via Financial Post | August 24, 2010

There’s been a fair bit of propaganda lately about it being acceptable to carry debt into retirement, including home mortgages. I don’t recommend this myself, but let’s take this thinking further. Does it ever make sense for retirees to go bankrupt?

It happens more often than you think, particularly if pensioners get stiffed when employers break the pension promise. No surprise that 2009 was a record year for bankruptcies in Canada. Following the 2008 crash, people of all ages were hurt in their investments, but seniors especially so, since they had more to lose and their wealth-accumulating years were behind them.

Read more »

via Financial Post

A reverse mortgage is often described as a way seniors — those who are house-rich but cash-poor — can continue to live in their homes and generate extra tax-free cash flow. P.J. Wade, author of a 1999 book titled Have Your Home and Money Too, argues they are not only for the elderly destitute. “It’s a financial, lifestyle and wealth-management tool,” she says, which lets homeowners convert their equity into cash without selling it or paying the debt until a pre-set time in the future.

In her 2008 e-book update, the title became Reverse Mortgages: Worst Enemy, Best Friend … Your Choice! She says reverse mortgages are now being better marketed and the interest rates charged — are more in line with other financial options.

But there’s nothing “reverse” about them, she cautions. “It does not easily reverse if you take the wrong product. You can use up your equity quickly. You need to look at every alternative before doing a reverse mortgage.”

For those who have exhausted all alternatives, and for whom remaining in their home and community is paramount, she says a reverse mortgage can be “your best friend.”

The “mortgage” part of the name should serve as a reminder this is still a form of debt. As time marches on, this debt increases, contrary to traditional mortgages. This is also the opposite of what many seniors early in their lives — building up equity by paying down mortgages as soon as possible. Indeed, I’d argue a paid-for home continues to be an essential element of financial independence.

Read more »

via Advisor.ca | February 11, 2010

Some clients may be coming up short for RRSP top-ups this spring, having maxed out their TFSA contributions early in the New Year. And who can blame them? Clients are bombarded by advertisements touting the benefits of the TFSA.

More often than not, the TFSA marketing message has come from the banks. Intent on gathering assets, these campaigns do not always fit best with the investor’s goals. High interest savings accounts may be good for building an emergency fund, but gains are too small to require the tax-sheltering benefits of the TFSA.

Read more »