It's Your Money  

Dealing with dementia

If you are concerned about what to do if you or a loved one is starting to experience memory loss or a decline in decision-making capacity, here are a few suggestions:

Act quickly and act early

In most cases, individuals experience a gradual decline in their decision-making capacity over an extended period of time. If you are starting to struggle with some of the decisions you are being asked to make, reach out for help, but from trusted sources.

Communicate with your doctor, financial advisers and family members about the challenges you are experiencing so that you can get the type of help you need.

It’s important for those in your close circle to understand that you are starting to struggle, so that they know that you may need more assistance with more complex decisions.

It will also alert them to be on the lookout for financial abuse, as individuals who suffer from dementia are more likely to be the victim of scams.

Communicate your limits and your abilities

Decision-making capacity is time-and-situation specific. Although you may no longer have the ability to make complex decisions, you may still have capacity to make simple decisions.

Tell your advisers and doctors which decisions you are struggling with, and when you need help. Understand that simply asking for help in some circumstances does not mean that you will not be able to make any decisions on your own.

Review your overall financial plan

Speak to your financial planner to ensure that your plan is up to date. Explain that you are having difficulty making complex decisions.

Your adviser may recommend moving to a more conservative portfolio or consolidating your investments so you have fewer accounts or different types of property to worry about (for example, businesses or real estate).

Maximize the use of available tax credits

As your condition progresses, you may be able to claim various tax credits, including the disability tax credit, the medical expense tax credit and the caregiver tax credit.

Speak to your financial planner to determine which credits you may qualify for, and what you need to do in order to be eligible to claim them on your tax return.

Consider whether your wishes are properly documented

Ensure that your estate plan is up to date. In the early stages, you may still have capacity to sign documents like a will or power of attorney, but that may no longer be the case as time goes on.

Speak to a well-qualified estates lawyer about how to best protect yourself in the event you suffer a serious decline in your decision-making capacity.

Although it is always important to have these documents in place, the issue will become even more acute as your mental capacity starts to decline.

Under no circumstances would do-it-yourself kits or online documents be recommended. Understand that if you complete the documentation incorrectly, your family will not be able to correct it after you no longer have sufficient capacity to do it yourself.

Build a network to provide you with support

Reach out to associations like the Alzheimer’s Society for support. These groups have extensive experience in supporting individuals through various challenges and can help you to prepare for what may come next. Knowing that you’re not alone can help to bring peace of mind.

The onset of dementia can be a difficult experience, but you don’t have to go through it alone.

Reach out to your close network and confide in your close advisors to get the support you need to live your life to the fullest.


Should you sell in May?

Every May the same old question comes around in the investment world: should you “sell in May and go away?”

While this adage has been around for many decades now and has been repeatedly proven to be a bad idea, the idea still persists. And each year we hear renewed calls to implement it that many un-educated investors fall for.

What does it mean?

The idea behind this practice is that stock market returns can be slower during the summer months and sometimes they even go negative.

Proponents of this “strategy” suggest that you sell all your equities in May and then re-buy into the stock market in October or November.

However, trying to time the market is difficult to do successfully and in order to pull this off, you have to pick the right timing twice – once when you sell and again when you buy back in.

The data simply doesn’t support the idea either as more often than not, you end up in a worse position by doing this. Looking at the Canadian stock market since 1990, this summer season has shown positive stock market performance 74% of the time.

Ian Tam, a director of investment research at Morningstar Research Canada, crunched the numbers recently and found that during the past 40 years, following this strategy each year resulted in a lower return versus simply staying invested.

Mr. Tam found that someone who invested $10,000 into the TSX index (Canadian market index) in 1977 and applied the “sell in May and go away” strategy each year would end up with $280,000 less in their portfolio as of March 2019 versus someone who stayed invested the entire time.

Looking at this another way, missing out on only the best couple of market growth days over decades can have a significant impact on your long-term growth.

If you invested $10,000 into the S&P 500 index (U.S. market index) in 1980, you would have had roughly $780,000 after 38 years. By missing out on only the five best days during that entire 38-year period, your balance would have been only $458,000.

Are you willing to bet that one of those best market performance days won’t happen this summer?

But this year is different right? Markets have already come back so strong after the crash last spring and the third (or fourth?) wave of COVID will certainly shut things down and pummel corporate returns. The truth is that nobody knows and anyone trying to make this prediction can do serious damage to their savings plans.

We have heard similar “this time is different” stories almost every year for as long as stock markets have existed.

Trying to guess which of these stories is true holds the same odds as a roulette table – hardly something you want to bet your life savings on.

Instead of trying to time the market, focus on staying invested and on track with your well thought out retirement plans. Sure, there will be more dips in the market and volatility will continue, but a long-term vision is the best path to success.

Don't waste your tax refund

The 2020 tax filing deadline has now passed and if you are like most Canadians, you probably waited until the last few days to send it in.

If you submitted your return on or near the April 30 deadline, and you are expecting to get a refund this year, you can expect to see your refund within eight weeks if you mailed it in or two weeks if you filed it electronically.

Only six per cent or so of Canadians still file by mail, so most will see this come back pretty quick. Those that use direct deposit with CRA (80% of Canadians) will likely see it a few days faster.

The big question though, is what will you do with that refund when it arrives?

Looking at returns processed up to April 29, the average amount for those who are receiving a refund was $1,834. And when surveyed, 68% of Canadians indicated that they would use that refund amount to pay down debt or invest it in savings.

There are two key problems with that figure though:

  • In my experiences over many years in the financial planning industry, I can comfortably say that many of those 68% who said that are lying.
  • There is still the other 32% of people who admit they plan to blow their refund on something frivolous.

If I had to guess, the actual figure is closer to half of those getting a refund plan to spend in one way or another. And why is this such a big problem in my mind?

Far too many people still look at a tax refund as “free money” that they are receiving. In reality, it is simply CRA returning your money that you overpaid to them.

If we’re being perfectly honest, getting a tax refund is a sign of poor tax planning throughout the year too as you should have never made that overpayment to begin with.

There have been countless articles written over the years on better uses for a tax refund.

In addition to paying down debt and putting the money into savings, you can do things like start or increase your emergency fund, invest in your education, make home improvements that will save on energy bills or even donate to charitable causes that you support.

The best way to look at this money is as if it was already sitting in your bank account. If you wouldn’t pull money out of your savings today to splurge on a shopping trip, then you shouldn’t be using your tax refund money for the same purpose.

If this message can reach just one of my readers and cause them to rethink a tax refund splurge this year, then I’ll consider it mission accomplished.


Did the budget help you?

The Liberal government released it long overdue federal budget on April 19.

While there is not enough room here to go into detail on each item contained in the 729-page document, I wanted to highlight some key items that are being proposed that will affect your personal financial planning:

*Note that these measures are not yet voted into law.

The Canada Recovery Benefit (CRB) will be extended for an additional 12 weeks to provide a maximum benefit of 50 weeks. The first four weeks will be paid at the current rate of $500 per week, with the subsequent eight additional weeks paid at a rate of $300 a week.

Budget 2021 also proposes to extend the Canada Recovery Caregiving Benefit (CRCB) an additional four weeks to provide a maximum benefit period of 42 weeks at a rate of $500 a week.

The budget further proposes legislative amendments to allow for additional extensions of the CRB and CRCB as needed until no later than Nov. 20, 2021.

For business owners, they are proposing to extend the Canada Emergency Wage Subsidy (CEWS) until Sept. 25, 2021. The applicable subsidy rate will gradually decrease as part of a phase-out of the program.

In addition, business owners taking advantage of the Canada Emergency Rent Subsidy (CERS) will see an extension until Sept. 25, 2021 as well. Similar to the CEWS, a gradual phase-out of the program will result in the decrease of the rate of subsidy available in each subsequent period.

The Canada Emergency Business Account (CEBA) has been enhanced. This program provides small businesses with an interest free loan for non-deferrable expenses up to $60,000. A third of the loan is forgivable if the remaining amounts of the loan are repaid by Dec. 31, 2022.

The Canada Recover Hiring Program (CRHP) will provide a subsidy of up to 50% (also declining over time) on the incremental remuneration paid to eligible employees between June 6, 2021 and Nov. 20, 2021. An employer can apply for the CEWS or CRHP but not both in a particular qualifying period.

Budget 2021 announced the intention to establish a federal minimum wage of $15 an hour, indexed for inflation, to support workers in the federally regulated private sector.

Homeowners and landlords will be able to access interest-free loans of up to $40,000 for undertaking certain deep home energy retrofits identified through an authorized EnerGuide energy assessment. These loans are intended to help finance more costly retrofits such as replacing windows and doors, installing high-efficiency furnaces and water heaters, or making insulation improvements.

There is a proposed increase to Old Age Security (OAS) benefits for seniors aged 75 or older. The first step will be a one-time payment of $500 in August 2021 to OAS pensioners who are 75 or older as of June 2022. The second step will involve increasing the regular OAS payments (again for 75 and over only) by 10% beginning in July 2022.

Proposed changes to the list of mental functions of every-day life that is used for the assessment for the Disability Tax Credit (DTC) are aimed to ease assessment, reduce delays and improve access to benefits. Those that did not previously qualify should look to see if they now can do so.

The introduction of a luxury tax on the retail sale of select automobiles, planes and boats was also proposed. The new tax will be effective as of Jan. 1 2022 and apply to automobiles and planes priced over $100,000 and boats over $250,000.

The excise duty rates for tobacco products are increasing effective immediately and there was also a proposal to implement a new tax on vaping products in 2022.

Vacant or underused property owned by non-residents of Canada will face a new one per cent annual federal tax starting in January 2022.

While certainly not exhaustive, the above list shows the main changes proposed in the federal budget that will affect your bottom line in the short term.

Make sure you are taking full advantage of the programs available to you and to ensure that your plan is as tax-efficient as possible.

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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