One of the great advantages of living in a Canada is the support of our community. Whether single, married or in a common-law relationship*, we enjoy most of the same rights and freedom as the straight community. This is true of retirement planning.
Yet there are still many important considerations we should review from an LGBT perspective to ensure we take advantage of every opportunity afforded us, and to ensure that our plans are carried out as intended, both during our lifetime and at our death.
When should I start the retirement-planning process? In a word, now! The basic foundation of a retirement plan starts out as a simple savings plan and grows more complex as you begin layering additional considerations—tax planning, estate planning, income and savings protection, etc.
To begin, you will need to outline your desired retirement lifestyle and then start to work backward to determine how much (in future dollars) that lifestyle will cost. Only then can you craft a detailed plan to ensure you save enough money between now and your retirement date to enjoy that lifestyle.
A financial advisor will assist you in determining these figures, help establish a disciplined savings plan and recommend an appropriate investment strategy. Your advisor will also help you explore additional financial considerations to layer into your plan to ensure you’re taking the most strategic approach and protect your assets in the event your savings plan is interrupted.
Tax-planning considerations As the saying goes, there are two certainties in life: death and taxes. While both are inevitable, we can make good strategic decisions as part of our retirement plans to help minimize taxes now, in retirement and at death. To begin, if you are married or living in a common-law arrangement, you will need to inform the Canada Revenue Agency. You will then have the ability to claim a tax credit for a financially dependent partner, to transfer credits and amounts (i.e., age amount, disability amount, tuition amount) to your partner. You may also combine basic credits on receipted payments (i.e., charitable donations, medical expenses) to maximize the overall credit.
Be sure to talk to your advisor about the following strategies and opportunities when building out your retirement plan: Income Splitting strategies with Spousal RSPs, sharing Canada Pension Plan (CPP) payments, Pension Income Splitting, tax-deferred rollovers of registered plans and tax-free rollovers of TFSA assets.
Income and Savings protection Life can change in an instant. Suffering an unexpected accident or illness can quickly affect our ability to earn income and can eventually deplete savings. Be sure to discuss strategies with your advisor on how to best protect your income through disability-insurance coverage. Many employers offer basic coverage. Your advisor can help you assess whether your current coverage is sufficient, or if you should explore solutions to further protect yourself and your income. Critical-Illness coverage should also be considered in the event you’re diagnosed with illness that would require your absence from the workforce for an extended period of time.
Estate-planning opportunities We often hear that it doesn’t matter what happens to your money or property once you pass, because you won’t be there to enjoy it! Our reality is much different, though. We each have intentions for our property and who we would like to benefit from our hard-earned savings. The following will help ensure that your intentions are carried out:
• Make sure your will is up to date and accurately reflects your intentions. If you experience such events as marriage, divorce or the birth of a child, you should revisit your will and update it accordingly.
• Consider a life-insurance policy to cover any outstanding debts, to provide your partner enough financial freedom to take time away from the workforce to grieve your death, or to leave a lasting legacy to your family.
• Beneficiary designations on insurance policies, registered accounts (i.e., RSPs, RIFs, TFSAs, etc.), pension plans and other work benefits should be current and reflect your life today.
• Review the structure of jointly owned assets and property so they’ll pass to your partner, as intended, without interruption.
Should I work with a professional advisor? Yes, absolutely! Find an advisor with whom you’re comfortable—someone who’ll take the time necessary to get to know you, understand what is important to you and who is knowledgeable enough to help you prepare a plan taking all financial considerations into account. Work with an advisor who’s able to help bring other experts to the table to ensure you’re taking advantage of every strategic opportunity available. Finally, you should like your advisor: This is a long-term relationship with someone you’ll review information with repeatedly to stay on track.
RELATED RESOURCES
• For a copy of the TD Wealth Financial Planning Considerations for Same-Sex Couples paper, or an introduction to an advisor who can help you prepare your retirement plan, you may contact columnist Al Ramsay at al.ramsay@td.com; 416-983-6818; Twitter: @AlRamsay_TD
• TD Wealth: Planning for Retirement
www.tdwaterhouse.ca/products-services/td-wealth/index.jsp
• BNN Money Talk with Kim Parlee, VP TD Wealth “Busting Myths: Same-Sex Financial Planning” www.bnn.ca/Video/player.aspx?vid=549784
Al Ramsay is TD Bank Group’s regional manager, LGBTA Business Development. Follow him on Twitter, @AlRamsay_TD.
*For the purpose of the federal Income Tax Act, you are a “common-law partner” if you cohabit with another person in a conjugal relationship, whether that person is of the same or not, if (a) that relationship has lasted at least 12 continuous months; (b) the two of you are legal parents of a child; (c) he or she has custody and control of your child (or did immediately before the child turned 19) and your child is wholly dependent on that person.
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