Help single, aging clients

Age 80-84: 35,305

Age 85-90: 22,885

Age 90+: 13,785

Source: 2011 Census of Canada

Retirement income

The per-capita cost of living is higher for singles than it is for couples. “It’s not half as expensive, just because you’re single,” says Munch. “Lighting, hydro and phone costs are the same.”

Malcolm Hamilton, pensions expert and senior fellow at the C.D. Howe Institute in Toronto, agrees. “A single person will have expenses that are about 50% higher than half of a couple. So if a couple needs $30,000, a single, to have a similar standard of living, would need about $22,500.”

This means a single-person household needs more for retirement. And, unless a client has existing health problems, she or he should plan to live until at least age 90.

For that planning, Hamilton recommends using the 4% rule, and then adjusting up or down based on inflation. So, if a single person is aiming to be retired for 25 years, she could withdraw about 4% of her capital in year one, and then more or less in subsequent years.

“If she has a half million saved in an RRSP, she could take out $20,000 that year. And she might get another $20,000 from government benefits, so that’d be an after-tax total annual income of about $35,000. She has to manage her expenditures accordingly.”

Read: Learn the signs of elder abuse

One way to get more income is by using life-only annuities (see “Annuity triggers,” below). Single clients are “excellent candidates for annuities because they may not need to leave behind an estate,” says Bruce Cumming, executive director, Private Client Group, HollisWealth in Oakville, Ont.

So if a 70-year-old female invests $100,000 today, she could get a 7% annual cash flow, which is about $595 in monthly income. “If she buys a GIC, she’d be hard-pressed to earn 2%,” he says. “She’s going to get north of 7% with an annuity, so that’s a 5% gain every year, which is $5,000.”

While some clients may not like that the remaining capital in the annuity isn’t paid to her estate upon death, “if her life expectancy is in the high 80s, that 5% higher guaranteed rate of return for the rest of her life is enough of an argument to offset the [concern that] she’ll lose her capital.”

Another example: a 70-year-old single male with a $100,000 annuity can get $659 monthly. That’s about $7,900 annually, which is almost 8% return. This is in comparison to a couple, both over 70, who’d get $516 monthly or $6,192 annually: a 6.2% return.

There’s also the option to invest in corporate class funds, which defer tax by returning capital. Say a client invests $100,000 on a fund and it earns 5%, says Farwell. She’d receive a $5,000 return, of which about 95% is tax-deferred. So, she’d get $4,750 after tax. “If that 5% was fully taxable as interest income, even at the 40% tax bracket, then of that $5,000, she’d only keep $3,000,” he says.

Farrell tells clients these funds still earn interest, dividends and capital gains income. He also reminds them the 5% isn’t guaranteed, like it would be with a GIC.

Annuity triggers
Source: Bruce Cumming, HollisWealth
The chart below outlines the differences in income for 70-year-old singles vs. couples at the same age, with each investing $100,000.
	Single male	Single female	Couple
Monthly income	$659	$595	$516
Annual cash flow	8%	7%	6.2%

Getting older

When a single person gets sick, he or she will likely have to pay someone to take care of them.

Read: 8 ways to celebrate senior clients

One of Munch’s elderly clients had a net worth exceeding $2 million. She’d downsized to a condo after her husband died. When she got sick, she decided to stay in the condo because she could afford 24-hour care. That full-time help cost between $2,000 and $3,000 per week.

After four months, the client died of a viral infection. Her total private home care bill was about $48,000, and she donated the remainder of her estate to charity.

But not all clients can pay for this type of care, so Cumming recommends long-term care insurance. “These clients have no natural caregivers, so it will be very expensive and challenging to have care in their later years” (see “Why clients should consider long-term care insurance” ). When discussing this insurance with a client, he points out the perceived advantage of not having heirs also means there are no natural caregivers. Then he explains that long-term care insurance allows her to buy that care.

Cumming also watches for signs of failing health. “You’ll start to see unusual behaviour, like more phone calls about investments; or their near-term memory is shot, and they’ll ask you the same questions several times.”

If a client starts acting out of the ordinary, he notifies the PoA. “I don’t have a clear protocol under which I’d do that, but I’d do it with the best of intentions,” he says. “It depends how well I know the PoA.”

If it’s a family member with whom he’d already had contact, he’d reach out with his concerns. If it were an unknown third party, he’d speak to his compliance department first.

And, if the situation worsens, Cumming suggests contacting the Community Care Access Centre (CCAC) or the provincial equivalent. At the CCAC, a healthcare expert will interview Ontario-based clients and review their situations. “If the client is living in her own home, she’s eligible for a certain number of hours of care, including someone to come in and straighten the house. If she’s in a retirement home, she can get CCAC attention for bathing, for instance,” he says.

Read: What the right-to-die ruling means for POAs

So watch out for changes in behavior, and offer your assistance. These clients will depend on you, and may have nowhere else to turn.

When an elderly client marries

Peggy Gates-Hammond, director, Wealth Services of BMO Private Banking in Halifax, has a client in her late 70s with assets in the millions and a generous company pension.

Running out of money isn’t an issue.

But when the client mentioned during an annual review that she was getting married for the first time, Gates-Hammond had questions. “My immediate concern was, ‘Is this someone who wants to take advantage of her? Is it someone who needs a caregiver?’ ”

She asked the client about her fiancé’s background, and learned he was a widower, and 11 years her senior. Gates-Hammond reminded the client that the marriage would invalidate her will in Nova Scotia, so they’d have to reopen that discussion. Since the client never had children, the original beneficiaries of her will were her siblings (two lived in Ontario, the third in Costa Rica), and her nieces and nephews.

But even with heirs to protect, she didn’t understand why she needed a prenuptial agreement. “She found those concepts difficult. I offered to meet with her fiancé and help her explain. After meeting him, I was able to form my own opinion. I didn’t think he was after financial gain because he had his own wealth.” Gates-Hammond adds she also noticed “he was smitten.” When she asked what the rush to get married was, “he said, ‘At my age, you don’t put these things off.’ ”

The advisor recommended the couple see a lawyer. They did, and Gates-Hammond attended the meeting to review the documents. “My biggest concern was that she was going to leave her home and move into his, so I wanted the prenup to address that.” The fiancé has three adult children, so he planned to leave the home to them. Gates-Hammond worried what that would mean for her client.

So, on her advice, they revised the will and prenup, stating her client would have a life interest in the property. If he dies first, she can live there as long as she wants. All parties, including the children, agreed, and the couple wed in early February 2015.

Suzanne Yar Khan is a Toronto-based financial writer.

Suzanne Yar Khan

Suzanne has worked with the Advisor.ca team since 2012. She was a staff editor until 2017 and has since worked as a freelance financial editor and reporter.

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Age 75-79: 44,030

Age 80-84: 35,305

Age 85-90: 22,885

Age 90+: 13,785

Source: 2011 Census of Canada

Retirement income

The per-capita cost of living is higher for singles than it is for couples. “It’s not half as expensive, just because you’re single,” says Munch. “Lighting, hydro and phone costs are the same.”

Malcolm Hamilton, pensions expert and senior fellow at the C.D. Howe Institute in Toronto, agrees. “A single person will have expenses that are about 50% higher than half of a couple. So if a couple needs $30,000, a single, to have a similar standard of living, would need about $22,500.”

This means a single-person household needs more for retirement. And, unless a client has existing health problems, she or he should plan to live until at least age 90.

For that planning, Hamilton recommends using the 4% rule, and then adjusting up or down based on inflation. So, if a single person is aiming to be retired for 25 years, she could withdraw about 4% of her capital in year one, and then more or less in subsequent years.

“If she has a half million saved in an RRSP, she could take out $20,000 that year. And she might get another $20,000 from government benefits, so that’d be an after-tax total annual income of about $35,000. She has to manage her expenditures accordingly.”

Read: Learn the signs of elder abuse

One way to get more income is by using life-only annuities (see “Annuity triggers,” below). Single clients are “excellent candidates for annuities because they may not need to leave behind an estate,” says Bruce Cumming, executive director, Private Client Group, HollisWealth in Oakville, Ont.

So if a 70-year-old female invests $100,000 today, she could get a 7% annual cash flow, which is about $595 in monthly income. “If she buys a GIC, she’d be hard-pressed to earn 2%,” he says. “She’s going to get north of 7% with an annuity, so that’s a 5% gain every year, which is $5,000.”

While some clients may not like that the remaining capital in the annuity isn’t paid to her estate upon death, “if her life expectancy is in the high 80s, that 5% higher guaranteed rate of return for the rest of her life is enough of an argument to offset the [concern that] she’ll lose her capital.”

Another example: a 70-year-old single male with a $100,000 annuity can get $659 monthly. That’s about $7,900 annually, which is almost 8% return. This is in comparison to a couple, both over 70, who’d get $516 monthly or $6,192 annually: a 6.2% return.

There’s also the option to invest in corporate class funds, which defer tax by returning capital. Say a client invests $100,000 on a fund and it earns 5%, says Farwell. She’d receive a $5,000 return, of which about 95% is tax-deferred. So, she’d get $4,750 after tax. “If that 5% was fully taxable as interest income, even at the 40% tax bracket, then of that $5,000, she’d only keep $3,000,” he says.

Farrell tells clients these funds still earn interest, dividends and capital gains income. He also reminds them the 5% isn’t guaranteed, like it would be with a GIC.

Getting older

When a single person gets sick, he or she will likely have to pay someone to take care of them.

Read: 8 ways to celebrate senior clients

One of Munch’s elderly clients had a net worth exceeding $2 million. She’d downsized to a condo after her husband died. When she got sick, she decided to stay in the condo because she could afford 24-hour care. That full-time help cost between $2,000 and $3,000 per week.

After four months, the client died of a viral infection. Her total private home care bill was about $48,000, and she donated the remainder of her estate to charity.

But not all clients can pay for this type of care, so Cumming recommends long-term care insurance. “These clients have no natural caregivers, so it will be very expensive and challenging to have care in their later years” (see “Why clients should consider long-term care insurance” ). When discussing this insurance with a client, he points out the perceived advantage of not having heirs also means there are no natural caregivers. Then he explains that long-term care insurance allows her to buy that care.

Cumming also watches for signs of failing health. “You’ll start to see unusual behaviour, like more phone calls about investments; or their near-term memory is shot, and they’ll ask you the same questions several times.”

If a client starts acting out of the ordinary, he notifies the PoA. “I don’t have a clear protocol under which I’d do that, but I’d do it with the best of intentions,” he says. “It depends how well I know the PoA.”

If it’s a family member with whom he’d already had contact, he’d reach out with his concerns. If it were an unknown third party, he’d speak to his compliance department first.

And, if the situation worsens, Cumming suggests contacting the Community Care Access Centre (CCAC) or the provincial equivalent. At the CCAC, a healthcare expert will interview Ontario-based clients and review their situations. “If the client is living in her own home, she’s eligible for a certain number of hours of care, including someone to come in and straighten the house. If she’s in a retirement home, she can get CCAC attention for bathing, for instance,” he says.

Read: What the right-to-die ruling means for POAs

So watch out for changes in behavior, and offer your assistance. These clients will depend on you, and may have nowhere else to turn.

When an elderly client marries

Peggy Gates-Hammond, director, Wealth Services of BMO Private Banking in Halifax, has a client in her late 70s with assets in the millions and a generous company pension.

Running out of money isn’t an issue.

But when the client mentioned during an annual review that she was getting married for the first time, Gates-Hammond had questions. “My immediate concern was, ‘Is this someone who wants to take advantage of her? Is it someone who needs a caregiver?’ ”

She asked the client about her fiancé’s background, and learned he was a widower, and 11 years her senior. Gates-Hammond reminded the client that the marriage would invalidate her will in Nova Scotia, so they’d have to reopen that discussion. Since the client never had children, the original beneficiaries of her will were her siblings (two lived in Ontario, the third in Costa Rica), and her nieces and nephews.

But even with heirs to protect, she didn’t understand why she needed a prenuptial agreement. “She found those concepts difficult. I offered to meet with her fiancé and help her explain. After meeting him, I was able to form my own opinion. I didn’t think he was after financial gain because he had his own wealth.” Gates-Hammond adds she also noticed “he was smitten.” When she asked what the rush to get married was, “he said, ‘At my age, you don’t put these things off.’ ”

The advisor recommended the couple see a lawyer. They did, and Gates-Hammond attended the meeting to review the documents. “My biggest concern was that she was going to leave her home and move into his, so I wanted the prenup to address that.” The fiancé has three adult children, so he planned to leave the home to them. Gates-Hammond worried what that would mean for her client.

So, on her advice, they revised the will and prenup, stating her client would have a life interest in the property. If he dies first, she can live there as long as she wants. All parties, including the children, agreed, and the couple wed in early February 2015.

Suzanne Yar Khan is a Toronto-based financial writer.