The Team
Meredith MacLeod
Business reporter
905-526-3408
mmacleod@thespec.com
Lisa Grace Marr
Business reporter
905-526-3992
lmarr@thespec.com
Photos and Video
by
Barry Gray
Staff photographer
bgray@thespec.com
| Glenna Wilson: 48-year-old single mom was told she is “very organized and very aware of her finances.” |
Single mom told she's doing all right |
Lisa Grace Marr |
The number of submissions to The Way We Spend was overwhelming. These experts met with these candidates just once or twice, gave them some tips and sent them on their way. We'll profile these candidates who received the mini financial makeover, the advice they received and what effect, if any, it had on the way they spend. Name: Glenna Wilson Age: 48 Family status: Single mom of two sons, one in high school, one in postsecondary Occupation: Office administrator From the submission: "I am and have been a single parent for the past 16 years and employed by the same company for 30 years. I have always owned my own home, but lately just keeping the roof over my head is becoming more challenging with each passing month. I have about $40,000 equity in my home -- no RRSPs or investments. "I would love some help getting control of my finances since retirement is a possibility within the next 10 years." Sean Straughan, certified financial planner: "Glenna is very organized and very aware of her finances. (Her pension) is going to be lucrative ... specific to her lifestyle. Once her kids are done school, her situation will change dramatically. She'll just have herself. "She does need to get a budget on a spreadsheet, and still trying to get rid of her credit-card debt with high interest." After the advice, she said: "I kind of knew, but it was good to have him support the fact that I was doing the right things. "I have had some changes with my son ... I'm not paying child support anymore, but I'm paying for a loan to send him to school. "It's still debt but it's manageable debt. "That means I have more a month and at some point I may ... put some into an RRSP. He made me understand I'm not wasting a lot of money. "You have to live as well. I found him supportive; unfortunately my resources really are limited. If I work until I'm 60, between my (pension) and my CPP, I think I'll be OK." lmarr@thespec.com |
About the series
The Way We Spend is a 13-week multimedia series appearing each Thursday in
The Hamilton Spectator and on thespec.com. It will feature four local families who
are learning how to tighten fiscal belts, cut back on indulgent spending and save in a
healthy way. The Lepp, Greenway, Hamilton and Butler-Morris families were selected
from more than 50 submissions. They have been paired with local financial experts,
set financial goals and are embarking on a money makeover. They will each receive
a $500 gift card from Staples and other gifts.
Previously in The Hamilton Spectator-Week 4
John Jen, Chris and Patricia Hamilton: $10,000 debt, no savings beyond and locked-in retirement account and RRSPs. Patricia, 52, wonders if retirement for her is even possible.
Super-scrounger single mom overjoyed to have a plan Lisa Grace Marr The Hamilton Spectator |
Patricia Hamilton is a crackerjack coupon clipper and a champion loonie squeezer, but feels like a dud when it comes to saving. "I would like to just be able to wake up one day and not worry about paying off this or that," she said. "I was never taught to save. If I made $8 delivering papers as a kid, I spent that $8 -- no one ever suggested I should save $4." But she was frugal: Four years ago when she was still feeding herself and her two teenagers, she spent $100 a month on groceries. Yes, one hundred dollars a month. Now, with just her and her 22-year-old daughter, Jen, at home, she often spends even less. She has single-handedly raised her children since her marriage ended 23 years ago in Calgary, and she flew home to Hamilton. She arrived with a four-month-old, a toddler, three boxes, a dresser and a dog -- and determination to raise her kids. As she said in her submission to The Way We Spend, she's been in debt since. She was on social assistance for a brief time, but found work as soon as she could. After a five-year court battle, her ex-husband, who stayed in Alberta, paid child support for one year -- $2,400 -- and that was it. She didn't have it in her for another fight. Now 52, she's got nothing saved but for $3,600 she scrimped and scrounged in the past few years for a RRSP. She also has a $41,000 locked-in retirement savings account (LIRA) from a previous employer that is invested in a GIC earning 4 per cent, not maturing until 2013. She's dreading retirement, and wonders if it's even possible. She worries about her two adult children, Chris, 25, and Jen, and what her inability to teach them to save will mean for their futures. "I want them to learn from my mistakes," she said. There's a good chance they will. Jen is also consulting with financial expert Marta Stiteler, a certified financial planner, who is paired with her mom on The Way We Spend. Chris has opted out of the financial makeover, but supports his mom and sister in their journey. Jen works in a discount retail store and recently had her hours cut. She grosses about $20,000 a year. She had moved out for a while, but moved back in with her mom two years ago. They split the rent and utility bills. Jen is in the process of moving out to live with her boyfriend, so Chris is moving back in. "I've always lived in this area. My friends are still here. I'll save some money," he said. More importantly, his mom will also save, and she won't have to leave her cosy Mountain apartment with Chris sharing the rent. One moving out, the other moving in, but no matter what, they all get together Sunday nights for dinner. They've always been there for each other, even in the toughest of times. Patricia remembers the hard winter months when the heating bills ate up too much of her grocery money to leave her food for lunch. "I always made sure the kids were fed," she said. But then, during an interview, Chris revealed that once he started working at 15, he would quietly buy groceries, and eat before his mom and sister got home so that they didn't have to feed him as much. "I was playing football six hours a day," he said. "I really got into cooking. Now cooking is a passion, I have a whole nutritional program worked out." Even on such a tight budget, Patricia and the kids have always eaten well. Canned food is rare -- everything is fresh and as local as possible. No packaged, processed food -- too expensive and not good for you. Everything's homemade, from slow cooker to barbecue. Turning off the lights and the computer when not needed, bartering banana bread for services from friends -- Patricia is a first-class innovator when it comes to living on a low income. She managed to volunteer for Girl Guides, send Jen to dance lessons, Chris to football and hold down a full-time job. Most of it was alone, but not entirely -- her family is there for her too, as much as possible. Before they meet, Stiteler asks to see Patricia's monthly expenses. It's tight. Patricia needs about $900 a month for basic living costs. Her job as an administrative assistant gives her a net income of about $1,850 a month -- leaving about $950 for expenses such as car maintenance, debt repayment and savings. One bill is a $200 payment each month to fend off the $3,143 credit-card debt Patricia has acquired. She also pays about $40 a month minimum payment on a line of credit. Trying to stay on top of those has resulted in falling behind on cellphone and cable bills. "I know $3,000 doesn't sound like a lot, but it might as well be $30,000 for how impossible it seems to me to pay off," she said. One of her worst debts is $600 she owes her dad. "He gave it to me years ago to help me get out of a rat-infested house with the kids. I've told him I'll pay him back. It weighs on my mind." Patricia has modest goals: pay off the credit card, line of credit and that money to her dad. Then she'd like to save more and retire at 65 on what she's making now, about $33,000 gross (about $22,000 net).
Stiteler said the first goal is to get out of debt. "Patricia should consider redeeming her available RRSP from the credit union and pay off her high-interest credit card, as it is highly unlikely that the RRSP will earn at least 19.8 per cent each year -- the rate charged on the credit card," she said. "The government will withhold 10 per cent tax, which will be applied to 2009 tax (calendar) year." Stiteler said the difference of around $300 (for cashing in the RRSP) will either have to be paid at tax time, or be minimized or even eliminated through planned RRSP contributions before the March 1, 2010 deadline. "Taking this RRSP money will not push her income into the next combined tax bracket." Stiteler recommends Patricia take the $80 a month she was diverting into RRSPs and pay off the line of credit. As for the credit card, it's time to shop around. It's too pricey. The second goal is to plan for retirement. That has to wait until their next meeting. Patricia's excited to have some direction."I came out of there (meeting with Stiteler) feeling so good because I had a plan."  |
Net monthly income
Patricia’s net wages: $1,850
Total: $1,850.00 ASSETS • Car: $8,000 • LIRA: $41,000 • RRSPs: $3,600 • Savings: $0 Total assets: $52,600 MONTHLY EXPENSES TOTAL MONTHLY EXPENSES: $904.64 • Line of Credit: $650 (maxed at 16 per cent interest) • Credit cards: $3,143 (19.8 per cent interest) • Car loan: $4,600 • Personal loans (family/friends): $600 • Cable: $150 • Cellphone: $257.41 • Overdraft: $500 Total Liabilities: $9,900.41 Net worth: $42,699.59
(Assets minus total liabilities) |
Your pension: unlock or not
By Jeffrey Holk
Members of an employer-sponsored pension plan who leave their employer before the normal retirement age often opt to transfer the commuted value of their pension benefits to a locked-in retirement account. A locked-in plan is similar to a registered retirement savings plan (RSP) but the funds are "locked-in” subject to either federal or provincial pension legislation.
In 2007, the Ontario government eased pension rules to allow individuals over 55 to “unlock” 25 percent of the balance of their lockedin accounts. Earlier this year, the Ontario government amended the pension legislation again by
doubling the unlocking percentage allowed to 50 percent effective Jan. 1.
Depending on the type of Ontario legislated locked-in account you have, there are some important dates to consider over the next couple of years. As the rules are complex, and an opportunity to unlock may be lost if the deadline is missed, you should speak to your
financial adviser to discuss your specific situation.
Conditions for unlocking
Age requirement:
Ontario does not have an age restriction to unlock; however, a person’s age does play a role. Ontario pension legislation allows an individual to purchase a new life income fund any time during the year before the year in which he or she would have been entitled to start receiving
pension payments from the pension plan. In most cases if the pension plan provides that pension payments from the plan could begin at age 55, the individual could purchase a new LIF at any time during the year in which he or she turns 54.
Procedural requirement:
Ontario legislation necessitates the transfer of assets to a new LIF before unlocking can take place. Once the transfer takes place, there is a 60-day window for the unlocking.
Should I unlock?
The most obvious advantage of lump-sum unlocking is greater flexibility in terms of accessing the funds. The unlocked portion that is transferred into a non-locked-in RSP or registered retirement income fund (RIF) can be:
• fully accessed in case of need, while continuing to enjoy tax deferral until withdrawn
• withdrawn without regard to legislated maximum limits
• useful in case of lump-sum capital needs (such as the purchase of major items) or emergency cash needs
• may also present the plan holder with greater latitude in personal tax planning
Perhaps the biggest determinant in deciding whether to unlock is your own comfort level. After all, locked-in rules are meant to protect plan holders from premature depletion of their retirement assets.
So if you are not an impulsive spender and are a prudent investment manager, unlocking lockedin plans to gain flexibility is worth considering.
Are there any reasons why you may not wish to take advantage of
unlocking provisions? Until last year, one of the most potent arguments against moving funds out of a locked-in vehicle was the loss of creditor protection. This is because only locked-in plans (the funds which are derived from registered pension plans) enjoy protection from the claims of creditors upon bankruptcy. Since 2008, there has been some creditor
protection for RSPs and Retirement income Funds under federal legislation in the event of bankruptcy, as well as a degree of protection in Ontario outside of bankruptcy, but pension legislation offers a higher level of overall creditorprotection.
The rules regarding locked-in accounts are complex. I recommend you seek professional tax and legal advice.
Jeffrey Holk is an investment adviser with TD Waterhouse Private Investment Advice.
He can be reached at 905-528- 5686 or jeffrey.holk@td.com.
Saving tips |
Shopping tip Say you buy a great shirt at the Gap. Next week you’re out at the mall and notice it’s on sale. Keep your receipts — Lisa Grace Marr |
So what are you worth? |
Our Expert |
| Marta Stiteler is a local financial adviser who specializes in financial, retirement and estate planning for Pillar Retirement Group and Worldsource Financial Management. Marta holds an honours BA from Seton Hill College in Pennsylvania and a master’s degree from McMaster University. Stiteler passed the certified financial planner examination in 2000 and achieved CIM, Canadian investment manager designation, in 2005. Stiteler has worked with Halton Business Institute, Hamilton and area Jaycees, Soroptimist International and is a frequent public speaker on financial issues. She is a past director of the Stoney Creek Chamber of Commerce and is involved with several boards and charities. |
