Beware Of Fraud Targeting Seniors

This month we raise our awareness about scams in the senior community.

As we age, our social circle usually becomes smaller and the reasons for it are varied.  It leaves seniors, and many of us for that matter, in the dark about the various scams out there just because we are interacting less. Since the start of the pandemic, I have limited my exposure to the news as so much of it was negative. Couple that with less face-to-face social interaction means missing some of the warnings about recent scams.  This is relevant to all of us, and I imagine most of us have been taken for something at some point in our lives, whether online, over the phone or in person.

Scams have become so realistic in nature, that it’s very difficult to determine what’s real and what isn’t.

This month’s blog, given to us by Marci Perreault, a partner in KenMar Financial, is a reminder to keep up to date with what’s happening around us. If you suspect you may be the target of a scam report it to the police, and if you hear of one that’s circulating, make sure everyone in your circle knows about it.
We need to be vigilant about this.

Click here from more information from the Royal Canadian Mounted Police (RCMP): A senior’s guidebook for security and safety. One of the topics includes fraud and scams.

Beware of Fraud Targeting Seniors

By: Marci Perreault, a partner in KenMar Financial

A person claiming to be a lawyer phones a targeted senior with an urgent request. Their grandchild crossed the border and got into legal trouble. They need $5,000 to avoid jail and said please don’t tell mom or dad. The grandparent scam is an old one that’s now making a resurgence across Canada. And there are a dozen or more other common scams, each one victimizing a senior for hundreds or thousands of dollars.

Widespread Scams

In a telephone scam, a supposed Canada Revenue Agency (CRA) official asks for  the person’s social insurance number (SIN) and bank account details to deposit  COVID-19 benefits. 

A fraudster professing to be a contractor rings the doorbell. They noticed the  senior needs a roof, chimney or other home repair. Just pay upfront for the  supplies—no labour charge until the job is done. 

Scams involving computer messages come in many forms, some asking for  personal information from what appears to be an official source, such as Canada  Post, and others claiming the computer is infected with a virus that can be  eliminated for a fee. 

Warn your loved ones

If you have a senior parent or other seniors in your life who could be susceptible  to fraud, you may want to talk to them about fraudulent scams. Ideally, ask them  to contact you if they’re approached with any demand or offer they didn’t  request—whether it’s online, through the mail, over the phone or at the door.  And remind them not to give out any personal or financial information.

How To Minimize Tax On Retirement Income

Ah, its tax time, and in our home there is a lot of discussion around the latest rules and next steps.

This month Marci, gives us a few tips for minimizing the tax we pay on our retirement income.

These tips provide a good basis for conversation with your wealth management partner or tax specialist.

Marci Perreault is a partner at KenMar Financial Services, and is available to discuss any aspect of your portfolio.

How To Minimize Tax On Retirement Income

By: Marci Perreault

When you’re retired, you need an income strategy that balances today’s cash flow needs with an investment strategy to safeguard your ability to produce income in the future.

Tax-saving strategies

You will also want to pay as little tax as possible so that you keep more of your hard­ earned savings. Here are four ideas to help you minimize the tax on your retirement income.

Pension income splitting

This is a strategy for couples to reduce taxes by transferring pension income (for tax purposes) from the higher income earner to the lower income earner. The transferring spouse or common-law partner can give up to 50% of their eligible pension income to the receiving spouse or common-law partner. If you are 65 years of age or older, eligible sources for pension income splitting include a Registered Retirement Income Fund (RRIF), a registered pension plan and an annuity purchased with a Registered Retirement Savings Plan (RRSP). If you are under age 65, eligible income is mainly limited to registered pension plan benefits and certain payments resulting from the death of a former spouse or common-law partner. Note that residents of Quebec under 65 cannot split pension income for provincial income taxes.

Withdrawing income in the right order

The traditional rule of thumb is to withdraw first from accounts that are not tax-deferred, such as your non-registered investment accounts. The idea is to put off withdrawals from RRSPs and RRIFs, where all proceeds are taxed as income, attracting the highest rate of tax regardless of how they were earned. It also allows those investments to continue to grow tax deferred.

The truth is that this rule is simplistic and overly focused on current tax savings. Your strategy really depends on how much you have and where those assets are held. It may be that income should be drawn from a mix of sources to achieve the best tax-efficiency both in current and future years. The right order for you will also depend on a number of factors, including whether maximizing government benefits such as the Canada Pension Plan (CPP) and Old Age Security (OAS) is a goal, if you want or need to keep your portfolio growing in retirement, and if you have non-investment income such as rental income or part-time employment income. Estate planning goals may also affect your withdrawal order strategy.

T-series funds

For mutual fund investors, T-series may provide a more tax-efficient way to generate income from your investments. T-series funds are designed to provide a predictable and sustainable cash flow, often at a set percentage which helps with cash flow planning. Depending on the fund’s earnings (usually interest income, dividends and capital gains) the fund may also distribute a portion of the investor’s original investment, known as Return of Capital (ROC). ROC is usually not taxable, resulting in a more tax-efficient payout for you.

If you are not currently in T-series funds, it may be possible to transition to the T-series version from the series of the fund you currently hold without triggering a tax liability. One word of caution: when you receive an ROC distribution, you will lower the Adjusted Cost Base (ACB) of your holding, which could have tax implications later. Careful planning and monitoring are required.

TFSAs during retirement

Tax-Free Savings Accounts (TFSAs) can play a useful role after you’ve retired because of their principal benefit: money earned inside the account is not taxable – even when you withdraw it (unlike RRSPs and RRIFs). If you have retirement assets in a non-registered account, they may be better off in a TFSA (up to the contribution limits) earning income tax-free. Remember that TFSA contribution limits are cumulative and provide room of up to $81,500 as of 2022 if you’ve been eligible to contribute since 2009.

TFSAs also provide a great place to “park” money in retirement. This could include money that you have been required to withdraw from your RRIF but don’t have an immediate use for, as well as money put aside as an emergency fund for unexpected expenses. By sheltering these funds and their profits from tax, you’ll ensure you get the benefit of all your savings.

Customization is key

Every retiree’s situation is unique and there is no “out-of-the-box” solution. While obtaining tax-efficient cash flow is an important goal, so is maintaining the right asset allocation for your portfolio’s long-term health and managing risk according to your own risk tolerance. Most of all, it’s about enabling you to have an enjoyable and sustainable retirement lifestyle. Professional tax and investment advice are needed to achieve the right balance for you.

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