadian house of 50 years ago.

 

The upper levels of Levitt and Goodman’s house, with about 1,600 square feet, are still larger than the average Canadian house of 50 years ago.

 

That raises the question of old age and a potential loss of physical mobility. Levitt and Goodman will live, still, on two levels; this goes against the emerging wisdom of “retirement communities,” in which people are choosing to retire to houses that are often on one level and wheelchair-accessible. Kelly Rossiter and Lloyd Alter have likewise chosen to live on two floors.

But is that even a problem? Alter, who is a writer on design and sustainability and an adjunct professor at Ryerson University, argues passionately that being located in a walkable neighbourhood, served by transit and connected to neighbours, is what matters as one ages.

“Older people, when they move into single-family houses in subdivisions, they’re setting themselves up for failure,” he says. “It’s a hell of a lot likelier that they’ll lose their keys before they lose their ability to walk up the stairs.

“This is one solution: this re-intensification of our neighbourhoods.”

Levitt and Goodman plan to live on two levels into retirement.

Levitt and Goodman plan to live on two levels into retirement.

 

Levitt and Goodman plan to live on two levels into retirement.

 

As Alter correctly points out, the conversion of houses into apartments (and back again) is nothing new – especially in Toronto, where such ad hoc adaptations have always provided a major portion of the city’s rental housing. But for upper-middle-class families, they now make sense. “Now we’re going into a generational change where the kids don’t have enough money,” Alter says, “and the parents have the house and don’t need it.

That idea drives much of the business for the Vancouver design-build firm Lanefab, which specializes in energy-efficient laneway houses. Since the city made zoning changes in 2009 to allow such projects (small new houses in the backyards of existing houses), the firm has worked with clients who are house-rich, aging, and ready to simplify their lives.

“If you’ve got an 80-year-old house in Vancouver, being able to move into a new building that’s energy-efficient – that’s appealing,” says Lanefab’s Mat Turner. “They can stay in their neighbourhood, in a house that’s custom-designed for them.”

This sort of promising equation may be enough to break some middle-class expectations about dwelling and family. Alter and Rossiter, with their upstairs-downstairs living in Toronto, are finding that their friends love the idea. “People come, they see it, and they say, ‘I’d love to do this,’” Alter reports. “‘If I could ever get my kids to go for it.’”

 

Source: ALEX BOZIKOVIC The Globe and Mail: Thursday, Feb. 25, 2016

Janna Levitt and Dean Goodman designed their family home so that part of it could be converted into a rental when their children moved out.

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‘No safety net’: How a divorce rips a tornado through your finances, and what to do about it

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Divorce sucks.

Whatever else you may think of divorce, or marriage for that matter, we can all agree on that.

In fact, I looked up the word “trauma” in the Oxford American’s Writer’s Thesaurus while writing this article. To my delight: “Trauma, noun, 1. The trauma of divorce.” There you go. Divorce is known as so universally crappy that it’s used as the example for a word whose synonyms include “torture” and “war-weariness.”

Reaching beyond the obvious emotional implications though, a major consequence of divorce is the absolute tornado it rips through your finances.

Few couples realize that no matter how conscious the uncoupling, no matter how determined they are to dissolve their marriage congenially, their finances are likely to be, if not decimated, then at minimum thrown into disarray.

“I really don’t know if there’s a watershed mark when people look at this thing and say ‘I have no money left’,” says Donald Baker, a family law specialist at the Toronto firm Baker and Baker.

“During the divorce what happens normally is that they don’t even think of the financial ramifications because, you have to remember when they go through this process, it’s an incredibly emotional process. Even a so-called simple divorce … they aren’t really thinking that clear.”

That is, until they are confronted with the raw numbers.

To determine asset split and spousal support, Canadians must fill out a financial statement, which is a document of about 15 pages detailing income, expenses and assets.

“This is sort of the first point in the process for people who are saying, ‘I didn’t realize it costs me this much to live,’ and it usually comes as a bit of a shock for most people,” Baker says.

Greg, who asked not to use his real name, is 48, works in sales and had two sons with his wife of 15 years. They divorced last January in what he describes as “amicable” circumstances.

“Almost no one talks about how you’re going to manage your finances when you’re separated before you actually go out and educate yourself at that time,” he says.  “And you’re dealing with a short window of time to bring yourself up to speed…. You’re not an expert and you’re learning things that surprise you.”

The biggest surprises for Greg were not the obvious hefty expenditures, like child and spousal support, but the smaller legal and administrative costs. For example, both Greg and his ex-wife had to take on critical illness insurance.

“There’s no fall back. Even in a situation where two people are married and one is stay-at-home, that situation can be changed and that other person can go back to work,” he says. “I don’t have that option (now).”

They also spent thousands on legal fees.

The cost of an uncontested divorce ranges from $1,000 to $3,500, according to 2015 Canadian Lawyer’s legal fees survey, but you also have to consider the cost of things like making a new will (another $430 to $750).

“I was still surprised, despite how amicable (we were) … how expensive the legal system was to navigate through,” Greg says. “And we did as much as possible ourselves in terms of the paperwork.”

Baker says that the court’s main fiscal aim is to ensure both parties “leave the marriage as equal partners.”

That means all property is generally split 50/50 and the spouse with the higher income pays the spouse with the lower income an equalization amount so that one party doesn’t experience a huge drop in his or her standard of living. (Any assets, besides the marital home, that you can prove you brought into the marriage you usually get to keep.)

But no matter how careful a couple is, there are almost always expenses that don’t make it into the calculations.

For example, Greg was required to split his pension plan with his ex-wife. Although he found the concept of the division fair, what really irritated him was that the pension plan administrators charged $800 just to find out the present value of the fund — a fee he was responsible for paying in full, since it was his asset, even though both parties would benefit.

He also got his taxes reassessed this year because he and his wife agreed to split the Child Tax Benefit, which seemed fair to them since they share custody. But the CRA told him the party receiving any kind of support is the one that can claim the entire tax credit.

“I still don’t understand why the system is set that way. It’s hard to comprehend where the equality is,” he says. “As far as I know we’re trying to set up each household with roughly equal income, so we naturally assumed that (credit) would be split as well.”

Ultimately, whichever way you split it, running two households is simply more expensive.

“It’s like single people,” Baker says. “You have two separate lives financially. Instead of paying one rent or one mortgage payment you have two of them. Those are after-tax dollars, so that’s pretty painful financially.”

divorcepiggy

Greg dealt with this by going through his budget line-by-line. Luckily, he was fiscally aware enough to know what he was spending and managed to trim his expenses by about $300 a month.

“The biggest thing I recommend everyone to do is go through your expenses twice,” he says. “Once to eliminate what you don’t need and, for the things you want, ask how you can get that stuff as low as possible.”

Even if you can cut back a bit, having higher overall expenditures means that saving for retirement often gets put on the back burner after a divorce.

Greg and his ex-wife used to put money in their RRSPs, but there’s simply not enough cash to go around right now.

“I’m not making progress on building security for myself and a buffer,” Greg says. “It’s a very thin line for me and I would be in a situation, if I were to lose my job, I would almost inevitably have to put up the house for sale immediately.”

Despite their experience on either side of the issue, neither Greg nor Baker can see any real way to prepare yourself for a divorce.

I don’t have a safety net and neither does she

Baker does suggest that people draw up a Marriage Agreement, sometimes called a pre-nuptial agreement, before they wed: Taking inventory of any assets you have before exchanging vows makes it easier to deduct them from your calculations upon dissolution.

Greg suggests taking a more practical and serious view of marriage and divorce.

“I believe in love and romance and marriage and all that stuff,” he says. “The only thing I’ve changed slightly is that I believe both parties should receive independent legal advice before they get married. That does need to be considered because you are essentially asked to sign a financial document without representation. It’s a legal document.”

It’s true that part of the reason divorce catches us so off-guard is because it’s a reminder of what we’re dissolving: not just an affair of the heart, but a covenant between two parties who once agreed to combine and share assets within a conjugal relationship.

“This is really permanent,” Greg says. “I don’t have a safety net and neither does she.”

How to make the financial side of divorce less horrible

1. Sign a Marriage Agreement

Commonly called a prenup, creating a Marriage Agreement before your wedding will allow you to tabulate your assets before marriage. If you ever divorce, says Baker, you’ll be able to prove that you did indeed have savings of $30,000, for example, before entering the marriage, which will then likely be entirely yours to keep.

2. Consider going through a mediator

If your divorce is amicable, you may be able to save money by going through a mediator instead of hiring two lawyers. Greg says he wishes he and his wife went to a mediator first “given we were so close,” and because they were so “surprised at how quickly the (lawyer) fees added up.”

3. Recognize divorce law is not what you see on TV

Canada has totally different divorce laws than the U.S., and trying to get tips from your favourite lawyer show won’t help you at all. For example, behaviour has zero effect on how much money you’ll walk away with. The division of assets is a purely mathematical calculation.

4. Know your expenses

Ultimately, the divorce process is likely to catch you off-guard and throw you into the ocean where you’ll be gasping for air. The only real way you can prepare for your post-divorce financial situation is to know what you’re spending now. By tracking your expenses, you can figure out where you can cut back once you’re on a single income and you’ll feel much more confident taking a firm grasp on your expenditures.

 

Source: Financial Post – Danielle Kubes, | February 19, 2016

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Snowbirds rush to sell U.S. homes to profit from tanking loonie

Winnipeg snowbirds Greg and Erina Barrett are spending their last winter in their Arizona home. They just sold it for a big profit.

Greg Barrett and his wife, Erina, wouldn’t call themselves savvy investors. But the snowbirds have just made a killing in the U.S. real estate market.

They join a growing number of Canadians who bought U.S. homes for cheap and are now selling them to take advantage of rising U.S. house prices and a tanking loonie. Even with added costs such as a possible capital gains tax, many Canadians are still coming out far ahead.

“It just worked out for us and we’re blessed,” says Barrett, a 75-year-old retired social worker.

In 2010, the loonie was virtually at par and the U.S. housing market had crashed when the Winnipeg couple bought an Arizona home to escape Canadian winters.

“It was a fabulous deal,” says Barrett from their three-bedroom bungalow in San Tan Valley near Phoenix.

Recently, he and his 73-year-old wife contemplated selling to lighten the burden as they age. When they crunched the numbers, they couldn’t resist taking the plunge.

Thanks to the rebounding U.S. real estate market, they have just sold their Arizona home for 65 per cent more than what they originally paid.

Add the exchange rate with the loonie hovering around 71 cents US, and you could say the couple hit the jackpot.

“In Canadian terms, it’s double the boost,” says Barrett. “I’m walking on sunshine, and don’t it feel good,” he adds, quoting a favourite pop song.

snowbirds Greg Barrett Erina

The Barretts pose in front of the Arizona home they just sold. The Canadian couple must move out at the end of the month, but plan to rent to get their taste of sunshine in coming winters. (CBC)

Swamped with sellers

The Barretts’ Arizona real estate agent, Diane Olson, says she’s swamped with calls from Canadians itching to sell their U.S. properties to cash in.

“They are just saying, ‘It’s such an awesome and great opportunity.’ They were not counting on the foreign exchange going to where it is,” says the agent, who specializes in Canadian clients.

Olson says she has 29 Canadian-owned Arizona homes either on the market or about to be listed.

“I am zooming, zooming, it’s crazy!” she says while driving on a Phoenix freeway, heading to her fourth meeting that day with a Canadian client.

Diane Olson

Diane Olson stands in front of one of her many real estate signs in Arizona advertising a Canadian-owned home for sale. (CBC)

From buying frenzy to selling spree

It’s a reversal from 2010, when the loonie was around par. In 2011, it would hit $1.05 US. At the same time, U.S. real estate prices had taken a dive, triggered by the 2008 subprime mortgage scandal and financial crisis.

So Canadians — from snowbirds to investors — swooped into hotspots like Arizona and Florida to grab a piece of sunny real estate for a steal.

According to the American National Association of Realtors survey, for the year ending in March 2007, Canadians accounted for 11 per cent of U.S. home sales to international clients. But as the loonie climbed, so did Canadian deals.

From March 2011 to 2012, Canadian sales more than doubled to 24 per cent, totalling an estimated $15.9 billion US.

“It was a buying frenzy,” says Olson. “You could buy a brand-new house on the outskirts [of Phoenix] that was nice for $80,000 [Cdn].”

Fast forward to 2016. Thanks to a strengthening economy, U.S. house prices have shot up 30 to 50 per cent, says BMO economist Robert Kavcic.

Add the loonie’s recent decline, and some Canadian sellers of U.S. homes are making big profits, even after any tax hits. “They have made out like bandits,” says Kavcic.

Canadians fleeing Florida

In Florida, Brent Leathwood is also seeing a surge of Canadians cashing out. The real estate agent says that when the loonie was stronger — from 2009 to 2013 — virtually all his Canadian clients wanted to buy.

Now, he says, about 80 per cent of them want to sell their homes in the Sunshine State.

“They’re making a pile of money, some of these people,” he says.

But Leathwood adds it’s not just big profits that are encouraging people to sell.

He says there’s a high price to pay these days when hanging on to U.S. property. Suddenly everything from American property taxes to electricity bills have become more expensive.

“A lot of these people are feeling squeezed by the ongoing monthly costs of maintaining a residence as the exchange rate continues to go against them,” says Leathwood.

Both he and Olson expect the selling frenzy to continue as long as the loonie stays low.

“There’s going to be a wave of money going back to Canada,” says Leathwood.

The Barretts plan to keep some of their money parked down south.

They still want to spend their winters in Arizona, but from now on, they’ll rent — with a lot less responsibility and a lot more cash.

“I’m sitting here in paradise and I’m making money. It’s just an amazing thing,” says Greg Barrett.

Source: Sophia Harris, CBC News Posted: Feb 01, 2016

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What happens to Aeroplan and other reward program points when you die?

Points

Aeroplan is “capitalizing on someone’s grief” by charging a fee to transfer points from a deceased member’s account, says the family member of a woman who died leaving 250,000 Aeroplan points behind.

“It seemed so callous. It seemed really insensitive. And it seemed really unnecessary,” says Kathryn Kwasnica of Victoria after finding out how much it would cost to transfer to her father the 250,000 points accumulated by her late stepmother.

But Aeroplan says it’s a “small” fee and that a second option allows users to avoid paying that charge altogether.

And even though the fees can be significant and travel booking potentially restrictive, compared with some other loyalty programs, Aeroplan has one of the better policies for dealing with points in the account of someone who has died.

Kwasnica’s stepmother, Linda Stewart, started feeling ill about a year ago, but it wasn’t until last summer that she was diagnosed with mesothelioma, an aggressive and deadly form of cancer.

AEROPLAN

It’s in the fine print. (CBC)

“Six months later she was dead,” says Kwasnica. Stewart was 68 when she died on Jan. 7.

Kwasnica, acting on behalf of her grieving father, Stewart’s husband, called Aeroplan to find out what to do about Stewart’s Aeroplan points.

She says she was told, in the event one of its members dies, Aeroplan charges a fee of $30 plus one cent per point to transfer the balance to a surviving family member. In Kwasnica’s case, because her stepmother had about 250,000 points, the fee would have amounted to about $2,530.  

“That seemed crazy for a data transfer,” says Kwasnica.

Aeroplan defends itself

“My father passed away a year ago, so I completely empathize with members who are going through what they’re going through,” says John Boynton, Aeroplan’s chief marketing officer.

“But we are always trying to balance shareholders and members, so there are certain costs that we have to recuperate.”

For a flat $30 fee, Aeroplan also offers the option to transfer those points to a newly created estate account, which can be used by surviving family members. But Kwasnica says she was told by the person she contacted at Aeroplan that the points in the estate account must be used in their entirety within one year.

Many Aeroplan trips need to be booked at least a year in advance, and Kwasnica understood that to mean her father would have had to make travel reservations practically while planning his wife’s funeral.

“Who wants to travel right after the love of their life dies and you’ve had the worst year of your life?”

But Boynton says that’s not actually the case.

“A year is how much [time] you have to do something with them. But you can also book an Air Canada ticket up to a year in advance too, so that’s two years. And if that’s too soon for you, you can also buy an Air Canada gift certificate, which doesn’t have an expiry, or a retail gift certificate as well.”

However, redeeming Aeroplan points for a gift certificate does not always offer the best value compared with, for example, redeeming those points for an international flight in business class.

Maximizing revenue

Patrick Sojka of the website Rewards Canada says transferring points is not a large expense for a loyalty program.

“Honestly, [the fee], it’s money-making,” he says.

“Ninety per cent of all programs worldwide charge you a fee to transfer points and miles to somebody else [in the event a member dies].”

In Sojka’s view, the fee is about maximizing revenue. “The fact [is] that the miles on those accounts are a liability. The sooner they can get them off the books, the better,” he says.

High cost of dying

Compared with Aeroplan, other loyalty programs have terms and conditions surrounding death that are even more expensive and draconian.

Air Miles used to allow the surviving family member to merge an account with that of the deceased at no charge.

But about four years ago, Air Miles changed its policy and now charges a fee of 15 cents per mile.

Sojka estimates the Air Miles fee is about 50 per cent higher than Aeroplan’s.

Other loyalty programs don’t even offer the option to transfer points in the event of a death.

According to the terms and conditions for Shoppers Drug Mart’s popular Optimum points program, “Upon the death of a Shoppers Optimum Member, the member’s account will be closed and any Shoppers Optimum Points in the account will be forfeited.”

Better not to tell?

But there may be ways around this.

In March 2013, Delta Airlines changed its policy, declaring SkyMiles would no longer be transferable upon death.

As a result, travel writers, bloggers, and travel hackers started advising SkyMiles members not to notify the program of a death.

“It’s a grey area. But you don’t let the program know that that person’s passed away,” says Sojka, who also advises this.

“What you do is ensure that everybody has your log-in and passwords and then you can use those miles. Because when you book rewards flights, they don’t have to be booked for yourself, they can be booked for anybody, essentially. You can go in and book points for yourself, your family members, you name it, using those points.”

It’s not clear if companies will crack down on this apparent loophole, but Sojka says he hasn’t heard of any repercussions from taking this route.

Now that they know about it, Kathryn Kwasnica says her family will probably go with the gift certificate option for her stepmother’s Aeroplan points.

“I think my dad would probably be into that. Because I think for him, the thought of travelling right now is just disturbing.”

 

Source: By Aaron Saltzman, CBC News Posted: Jan 27, 2016 

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Seniors look to their home for financing the future

Canadian seniors consistently report that they prefer to live at home and age in place, instead of moving to assisted living. Yet, they also report that financial challenges are the biggest hurdle to doing so.

A recent report from the Federation of Canadian Municipalities (FCM) shows that 93% of seniors live at home and prefer to age in place. And, HomEquity Bank statistics support this, reporting that 60% of retired Canadians describe staying in their home as critical to their quality of life.

“Every day, our team hears from older Canadians who want to remain in their homes and communities, but find the financial challenges very stressful,” says Yvonne Ziomecki, SVP, HomEquity Bank. “We work with seniors to help them explore utilizing the equity in their homes so they can continue to live in a familiar environment – which in most cases is the family home.”

According to the FCM report:

  • 700,000 senior-led households face a housing affordability challenge;
  • a combination of modest incomes and high living costs mean that one in four senior-led households are spending more than 30% of their income on shelter; and
  • seniors who live alone experience poverty at twice the rate of other seniors.

One reason finances have been adversely affected, notes the FCM study, is because only one-third of the Canadian workforce is covered by a registered pension plan, down from 37% in 1992.

HomEquity Bank stats show 30% of Canadians nearing retirement have $50,000 or less in savings. And, almost 70% of those nearing retirement are still carrying debt, with 35% of Canadians nearing retirement planning on using the value of their home to generate retirement income.

Source: MortgageBrokerNews.ca Donald Horne | 07 Jan 2016

Are you a senior who would like to stay in your own home and worried about being able to afford it? Book your know obligation consultation with the Ray McMillan Mortgage Team or visit www.RayMcMillan.com and let us explore your options together.

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