Tag Archives: retirement living

The Retirement Crisis Facing African Americans

Credit: Shutterstock

There’s a saying: When white America catches a cold, black America catches pneumonia. So, if there is an impending retirement crisis in America, what does that mean for African Americans? The answer to that question is discouraging.

There is a huge gap in retirement preparation of African Americans compared to white Americans, generally speaking. According to the Urban Institute’s Nine charts about wealth inequality in America:

The Retirement Savings Racial Disparity

The average white family had more than $130,000 in liquid retirement savings (cash in accounts such as 401(k)s, 403(b)s and IRAs) vs. $19,000 for the average African American in 2013, the most recent data available.

The wealth gap is growing. The average wealth of white families in 2013 was more than $500,000 higher than that of African American families ($95,000). In 1963, the average wealth of white families was $117,000 higher than for black families.

White families accumulate more wealth over their lives than African American families, on average, which widens the wealth gap as they age. In their 30s, whites have an average of $140,000 more in wealth than African Americans (three times as much). By their 60s, whites have over $1 million more in wealth than African Americans (11 times as much).

“The American dream has not happened for African Americans and Hispanics,” says Signe-Mary McKernan, economist and co-director, opportunity and ownership initiative at the Urban Institute. “Retirement wealth is at the end of the cycle. A lot of things can happen along the way before you get there.”

The pay gap and the wealth gap are among the many reasons African Americans enter retirement in poor financial shape, says Maya Rockeymoore, President of Center for Global Policy Solutions in Washington, D.C. Other explanations include financial literacy and investing habits.

The Pay Gap

“There is a pay gap when it comes to what African Americans earn when it compares to whites, even when you control for education,” says Rockeymoore. “We are starting with less.”

The hourly pay gap has widened to the worst in 40 years, according to the Economic Policy Institute (EPI) — a roughly 27% difference in 2015. Whites earned an average of $25.22 an hour vs. $18.49 for blacks, the EPI says. Declining unionization, the failure to raise the minimum wage and lax enforcement of anti-discrimination laws have contributed to the growing black-white wage gap, according to the EPI.

“We need to be having forums addressing labor-market decisions,” Rockeymoore says. Blacks are earning less than whites and it is not a reflection of talents or skills, she notes. “It is a reflection of discrimination in the labor market. We talk about the gender-pay gap, but we need to talk about the racial-pay gap.”

The Wealth Gap

According to the Federal Reserve’s Survey of Consumer Finances, in 2013, the median white household had $13 in net wealth for every $1 in net wealth of the median black household. Also, according to a Pew Charitable Trusts report, What resources do families have for financial emergencies, the typical white household has slightly more than one month’s worth of income in liquid savings, compared with just five days for the typical African-American household.

The Federal Reserve report said that whites are five times more likely to receive large gifts and inheritances than blacks and the amounts tend to be much larger for whites. “That is one of the main issues,” says financial planner Nick Abrams of AJW Financial Partners in Columbia, Md. “We [African Americans] are starting at ground zero every generation. That is hurting us financially.”

Rockeymoore agrees. “The wealth gap is serious,” she says, pointing to disparities between blacks and whites regarding employer-sponsored retirement plans.

“A significant number of us [blacks] are in jobs where we do not have access to pre-tax preferred retirement vehicles like 401(k) or 403(b) accounts,” says Rockeymoore. Many blacks work in small businesses where such plans frequently are not offered.

“If we do work in jobs that offer tax-preferred vehicles, we tend to not contribute at rates that whites do. And we take out loans out at higher rate,” adds Rockeymoore.

One solution, she notes, would be more access to such employer-sponsored plans.

Home ownership also plays a big part in the wealth gap. The typical white household aged 47 to 64 has housing wealth of $67,000; the typical household of color in this age group has zero home equity, according to the December 2016 report, Social Security and the Racial Gap in Retirement Wealth, from the National Academy of Social Insurance.

Debt can limit the ability to achieve other financial goals, especially retirement planning, too. “Among African American employees surveyed who are offered an employer-sponsored retirement account but contribute less than the employer match or do not contribute at all, 40% say that paying down debt is a higher priority for them than making retirement contributions, according to Prudential’s 2015-2016 African American Financial Experience.

Financial Literacy

There are also big differences in financial literacy between blacks and whites. Only one in 10 African Americans work with a financial professional compared with one in four white Americans, the Prudential report said.

“Many African Americans have had no history of someone who was a grandfather or someone who gave them some level of financial education in that household,” says James Brewer, president of Envision Wealth Planning in Chicago and president of the Association of African American Financial Advisors. “So, one of the challenges is around some level of financial education.”

Theodore Daniels, president of the Society for Financial Education and Professional Development agrees. “There has got to be more education. People have got to be willing to attend financial education workshops. Some people don’t know what they don’t know. Once they attend, they say ‘I can do this.’ If they are not educated, they are not comfortable making decisions, and they won’t do it,” Daniels notes.

African Americans Tend Not to Invest in Stocks

Some analysts also say that African Americans often shy away from investing in the stock market. “Whatever discretionary income we have, we tend not to invest in equities,” says Rockeymoore. “We don’t have a diversification.”

This may be due to a lack of comfort with the stock market.

“African Americans are risk-averse,” says Deborah Owens, a former Fidelity Investments vice president who calls herself America’s Wealth Coach. “So, one of the major reasons they have less in retirement savings is they are ultra-conservative, particularly African Americans who work in the public sector and nonprofit organizations.”

Owens says black investors typically focus on guaranteed or fixed investments that are low-risk or no-risk. As a result, their retirement funds aren’t compounding at a high rate of return.

According to the Federal Reserve, the average balance of African Americans in 401(k)s is only $23,000. And Social Security and the Racial Gap in Retirement Wealth found the average balance for African Americans in pensions and IRAs was $10,300, vs. $105,600 for white Americans.

Owens believes many African American workers don’t take full advantage of all the choices in their employer-sponsored plans because they don’t understand them. “The tendency to be risk averse is directly correlated to their lack of knowledge,” she says.

What Employers and Policymakers Could Do to Help

Brewer believes employers could play a bigger educational role.

“It is important for companies or organizations who have higher percentages of African American employees to realize that there are some differences, and they need to bring in people who have some cultural sensitivities to those differences, and come up with a plan to help those groups,” says Brewer.

He says African Americans need financial advice on issues such as having higher student loan debt than white counterparts and, often, a greater need to financially assist less affluent family members. Rockeymoore says African Americans, even in retirement, tend to support other family members, including children and adult children. Also, they are disproportionately taking care of grandchildren, making them unable to save more for retirement.

All in all, says Rockeymoore: “There needs to be a national campaign to encourage young African Americans to save and invest. Home ownership is the pathway to wealth. They [blacks] need to be educated in the homebuying process and also to diversify their investments to include stocks and bonds.”

McKernan believes policymakers also need to take action to close the racial retirement security gap. “This country is built on the premise that it provides economic opportunity,” she says. “But this country continues a history of discrimination and the result of that is passed from generation to generation.”

Source: Forbes.com – By Rodney Brooks, Next Avenue Contributor 

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Advice for retirees who must answer the question: Buy, sell or rent?

It wasn’t that long ago when the outlook for retirees focused on baby boomers downsizing and moving into smaller homes in the country — trading an urban lifestyle with a relaxing, rural retirement.

Fast forward 20 years, and many retirees are opting to stay in their homes for longer: renovating, upgrading and improving accessibility along the way.

A comfortable home is a comfortable lifestyle that many are not willing, or wanting, to give up.

The definition of “old” has changed.

Joseph Segal, the founder of Kingswood Capital, has just put his tony 22,000-square -foot home in Vancouver’s west side up for sale, for $63 million.

Why? Because they are downsizing to a smaller home in Vancouver.

“I’m an old man,” said the 92-year-old Segal, and “it’s a big place.”

Many of us are living longer and have healthier lifespans with various sources of retirement income, and ultimately we will ask the question: should we buy a condo, downsize to a smaller home or cash in and rent?

All options have pros and cons.

Is a condo right for you? 

Buying a condo may mean downsizing our footprint, but in many cases it doesn’t mean downsizing the cost.

Retirement communities are being pitched to seniors across the country with promises of amenities such as entertainment, hospitals to retail.

Many choose to be closer to families along with the desire to live in accommodations that are maintenance free. It can be enticing.

On the other hand, the concern over new costs such as condo fees or retirement residence fees can be worrisome.

Is it time to downsize?

In a hot real estate market, the temptation to cash in and lock in your appreciation can be overwhelming.

But before you do, Ted Rechtschaffen, president and CEO of TriDelta Financial, said in a BNN interview to ask yourself: is the house I’m in now too large or too difficult for me to manage?

And consider where your wealth is concentrated. Do you have too much of your wealth tied up in real estate? You have to live somewhere. So do you buy or rent? Unless you plan on living in a home for at least 6 years, you might be better off renting.

Bottom line

I’ve never been a fan of trying to time the market. You have to get it right at least twice. Going in and getting out.

Consider your lifestyle, potential longevity and retirement funding options. Even if you don’t pick the peak of the market you are still holding on to the lottery ticket that doesn’t have an expiration date.

You get to cash in when you need to, or want to.

Source: CTV – Patricia Lovett-ReidChief Financial Commentator, CTV News

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Retirees find financial freedom in renting after selling their homes

William Jack and Mary Taylor sold their home two years ago, but they didn't buy a condo. Instead, like a growing number of people downsizing, they rented a place.

A growing number of homeowners are unlocking the equity in their houses, by selling and moving into a rental.

William Jack woke up in the middle of the night last month as he often does. This time, though, he rolled over and went back to sleep.

That’s when he knew that after more than two years of turmoil, he was finally home. The fact that the roof over his head belongs to someone else only added to his peace of mind.

William and his wife, Mary Taylor, are among a growing number of Toronto area downsizers, who are choosing to rent rather than buy a retirement nest. It is a choice, they say, that can be physically, mentally and financially liberating.

The couple — he’s 71, she’s 69 — are healthy, vibrant people. But a couple of years ago, their two-storey home of 32 years with its reverse ravine lot was “just consuming too much time and it was absorbing huge amounts of energy that we wanted to use in other ways,” said William.

“There were rooms we didn’t go into,” said Mary.

“We watched both our parents go through this downsizing exercise. I swore I would never do to anyone what my parents did to me. It was a nightmare,” said William.

“We wanted to leave while we still could — gracefully,” said Mary.

Royal LePage realtor Desmond Brown helped sell the couple’s east-end home and, in the end, he was the one who helped them find the two-bedroom, 1,800-sq. ft. condo they have been renting near the lake since the fall.

The emotional and financial decision to rent rather than buy is becoming more common, said Brown.

Clients like William and Mary, “have had a really good run by owning their own homes for many years,” he said.

“They’ve accumulated a lot of equity. They have a feeling that the market is going to go back down again and all the benefits of this great market are going to be lost if they don’t cash in,” said Brown.

At the same time, these home sellers can’t necessarily see spending $1 million or more, plus maintenance fees, on a condo.

“Yes, I was incensed when I saw these places for the same amount of money as our house. How could that possibly be,” said Mary.

But, she said, “It doesn’t make sense to rail against the market. That’s the market, so you accept it or not.”

Initially they were open to renting or buying.

“Buying any of the units we looked at would have consumed a huge percentage of our net worth. You don’t want 50-, 60-, 75-, 80 per cent of your net worth in one piece of real estate. It’s just too risky,” said William.

“The price of the condominiums we were looking at went up by $20,000 a month or more,” said Mary.

The couple pays about $4,200 a month in rent. It might sound like a lot but they write only three cheques a month — rent, hydro and cable. When they lived in their house, there were 15 to 20 regular expenses.

Gone, they say, are the bills for a security system, for chimney repairs, sewer connections and maintenance agreements on appliances. Even firewood cost $500 a year.

The condo is the third rental for the couple since they sold their house. The first summer they rented a place in Prince Edward County and then they moved to the west end for a year. But they missed the east end.

“We realized community was much more important than we thought. The cottage was isolated and (the west end) place was so transient you couldn’t have a community,” said Mary.

Now they live in a building where they know other members of their yacht club and they enjoy bird-watching near the lake.

Their apartment is decorated with souvenirs of their travels but there is no granny vibe.

It’s the type of high-end rental that can be difficult to find. Apartment hunting is not particularly lucrative for realtors even if they can find something suitable among the few leases on the Multiple Listings Service.

In the hot Toronto property market, renters are increasingly in the same position as home buyers. They have to compete, sometimes by offering higher rents or cash upfront.

“We were paying $3,750 (in their previous west-end apartment) and when (the owner) listed it on MLS there was a bidding war and she ended up getting $4,500 a month,” said William, an actuary and former IT executive.

Helping clients find a rental is all part of the service Brown provides when he has helped someone sell a home. He found this couple’s condo by word-of-mouth. But he acknowledges the searches can be challenging.

“When you’re spending up to $5,000 you’re going to be picky so finding the right one can take some time,” said Brown.

Mary says they knew they were home as soon as they walked through the door of their condo. But that was after they had looked at a lot of places — many were “appalling,” said William.

Is renting a condo saving them money on a monthly basis?

“Probably not. But it isn’t costing us more,” said William. He says they have taken the proceeds from their home sale and invested the money.

Releasing the equity on your house can actually generate enough cash flow to cover rent, agrees Scott Plaskett, CEO of Ironshield Financial Planning.

For people rich in equity but cash poor, renting can give them the freedom to pay for some of the extra things they want in life. It’s all very well to watch your home’s value appreciate, but you can’t eat a doorknob, he said.

If the decision to rent or buy a smaller home is a financial wash, he advises his clients to go with the better emotional fit. That frequently depends on whether they are comfortable giving up the control of owning their own place or whether they really need the cash to cover the cost of enjoying their retirement.

But Plaskett warns retirees to be aware that the economic environment in which they are investing the equity they have earned on their homes has changed.

“We’ve never really existed in an environment where we’ve had wealth with interest rates this low,” he said.

If you’re going to rent and invest your home’s equity you need to look carefully at where you’re putting that money so you’re not seeing your old age security benefits clawed back.

“Now you have all this money that’s being released from one of the legal tax shelters in Canada into a non-sheltered environment,” said Plaskett.

When their abundant garden became too much to manage, Jane and Bill Martin, 79 and 80, didn’t even consider buying another home.

“We don’t want the responsibility. (With an apartment) you can close the door and go away. We just didn’t want to own again,” said Jane.

Experienced apartment dwellers, the Martins raised their kids in an east end rental.

They only bought their house south of Scarborough General Hospital because an accountant advised it as a wise investment, said Jane.

When it came time to move, it took a couple of months viewing between 15 and 20 apartments (“From the worst on up,” said Jane.)

“The ads look good but when you go and look at the place. . . ” she said. “Most condos you’re talking 700 to 900 sq. ft. That won’t do.”

They found 1,230 sq. ft. with two bedrooms, two bathrooms and two balconies for $1,882 a month near Cummer and Bayview Aves.

The TTC is outside the door and conveniences such as a drug and grocery store, banks and the post office are right there.

They’re not used to the shopping in their new neighbourhood yet. It feels like a long way to big department stores after living five minutes from the Scarborough Town Centre for so many years.

They still go back to their old neighbourhood butcher.

“We had a lot of good friendly neighbours so you miss them,” Jane said. “Every now and again we make a little excursion day and head down there and do some shopping and get some haircuts.”

Downsizing duty

Laurie Bell has been downsizing seniors for five years. Lately, she says, she sees a trend to renting rather than buying among people who can still live independently.

One couple actually rented a condo to see if they would like the lifestyle.

In two other cases the reasons were financial, said Bell, who has a background in mental health and, at one point, even sold real estate.

“When the person’s significant major asset is their house, they’re looking at how they can move, get rid of the maintenance,” she said.

“They just want to know where they stand financially. It’s frightening to look at renting a condo because it might just be for a year.”

More seniors want to maintain their autonomy and avoid relying on their children or other family members.

“They’ve seen it not go well if people do wait too late and there’s been a precipitous incident,” said Bell, whose company is called Moving Seniors with a Smile.

Services like hers take a lot of the physical and emotional stress out of the downsizing process.

There is often 30 or 40 years’ worth of possessions to sort through, which can be emotionally taxing because her clients can’t keep it all.

She also has a coterie of reliable service providers: movers, junk removal companies, even shredders for paper work.

Bell describes it as a three-day process. The first day is spent packing, the second day the client’s belongings get moved and the third day they get the new place set up.

“They can have friends over for cocktails by 5 p.m.”

Source: Toronto Star – Tess Kalinowski

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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?


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.


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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Should you downsize?

Adult lifestyle communities

When the time comes to sell the family home and think about settling into a new, smaller place, there are several options from which to choose – like a condo, a duplex or a house in a retirement village. Here are a few tips to help you make the decision that’s right for you.

Before you “go condo” do your research
Now that the kids have grown up and moved, you’re probably giving some thought to downsizing from your family home. And there’s a good chance that you’re looking at a more economical and easily maintained condominium. The condo life can indeed be a great idea, with living becoming simpler and probably cheaper too.

But before you put the “for sale” sign up and start shopping around, you need to consider a few pitfalls. First and foremost, there’s the issue of cost – more specifically, the future maintenance and replacement costs that are supposed to be covered by the condominium’s reserve fund, as required by law.

In Ontario, the Condominium Act allows developers to initially deposit 10 per cent of the first year’s estimated operating budget into the reserve fund. This Act also requires the condominium corporation to conduct a reserve-fund study in the first year of operation, and if there’s a shortfall, the condo residents are required to make up any difference.

But that initial deposit is likely to be woefully inadequate. “The first year’s reserve process is deeply flawed,” says John Warren, a chartered accountant and partner at Adams & Miles LLP in Toronto. “That 10 per cent figure is not right – you need a lot more than that.”

Double your reserves
Sally Thompson, vice-president of Halsall Associates Ltd., Toronto-based engineering consultants, agrees. “That 10 per cent is just plain low – they goofed when they created the Act. Once the study is done, most new condominiums end up needing between 20 to 25 per cent.” The net result is that new condo buyers often end up paying more than double the initial estimate for the reserve-fund component of their monthly fees!

“A good rule of thumb is that you can expect to pay about $1,000 per unit per year toward the reserve fund; add another $200 to $300 per unit if there are recreation facilities,” says Thompson. “But in many cases, the developers are contributing only $300 for the first year, and that’s ridiculous. If you own any kind of house, you know that you can’t maintain it for $300 a year!”

Accordingly, if you are considering a brand-new condo, take a very close look at the reserve fund. And if it’s a used condo, take an even closer look. “Because you can’t get a building inspection on a condo, the reserve fund study is very important. It’s essentially a long-range capital budget outlining major repairs in the future,” explains Warren.

An engineering firm is contracted to survey the common elements and estimate when they will need to be repaired or replaced. These estimates cover a 30-year period and are adjusted for interest and inflation rates. Based on these estimates, a payment schedule is included to build up the reserve fund to cover these future costs.

Warren says you should ask lots of questions: Does the condo have a history of special assessments? Is there an operating surplus to cover unexpected expenses? There should be a reasonable amount in the bank, equal to one or two months of common element fees, to cover emergencies. Do the financial statements show a deficit? If so, then the condo is in a financially precarious state.

“Most importantly, is there a current reserve fund study, and are its recommendations being followed?” continues Warren. “The Condominium Act stipulates that a reserve fund study must be updated every three years. It also stipulates that condos have until 2014 to have their reserve funds fully funded.”

If the building is an older one, you also need to take a closer look at the facilities themselves. Do you see signs of deterioration? Are the hall carpets and foyer in good shape? Is the underground parking (if any) clean and dry? Is the plumbing drip- or leak-free? If you see anything slightly amiss, ask even more questions. “The cost of these repairs can be deceiving,” says Thompson. “And bear in mind that in an older building, all those expensive jobs are that much closer to needing to be done.”

How much do the utilities cost? “Many condos have electric heating, and that can be expensive,” says Warren, adding that condo units in Ontario are all slated to go onto sub-metered systems by 2010. “And all your expenses are going to rise by at least the rate of inflation, usually more. Over a three-year time frame, maintenance fees in new condominiums can typically rise 50 per cent.”

And, while it may be tempting to buy a condo with all the possible amenities – pool and spa, gymnasium, rooftop garden – Warren says that you should think twice about it. “Even if you don’t use them, you’ll still pay for them.”

Check out management
Warren also suggests that you consider the reputation of the builder, as well as the quality of the condominium’s management. “How long have they been there, and how many times has the management changed? If they’re changing often, that’s not a sign of a healthy condominium corporation,” warns Warren. Changing management can also be a sign of problems with the condo management committee, which is made up of elected tenants. And things could get much worse, so nose around and ask some of the tenants whether they feel the property is being run well. Warren cautions that management problems can adversely affect your own unit’s value. “You have to bear in mind that unlike a house, you can’t maintain the value of your property by yourself.”

Lifestyle considerations
Former house dwellers may find that the condo lifestyle isn’t what they had in mind. “Lifestyle issues can become the most contentious for people who aren’t prepared for the change,” says Warren. “What you’re going to be doing, in effect, is living in an apartment with noises from the neighbours. There’s a whole series of compromises that must be made.”

For example, even within your own unit, pets may not be allowed, curtains visible from outside may have to be a certain colour and there may be restrictions on what you can do on your balcony. You probably won’t be allowed to barbecue, and you may even be prohibited from putting Christmas decorations on the outside of your front door. Adds Thompson: “In older buildings, any repair work can be obtrusive too, especially for retirees who aren’t away at work during the day.”

“It’s a restrictive lifestyle,” says Warren. “The condo bylaws, rules and regulations can be onerous. There can be 60 to 70 to 80 pages of them, and if you really want to talk to a lawyer who specializes in condos, you might have to pay $2,000 to do so. Most people don’t, and then they’re surprised at what they’ve bought into. It’s being penny-wise and pound foolish.”

Of course, there can be advantages to living in a condo. But you have to look at all aspects of the deal, including, of course, location: “It is still the prime determinant of value for any kind of real estate,” says Warren. Thompson goes a bit further: “You have to be realistic about the reserves – don’t be deceived by the initial allowances. In fact, my advice is not to buy a new condo but rather look for one that’s a year or two old so the fee structure is established.”

Living together – separately!
Other housing options may be better suited to your tastes and needs. These include the intergenerational home – where children and their elderly parents live under the same roof but in separate apartments – and the duplex.

Intergenerational homes
This living concept has long been favoured by some entrepreneurs, and the formula continues to gain in popularity – for good reason! As well as fosteringcloser family ties and letting you enjoy an exchange of favours and a financial partnership, the intergenerational home is the obvious choice for people intent on growing old among loved ones while at the same time ensuring their own safety.

“We’re really happy here,” says Lucie, who shares a single-family home with her daughter, her son-in-law and their young son. For the last three years, Lucie has lived in a large one-bedroom apartment attached to the couple’s home. She has her own entrance and a terrace at the back. “For starters,” says Lucie, “you have to get along [with each other] to choose this type of life. Our apartments may be attached, but my home is my home. We keep the doors closed, we announce ourselves, we call one another first, and we knock before entering. On weekends, I invite them to supper, but they’re free to accept or decline.”

The importance of rules
Successful intergenerational cohabitation depends on the establishment of clear rules. Before you opt for shared living, it’s important to discuss the details with your future “roommates”: Which spaces are private and which are shared? What are the visiting hours? Will you be co-owners? Even though you’re living with family members, we strongly suggest that you establish rules and write them down to minimize the frustration sometimes involved in sharing a residential space.

 Having your adult children nearby and being able to get help when it’s needed may reassure some, but for others it can quickly become a ball and chain if privacy is not respected. Shared living thus requires preparation and caution. Some municipalities offer property-tax credits to people who transform a single family home into an intergenerational property – support that’s always welcome when you’re investing in a relatively costly home makeover.

Note that some tax credits and grants can be applied to the purchase or transformation of a home; the Canada Mortgage and Housing Corporation (CMHC) offers the Homeowner Residential Rehabilitation Assistance Program (Homeowner RRAP) in conjunction with the mortgage and housing corporations in each province.

Duplex life
There are numerous advantages to purchasing a duplex or a semi-detached home, not the least of which are privacy and proximity. Suzanne and her husband live on the second floor of a duplex they co-own with their daughter, who occupies the ground floor. “We lend one another a hand. My husband helps with the maintenance, my daughter drives me to my medical appointments and my son-in-law does small jobs in the apartment. With this arrangement, we’ve been able to watch our grandchildren grow up. We’ve been here for 24 years, and we hope to stay for the rest of our lives.”The duplex option lets you stay close to your children without having to comply with the municipal requirements concerning intergenerational homes. And in the event that this type of arrangement no longer suits you, you can always rent out your half or sell it – an option that many municipalities do not permit in the case of intergenerational homes.

Adult lifestyle community
People who intend on being sole owners while still enjoying a sense of communitymay want to consider the concept of adult villages. They offer autonomy, comfort and, perhaps most importantly, peace and quiet.

The pleasures of freedom
Called “gated communities” or “active-adult communities” in Florida and several other American states, villages for pre-retired or retired persons 50 and over are an increasingly popular option here in Canada as well.

Comprised of one-storey homes, either detached or semi-detached, these communities let you own the bungalows, but staff are hired to provide lawn care, grounds keeping and snow removal, and to maintain a community centre.

As well as help you feel at home, this concept absolves you of the onerous task of performing outdoor work and allows you to make the most of any activities specially tailored to villagers’ needs. “I love this arrangement!” says Theresa, who has lived in this type of community since 2004. “We own the space we live in, and we also take part in the activities offered (for instance, I give Spanish lessons). And there are often theme parties – oyster or lobster dinners, large gatherings with the grandchildren, that sort of thing.”

While this type of living arrangement is ideal for some, others may find it too restrictive – some communities don’t allow fences, sheds or clotheslines. For this reason, it’s important to find out about the regulations in force before you decide to move there. And, on top of the often steep purchase price, there are also monthly maintenance costs to consider.

Source: Canadian Living  By Olev Edur and Marie-Claude Masson

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