2023 Year End in Review: After Eleven Full Years of Retirement

My husband Rich and I have been retired for more than eleven years now and hardly remember what it was like to work anymore.  In 2023, I reached a bit of a milestone when I turned 60.  But while reaching a whole new decade should feel more momentous, in financial terms it was a non-event.  When we turned 55, we qualified for our first “seniors” discounts at Rexall and Shoppers Drug Mart, although Shoppers recently raised their seniors discount age to 65 which is why we frequent Rexall more now.  Turning 60 does not really qualify me for anything significant in terms of extra seniors’ discounts.  I have to wait until I am 65 to really benefit from this.  I do qualify to start receiving CPP at a severely reduced rate if I want, but as we don’t need the extra money right now, I will try to wait until I am 70 unless something changes drastically in our portfolio.  I do “officially” qualify to play pickleball in the 60+ community centre drop-ins now but we were considered “close enough” at 58 and 59, so we have been playing for the past 2 years anyways.  So for now, 60 is just a number and since I still feel 25 at heart, it doesn’t make much difference.  I do take note that there are only 5 more years until I am 65 and 5.5 years for Rich.  While we will receive more benefits at that age, there will also be more scrutiny and expense in terms of medical and travel insurance.  So we are making a 5-year travel plan to tick more places off our bucket list before we hit that next milestone.

Our strategy of holding good quality stock that regularly raises its dividends and using those dividends to fund our income continues to work for us.  By the end of 2023, the dividend income generated from the stocks in our non-registered account was up another 4.92% from the previous year, while the rate of inflation in this year was 3.4%. Of the 26 different companies that we held in this non-registered account, 24 of them had raised their dividends.  Looking back from the time we retired in 2012, the income generated from this account has risen 60%, to a small degree from adding stock-in-kind RRIF withdrawals that would generate more dividends, but mostly from regular dividend increases.  Following the old adage “If it ain’t broke, don’t fix it”, we will carry on doing the same thing which at this point is more or less doing nothing and letting our dividends do the work for us.

Equitable Bank (EQ Bank) has been our primary bank for our US dollar savings account since 2021 and currently pays an unprecedented rate of 3% annually on all US funds with no minimum balance required.  2023 was the year that we fully committed to using EQ Bank as our primary bank for Canadian funds as well. Up until then, each month we would remove enough dividends paid to our Scotia iTrade non-registered account into Simplii Financial (the no fee bank under CIBC)  to cover our monthly bills plus our credit card bills.  Then any excess dividends would be transferred to EQ Bank to  bolster our emergency fund savings accounts.  In 2023, not only was EQ Bank paying 2.5% annual interest on our savings accounts, but it offered an extra 0.5% if at least $500 of pre-authorized bills were paid from that account.  This gave me the impetus to finally contact all of our recurring billers and fill out all the tedious forms required to move our pre-authorized payments from Simplii Financial to EQ Bank.

It took about a month to accomplish but by the beginning of March, I successfully migrated our condo fees, property tax, and heating bill to be deducted from my EQ Bank savings account, pay all our credit card bills from here and reassigned my primary email for Interac payments to point to this account as well.  In terms of income, I transfer all of our dividends paid to our non-registered account into my EQ Bank account and I receive an interest rate of 3% annually on the daily balance.  I also redirected my climate change rebate and income tax refund to be deposited into this account.  I still keep my Simplii Financial account to pay any small billers who are not registered with EQ Bank and will transfer money there as required.  If I had employment income that I could direct deposit into EQ Bank, I could be earning another 1% bonus for a total of 4% !  I need to investigate whether having a pre-authorized monthly RRIF withdrawal deposited into EQ Bank would qualify me for this extra bonus.  That will be a topic for next year’s review.  <UPDATE: I found out that only employment income qualifies for this bonus, not monthly RRIF withdrawals>

Having some bills be paid from Rich’s EQ Bank savings account so that he could achieve the bonus as well would be too much work to keep track of, since he  would then need to continually make sure he had enough funds to cover the payments.  So Rich’s account makes the base rate of 2.5% and we just keep enough funds there to use as a short term emergency fund.

The value of the stock market experienced a steep decline in the 2nd quarter of 2022 and was still relatively low at the start of 2023.  This made it a bad time to sell but a great time to withdraw “stock-in-kind” from our RRIFs into our non-registered account for our annual RRIF withdrawal.  The lower the stock price, the more shares we can withdraw at the same income level, and the more dividend income those shares will generate for us. Since we did not have any major extraordinary purchases or expenses planned for the year (or so we thought in January!), this seemed like a good thing to do since it would reduce the value of our RRIFs and increase the income generated from our non-registered account.

At the end of 2022, I selected which stock I wanted to withdraw from each of our accounts. I made the decision based on which company was generating less income for us in our non-registered account, and also on which month in the quarter the dividend was paid.  I am always trying to smooth out our monthly dividend payouts so that we have enough cash to cover our bills every month of each quarter.  The middle month of the quarter (February, May, August, November) is always the most troublesome because for some reason, very few companies pay out in those months, unless they make monthly payments.  From my LIF, I chose to withdraw Emera (EMA.T) and from my RRIF I picked Bank of Montreal (BMO.T) since they both pay in the middle month.

When withdrawing stock-in-kind, you can request the withdrawal to be made at any price that it hit during that day. In general, stock prices rise and fall over a day, usually moderately but sometimes dramatically.  By requesting the “lowest price” of the day, you maximize the number of shares that you can withdraw for the same income level.  To try to find a day when the stock price has dipped, I set up two alerts in my discount broker account with Scotia ITrade.  First I selected a price that I would like to withdraw at and asked to be notified if the stock falls to that price or lower.  Next I set an alert to be triggered if the stock price drops 2.5% or more from the previous close.  Based on these alerts, on January 5, I was able to swoop in and withdraw some BMO shares at the lowest price of that day which was $124.78.  After that the stock market started to rebound and by the end of January, the price was trending around $133.  I also completed my withdrawal in time to qualify for the first quarter dividend payout in February, so all in all, this worked out. I didn’t do as well in getting a good price for EMA in my LIF but still ended up withdrawing some shares in-kind to pad our dividend income in the second month of the quarter.

Luckily, I had not yet gotten around to making the annual withdrawals for Rich’s RRIF and Spousal RRIF accounts since unexpectedly our priorities changed at the beginning of March.  We had been discussing for several years about the necessity of renovating our aging condo.  By 2023, it was now over 20 years old, and our equally ancient appliances were all at risk of failing catastrophically at any moment. The rest of the unit was looking tired and run down as well, with chips in our hardwood and paint, sagging kitchen cupboard doors and a poorly designed shower in our master bathroom that we have cursed since we first bought the place.

The main issue that had held us back from embarking on a major renovation was finding a trusted contractor who was experienced in and would agree to working on a job in a condominium building, which presents many unique challenges over renovating a house.  These include condo rules and regulations as to when work can be done, booking of elevators for delivery and removal of debris, parking, finding staging areas and more.  Because of these extra logistical challenges, it is more expensive and might take longer for a condo renovation and from a scale perspective, it would probably be more lucrative for the contractor to work on an entire house.  So when our friends recommended a contractor who did good work for them and who had practical experience working on condo buildings around our area, we jumped at the chance to finally get our renovations done.  The scope of work would involve a gut job and redesign of the master bathroom and kitchen, upgraded toilet, mirror and light fixtures in the guest bathroom, new hardwood floor throughout, repainting all walls and surfaces, addition of pot lights in the living room, upgrade of other overhead lights and a new electrical outlet on our terrace.  As part of the renovation, we would replace the fridge/freezer, dishwasher, stove/oven (finally getting the induction stovetop that Rich coveted) and microwave.

Now we had to switch gears in terms of our financial goals for the year.  Instead of withdrawing stock-in-kind to grow the dividends and therefore income generated in our non-registered account, we needed large amounts of cash in a short period of time.  Unfortunately, I had already made my annual in-kind RRIF withdrawal so taking out extra cash to help pay for the renovations meant increasing my taxable income for the year.  We would be billed in stages as renovation work was completed so we had to go through an exercise to figure out how/when/where to remove money from our investment portfolio in order to fulfill our payment obligations as they came up.  This was similar to the analysis that we did back in 2021 to fund our new car, but at a much larger scale.

To pay for the renovations, we started out by using up all of our emergency fund cash that we kept in our high-interest savings accounts at EQ Bank, which was augmented each month with excess dividend payouts from our non-registered account that we did not need for paying our monthly expenses.  To reduce these monthly expenses, during the renovation period, we cut down extraneous spending including lengthy expensive vacations, dining out and discretionary purchases.  We also took out all of the cash sitting in our various registered RRIF and TFSA accounts, using these funds to further top up our EQ bank accounts.

This kept us going for a while but eventually what we owed outstripped what we earned, so we had to decide which stock to sell to get more funds from the rest of our investment portfolio.  The decision was between selling losers which would lock-in what was previously a “paper” loss and not net as much in value since the stock was depressed in price, or selling winners which were paying out good dividend but would yield us more value.  There was also the decision of whether to withdraw more from our RRIF accounts which helps my goal of reducing their values to reduce claw-back when we take CPP/OAS but would generate taxable income, or from our TFSA accounts where we could get money out tax free.  We ended up with a blended approach, taking funds from all of these accounts.

From my RRIF account, I decided to get rid of two losers which had not been pulling their weight over the years.  Cineplex (CGX.T) had eliminated its dividend back in 2020 when the pandemic hit and has never resurrected it.  Walgreens (WBA-Q) was another loser that had tanked in value since we bought it.  Selling these two stocks netted some much needed cash to help pay for the renovations but also increased my taxable income by the same amount.  To account for this, I requested that sufficient withholding tax be held back to cover the estimated extra income tax owed.  I could not take more out of my LIF account since I had already withdrawn the maximum allowed amount for 2023 at the beginning year.

Next I raided my TFSA and sold my shares of Plaza REIT (PLZ.UN) since it has not raised its dividend since 2017, as well as Brookfield Renewable Partners (BEP.UN) which was not doing well at the time.  I also sold some shares of Exchange Income Corp (EIF.T) despite this being an excellent dividend-paying stock. We hold a lot of EIF shares throughout many of our accounts, so this withdrawal was a good way to rebalance.  I was able to get a large chunk of cash out of my TFSA tax-free but have decimated its worth, so I will need to slowly build it up again over the next few years.

Rich’s RRIF held all winners, so it was a matter of deciding which ones to unload.  Thinking ahead to when we could afford to take out stock-in-kind for our RRIF withdrawals again, he would not be choosing any income trusts since they are painfully complex to deal with outside of registered accounts.  So he sold shares of Canadian Apartments REIT (CAR.UN) and Brookfield Infrastructure (BIP.UN) as his contribution to the renovation costs.  Although it was worth almost nothing at this point, he also dumped Corus Entertainment (CRJ.B) from his Spousal RRIF just to get rid of it, since it was more of a nuisance to keep track of for so little return.

Finally we decided to dump the Cineplex shares that we held in our non-registered account, having given up hope that this stock would ever recover and start paying dividends again.  I would normally never sell stock in our non-registered account to gain cash since reducing dividend-paying stock meant reducing our monthly income.  But given that Cineplex had not paid a dividend since the beginning of 2020, there was nothing to lose.  Although its sale only gave us a very small amount of extra cash (every bit helps!), we were able to bank the capital loss to apply against any future capital gains.  With all of these trades, plus the continuing flow of our dividend income, we were able to pay for our renovations.  I did press the contractor for an advanced schedule of when payments would be due so that we would have time to get the funds ready.  To sell stock, wait for the trade to settle and then move the funds to a bank that recognized our contractor as a biller could take over a week to complete.  An added complication was that the contractor was too small a biller to be registered with EQ Bank where our savings resided.  Accordingly, each time we needed to pay our bill, I had to first transfer the sum to Simplii Financial causing a further delay of up to 3 business days.

After paying a small retainer in March to secure the services of the contractor, we went through a design phase that spanned April to June with a plan to have the work done from mid July through mid October during which we were required to vacate our home.  It was important to me that the bulk of the construction be done in the summer since I had a plan in mind for saving the cost of temporary accommodations. Our good friends who lived in the same building but several floors above us moved to their house in the Haliburton Highlands for the summer months.  We could stay in their unit for about 9 weeks while still being on-hand to check on the construction work, answer any questions that might arise and book elevators when required.  This turned out to be crucial as we caught a few errors early before too much work had proceeded and were able to give timely feedback that kept the job moving smoothly.  Having the renovation done during nice weather also meant that our outdoor terrace could be used for staging, sawing, sanding and other tasks that would have caused a huge mess inside our unit.  Once the 9 weeks were up, we embarked on a 2-week road trip while our neighbours kept an eye on our renovations and took regular photos of the progress.  For the rest of the duration, we went “couch-surfing”, staying a few days at a time at the homes of various friends who were away on vacation or who had a spare room that we could use.  We owe a lot of people some big favours!

All of our belongings had to be removed and placed in storage in order to have new hardwood flooring installed.  To save some money on the actual removal and return of our things as well as the storage fees, only the large furniture was taken away by the movers.  I spent six weeks packing and finding hiding places for all other items including cooking/eating utensils plus all food items in our pantry, bathroom sundries and towels, knickknacks, wall art, and all excess clothing that we were not taking with us. I filled up both of our storage lockers by stacking boxes from floor to ceiling, hid items under the covers to our patio furniture on the terrace and stuffed every closet in the condo that did not have to be disassembled to install the flooring. This also gave us incentive to mercilessly purge all non-essential items so that we didn’t have to pack and stash them.

With any large project, there is the risk of unforeseen issues and ours was no exception.  The first problem arose when the workmen tore up our old hardwood floor planks. Underneath, they found thick pieces of plywood with giant nails driven through them into the cement subfloor.  Removing the plywood involved prying out the nails at great effort which left huge gouges throughout the cement.  It took extra days and additional cost to fill all the holes and smooth the cement in preparation for installing the new soundproofing and hardwood.  The next two issues were supply-chain related when we learned that both the new solid wood doors that we ordered for our closets and entryways, as well as the bathroom tiles for our new shower would not arrive in time to meet our desired schedule of moving back in by mid October.

Considering the classic project management triangle of scope vs time vs cost, our contractor understood that the most important thing to us was schedule.  If something had to give way, within reason, it would be cost as we did not want to cut corners and impact the quality of the work.  In each case, they found creative solutions that would keep us on schedule by adding a relatively small amount to the overall budget for the renovations.  For the doors, they offered to custom-create the doors for us which would cost about the same as the ones that we ordered, but we would have to pay for two extra coats of primer.  The bathroom tiles required a bit more ingenuity since they were to be shipped on a slow boat from Italy!  Who knew that we had selected Italian tiles?!?  Our alternatives were to go back to the drawing room and select new tiles (with no guarantees that these would arrive sooner) or wait up to 3 months for the tiles to arrive.  A third option was proposed by our contractor.  The supplier could air-ship the tiles and these would arrive in less than a week.  Our contractor even offered to chip in a small portion of the transportation costs and then had to juggle the project plans to account for the delay, moving tasks around in order to maintain our schedule.  Although we paid a bit more in renovation fees, this more than offset the extra costs that we would have incurred with a delay of even a week, let alone a longer one.  We had run out of friends to impose upon and would have had to find rental accommodations during the delay, as well as continuing to pay for the storage of our furniture.  This did not even factor in the emotional cost of living out of a suitcase for 3 months.  I don’t think I could have handled continuing like this for even one day longer.

Understanding our motivations, our contractor did an outstanding job of completing all the “necessary” work that would allow us to move back home.  There were still a few minor, inconsequential tasks that needed to be completed and the workmen continued to come by for several weeks after to finish the job.  In the end, we are very happy with our newly renovated condo and thrilled to be back home again.  Although by no means inexpensive (remember the project management triangle), our contractor did high quality work on schedule, even finishing one day early.  On the last day, they sent a full crew of cleaners to vacuum, dust and shine all of our surfaces so that there was very little to do when we returned, other than relocating and unpacking all the items that I stashed away 3 months ago.

While our Canadian funds were dedicated to paying for our renovations, we also have a stash of US cash in our US EQ Bank account which pays daily interest of 3% annually.  The US account was funded for years from dividends paid in US cash from AT&T and Algonquin Power (AQN) which we held in the US side of our non-registered account.  At the end of 2021, there were rumours that AT&T was experiencing financial issues and planned to cut its dividend (which it did by 2nd quarter 2022).  Accordingly in December of 2021 we sold our shares of AT&T and added the US cash from that sale to our US account.  Because of the pandemic, we had not resumed traveling out of the country until 2022, so by 2023, we still had a healthy balance of US cash.  This came in handy in terms of going on vacation in the States using our US cash, not needing to pay currency conversion, and without eating into the Canadian funds that we needed for the renovations.

In May, we took a 7 day trip to New York City using travel points for the airfare and US funds for all other expenses including accommodation, food, and entertainment.  We brought along some US cash but found out that just about everywhere in Manhattan takes credit card, even the hot dog vendor!  In September we took a second vacation the States in order to use up some more of the time that we needed to be out of our condo during the renovations.  This was a road trip to New York State and Pennsylvania, which I’m still working on blogging about.  Once again, other than the initial tank of gas to get us across the border, we paid everything in US funds.

Despite our focus and finances being devoted to home renovations for most of the year, we still had fun with our usual activities of tennis, pickleball and live theatre.  We didn’t do much cycling since our bicycles were blocked by stacks of boxes.  Now that we have tackled replacing our old car and upgrading our old condo, hopefully 2024 can go back to being a normal year in terms of spending.  We need to replenish our emergency fund accounts and TFSAs but would also like to venture back to Europe (in line with our 5-year plan for traveling more before we hit 65).  But you never know what unexpected expenses may come up, so check back in next January to see how we fared.

EQ Bank Enhancements Make it Better Than a "Real Bank"

When my husband Rich and I first joined the CDIC-backed EQ Bank in 2016, we used it solely as a savings account that paid a great interest rate (2.25 percent at its inception).  There weren't any other banking functions available and you needed to link to a "real" bank to to transfer money into or out of the account.  Yet as a savings vehicle, it offered everything we were looking for--totally liquid cash (as opposed to locked in term GICs), a steady interest rate that was significantly higher than what was offered at the "Big Banks", no minimum balance required, free unlimited transactions, no service charges (albeit no services to charge for) and no teaser rates that evaporated after some short period of time.  We also took advantage of EQ Bank's US savings account which currently pays an unprecedented 3% on US funds, again with no minimum balance required and no fees (and this is the normal rate, not a 3 month teaser like so many other banks offer).

While EQ Bank only acted as a savings vehicle, we used Simplii Financial (CIBC's branchless no fee option) to handle all the rest of our banking needs and to pay off our monthly expenses.  Only if we received excess dividends beyond our expense requirements for the month would we transfer the extra funds to EQ Bank for long term savings goals.

Over the years, EQ Bank has gradually been adding more and more banking functions.  Today, we can almost use it as our primary bank.  We are now able to set up automatic deductions to pay for reoccurring expenses, set up recurring or one-time bill payments to common vendors, send and receive free unlimited Interac payments and electronic money transfers, generate an online "void cheque" to link to any other bank, deposit cheques using their mobile app, and send money internationally if required.

Most recently, EQ bank has added yet another feature which brings it even closer to being a "real bank".  It introduced a bank card onto which you can preload funds from your savings account.  You continue to earn the going interest rate while the money sits on the card, and you can withdraw funds from the card using ANY Canadian bank's ATM for free (EQ bank covers the charges). The convenience of this is staggering as we are no longer tied to our own bank's ATMs.  On top of that, you earn 0.5% cashback on any purchases made using the card, with the rewards being deposited into your savings account.  This certainly beats the debit card from our current bank which offers no rewards.  It can be used internationally anywhere that Mastercard is accepted and charges no foreign transaction fees.

In effect, our EQ Bank has turned itself into a high interest savings AND chequing account all in one.  With all these new features, it makes sense for us to use EQ Bank as our primary bank for most of our banking needs while earning the excellent interest rate (currently 2.5% calculated daily) on all funds that we store there.  I have been working over the past month to make this happen.  I contacted each of the billers that we had set up to automatically pay monthly from our Simplii account and provided the banking info for our EQ Bank account instead.  This included our condo fees, property tax, and hydro bill.  I updated the banking info on our CRA accounts so that our tax refunds would be automatically deposited into EQ Bank.  I registered each of our Canadian credit cards so that we could make monthly one-time payments to pay off the balances.  I reassigned my primary email address to link Interac payments to EQ Bank while assigning a secondary email to Simplii Financial.  This way, nothing changes for all the people who have set me up as a contact for Interac e-Transfers but now the money automatically routes to EQ Bank.  I applied for an EQ Bank card, loaded it with some funds and will use this for any "debit-like" payments at stores that don't accept credit cards.  And most importantly, I linked my EQ Bank account to my Scotia iTrade non-registered account so that each time we receive dividend payments in our non-registered accounts, I can transfer the cash directly to EQ Bank, minimizing the lag time before our money starts earning the daily interest.

Today I closed my Simplii Financial "High Interest Savings Account", leaving only my chequing account with that bank.  When the agent asked me why I was closing the account, I replied that despite its name, at 0.40%, it does not actually pay high interest (or even medium interest), relatively speaking.

At this point, EQ Bank meets about 90% of our banking needs but there are still a few things that it doesn't do (yet?).  

1. Even though I have an EQ Bank US funds savings account, I cannot directly pay off my TD US VISA from those funds.  EQ Bank does not recognize non-Canadian currency credit cards as billers.  When I need to pay off my US credit card, I will have to transfer US cash from my US EQ Bank account to my US TD Bank account (which pays no interest!) and pay off the credit card from there.  
2. Smaller vendors are not currently registered with EQ Bank.  When we needed to pay an invoice issued by the contracting firm who will do renovations on our condo, I could not add them as a biller within EQ Bank as they were not found in the billers list.  National Bank has an interface where you can add unknown billers by providing info including their bank, transit and account numbers.  So far, there is nothing like that in EQ Bank.
3. There are no physical cheques provided with EQ Bank (other than the online void cheque for linking accounts), so when there is a need to write a cheque, I need to move money back to my Simplii chequing account and write the cheque from there
4. You cannot specify a beneficiary for your savings account(s)

These are infrequent inconveniences that I can happily live with in order to reap all the benefits of my EQ Bank account.  

While we can't use EQ Bank as our only bank account, in so many ways it is better than anything the Big Six banks are offering.  EQ Bank has a referral program that pays $20 to both parties for the first 3 successful referrals, $30 for the next 4 and $40 after that up to a maximum of $500.  If all this sounds good to you and you want to join, shoot me an email at retiredat48book@gmail.com and I can refer you.  We can both make $20 😁

UPDATE: As of 2023, EQ Bank offered 0.5% extra interest on your savings account if you direct at least $500 of pre-authorized payments to be regularly paid from that account.  As of 2024, they are offering an additional 1% on top of that if you direct your pay into the account, for a total of 4% if you do both.  Unfortunately, "pay" only applies to employment income, not retirement income (e.g. RRIF withdrawal) so we don't qualify for the additional bonus.  Those of you who still work and are paid by a company do though!

Banks Show No Respect for Retirees or Retirement Income

Considering that we are in midst of a time when most of the Baby boom generation are either retired or close to retirement, it boggles the mind as to how little understanding Canadian banks have regarding retirees who no longer have employment income. 

Case in point, my husband Rich has been trying since the beginning of January to apply for a CIBC No Fee Dividend Cash-back VISA and has been jumping through hoops in trying to prove that he makes enough income to qualify.  This is despite the fact that he already has excellent credit history and a fee-based BMO World Elite Mastercard for which he is repeatedly offered higher credit limits.  As an aside, new immigrants without jobs and students just out of school seem to have less issues with getting credit cards.

Even though Rich clearly stated on the application form that we are retired (and have been for over 10 years now), the agents that he spoke to via email, chat and phone all insisted that he send proof of employment income by showing the EFT payment of his last pay cheque.  He repeatedly informed them that he has no employment income and no pension.  All his income comes from annual RRIF withdrawals as indicated by T4RIF statements, dividend income from our joint non-registered account (T5 statements) and interest from his high interest bank account with EQ Bank (T5 statement).  Yet even after sending in images of all these tax statements from 2021 (the most recent available at the time), he was still sent emails demanding proof of EFT transfers and told that his application would not be processed without this.

After spending what felt like an eternity on the phone speaking to multiple CIBC agents, he finally (or so we thought) got them to understand that he had no employment income, no pension, but he did have investment income.  He was next informed that the 2021 tax statements were not recent enough.  The last agent idiotically asked for 2023 T4/T5 statements!  Clearly this person does not live in or pay tax in Canada, or she would understand that this is not how Canadian tax system works. 

This process took so long that Rich received his 2022 T4RIF and T5 statements and could send those in to show more current income.  But he needed a secure portal to send in these sensitive documents.  He was asked to use the portal that was open for him back on January 18, 2023.   That email is long gone but consider this -- How secure is a portal that stays open forever?!?  Asking for a new secure portal to be sent to him proved to be the next challenge.  After waiting over a week and not receiving one, Rich decided to make an appointment with a live agent at our local branch so that he could show all his documentation personally and explain the situation.

On the day of his appointment, the email with the secure portal finally came and this is what the email said:

It is like the previous 5 agents that Rich spoke to totally ignored the conversations and just could not grasp the concept of someone not having employment income.   Are we not now at the tail end of the baby boom and have there not been masses of retirees to deal with over the past 30 years?!?  Even if this was a form letter, where is the option for retirement income (be it pension, investment or other)?

Ignoring this last frustrating email, Rich proceeded to the meeting with the bank representative at our local branch.  This time he went in armed with his tax notices of assessments from 2020, 2021 and his T4/T5 slips from 2022, all showing that he had more than sufficient income to qualify for this credit card.  After another hour of questions, a credit check (which presumably was already done before) and viewing of driver’s license and other credit cards, the agent was finally able to approve Rich’s credit card there on the spot.

If you think this is just an issue with CIBC, we have found that this culture of disrespect for retirement income is consistent through all the banks.  A year after we first retired, we thought it would be smart to have a small line of credit for emergencies, although we never intended to use it.  When we applied for the line of credit with one of the other big banks, we were told that our investment income (which consists of mostly dividend payments from blue chip stock) is not reliable since at any time, we could sell our stock and lose that income.  In contrast, this was compared to a steady employment pay cheque, yet there was no consideration that one could lose or quit their job and therefore lose that income.

Rich also ran into trouble when he initially applied for the BMO World Elite credit card. Once again, our investment income was discounted, and he was looked down on for not having employment income.  It was not until we sat with the bank manager and showed financial statements reflecting our investment portfolio that he was finally granted this initial card.  At the time, we thought it was because he did not have much credit history, but this is no longer the case.  Rich now has over 3 years of stellar credit history and should have an excellent credit score since he has never missed paying his balance in full.

There are a few lessons learned for retirees or soon-to-be retirees.

1. Forego the “convenience” of an online credit card application and head straight to the bank to begin with.  You will save many agonizing hours on the phone speaking to agents who just don’t get it

2. If you can, get all your credit cards, line of credits, loans, etc. locked down before you retire, while you still have employment income

3. Banks need to change their antiquated processes that are totally focused on the employed.  There is a large contingent of responsible, financially secure retirees that are being shafted by this mindset.

Handling US dollar income and capital loss on Canadian tax returns

This year, just before we were about to file our 2022 tax returns, Rich received a notice of reassessment for his 2021 tax return.  It indicated that he missed declaring some income and as a result, would need to pay an extra amount in tax, as well as a small interest charge. The issue turned out to be on the T5 form for our dividend stock that paid in US funds.

In 2021, we had two stocks in our non-registered account that paid in US funds.  The first is Algonquin Powers (AQN.T) which is a Canadian stock that qualifies for the dividend tax credit but pays dividends in US funds.  These dividends were shown at the top of the T5 form in boxes 24-26 and were declared properly.  We also owned AT&T which is a US stock and its dividends appeared at the bottom of the T5 in boxes T15 and 16.  In a careless clerical error, I totally missed these lower boxes while preparing our tax returns.  Both of our tax returns should have been reassessed since we split our non-registered income 50/50.  But for expedience, CRA attributed all of the missing income to Rich, since his name was listed first on the Joint T5 form and my name came after.

That was just the start of the issues.  The amounts of dividend shown on the T5 were in US dollars but on the tax return, we were required to declare in Canadian dollars.  Some currency conversion was required, but at what rate?  The agent we spoke to on the CRA help line informed us that we needed to use the Bank of Canada annual exchange rate for 2021, which can be found here:   https://www.bankofcanada.ca/rates/exchange/annual-average-exchange-rates For 2021, the rate was 1.2535.

The day after we spoke to this agent, I realized that on our 2021 returns, I also neglected to submit the T5008 form that listed our capital loss when we sold AT&T in Dec 2021.  Without a record of this form on our 2021 tax return, we would not be able to claim the loss against any future capital gains.  I did not realize this at the time, and since there was no income to declare, I hadn't included it.

I was back on the phone with the CRA info line to find out what was the best course of action to retroactively add this.  Before talking to an agent, I did my own investigations and came up with two possible solutions.  I could try to do a REFILE on my 2021 tax return to add the details of the T5008 form.  This would be a viable solution if I had not also been reassessed (I got a small additional refund, which I accepted without question).  If I did a REFILE, I would be resubmitting my “pre-reassessment” form which would be out of date.

The second alternative was to log onto my CRA Account to select the “Change My Return” option.  I would not be able to enter all of the fields from the T5008, but this seemed to be OK since CRA already had this form on file.  Instead I would update Schedule 3, line 13200 and enter the amount of loss that we incurred when we sold the AT&T stock.  But once again, the amount was in US dollars so it was not as simple as taking the Book value and subtracting it from the Disposition proceeds.  Once again, I had to convert to Canadian dollars.  But this time, I needed the Bank of Canada historic noon rate for the date of the sale, which in this case was December 8, 2021.  Now I had to go to this link to get the right exchange rate:  https://www.bankofcanada.ca/rates/exchange/daily-exchange-rates-lookup  I multiplied our loss by the stated exchange rate and submitted this new value in line 13200.  I got a rapid reassessment that indicated my loss was now on record and I could claim 50% of it against my next capital gain.  Note that I applied all the loss to myself rather than giving half to Rich.  That was more complexity than I wanted to deal with and since CRA did the same with Rich's reassessment, I figured this would be OK.  I was just happy that we didn’t lose the right to use our capital loss in the future.

So, this tax reassessment led to several lessons learned.  Ironically, we learned these lessons too late to be of use to us, as we have since sold both AT&T and AQN from our non-registered accounts and currently no longer have US dividends as income from that account.  But in sharing our lessons learned, hopefully others will not make the same mistakes that I did.

2022 Year End In Review: After Ten Full Years of Retirement

My husband Rich and I can hardly believe that we have now been retired for over 10 years!  At ages 58 and 59 respectively this January, we are now welcoming many of our friends and family as they join us in retirement.  I feel like we have fulfilled so much of our early retirement wish list with extended travel and the luxury of free time to explore hobbies and interests. Now it feels like we are in the "gravy years".  I am grateful that we were able to do all of that before the pandemic brought social life and travel to a halt. I feel sorry for those who retired just as COVID-19 reared its ugly head, but hopefully they can now resume their post-retirement plans.  At least they had the silver lining of preserving extra retirement capital during the period of lockdown when there was nowhere to spend discretionary money.

2022 was a strange and stressful year for the economy. Weather factors impacting crops, global political strife and uncertainty, as well as grain and oil shortages due to the Ukraine War all contributed to soaring inflation experienced around the world.  In Canada, the 2022 inflation rate ended just under 7%, impacting cost of living across the board. Two examples include a bag of three romaine lettuces that cost around $2.99 only a year ago now selling for $8.99, and the price of poultry which increased by between 10-20% over the last two years.

For years, Canada’s inflation rate was steady at around 2% and this is the rate we used in our Retirement Plan that tracks how our portfolio is doing. At the beginning of 2022, I adjusted our plan to reflect an average of 4% inflation rate going forward.  This acknowledges the increase in inflation rate but optimistically assumes that inflation will not continue to trend at 6-7% for the long run. Even with this change, I was relieved to see that although our capital would reduce more rapidly, we still have sufficient funds to last beyond our expected lifetimes. I will keep my eye on this rate going forward and may need to make more adjustments in the future including reducing our rate of spending if required. 

Inflation, supply chain issues and global uncertainty took its toll on the stock market, as the TSX/S&P Composite Index was down by over 9%.  The value of our portfolio took an even bigger hit as our value decreased by over 11%.  It was dragged down by the 1-year returns from long-term losers like Corus (CJR.B – down 51%) and Cineplex (CGX.T – down 40%).  But unexpectedly, we also took a hit from the former stock darling, Algonquin Power (AQN.T) which unexpectedly plummeted in 2022 with a negative return of over 46%!  This further illustrates the need for diversification and not putting all your eggs in one basket by owning just a few companies or industry sectors.

Things looked dire for Algonquin Power in November as the stock price plunged. There were rumours of the possibility of the company cutting its dividend and this came to fruition in the second week of January 2023 when the dividend was slashed by 40%.  We still like this stock for the long term, so we decided to hedge our bets on it. At the end of November when the AQN stock price in our non-registered account dropped to just about the amount that we originally bought it for, we decided to sell these shares, triggering a tiny capital gain. We will use the proceeds to purchase stock that will provide us with more stable dividends. At the same time, we doubled down on Algonquin in my RRIF, enrolling in the DRIP (dividend reinvestment plan) to pick up more shares while the price is low. If the stock does rebound as we hope, then we will have increased our holdings at a discount and can move some shares back out to the non-registered account then.  Algonquin is a Canadian stock that qualifies for the Dividend Tax Credit, but pays its dividend in US Funds, so it would be nice to eventually have our regular source of US cash again.

Despite the dismal year for the value of our portfolio, 2022 was a good year for dividends, which is the main thing that we care about. Our income strategy has been to buy and hold good companies and live off the dividends that they pay.  This strategy has sustained us through several bear markets over the past ten years.  The dividend increases were especially strong in our non-registered account, which is where most of our large-cap, blue chip stocks are held, and where we source our annual income.  Within this account, our dividends rose by over 6%, which just about covers the high rate of inflation for 2022.  I think we are still feeling the effects of the post-COVID boost that started at the end of 2021 when banks and insurance companies were finally allowed to raise dividends and other sectors also started to ease their pandemic fiscal restraints.  It is uncertain what 2023 will bring with inflation is still running rampant.  Yet so far, seven of the companies in our portfolio (BMO, CIBC, ENB, NA, RY, Telus and TD) have already declared dividend raises for 1Q2023, albeit much smaller raises than the double-digit anomalies that we enjoyed when the restrictions on the financial sector were finally released.  Despite a bad year for the value of our stock holdings, our income strategy of living off our dividends remains a winning one.  Since we first retired in 2012, our dividend income has more than doubled.

Another benefit of the pandemic subsiding is that savings account interest rates started to rise again.  For years now, we have used EQ Bank as our no-fee, high-interest savings bank.  We like this company because it consistently has better than average interest rates (especially compared to the big banks) and doesn’t play the “bait and switch” game of teaser rates that only last for a few months. I like the stability that this bank offers and can’t be bothered trying to chase higher rates offered for short periods of time.

In January 2020, just prior to the start of COVID-19, EQ Bank was paying 2.45% on Canadian dollar savings accounts, with no minimum balance requirement. As the pandemic dragged on, the bank gradually lowered its rates, going from 2% in March, to 1.7% in August, 1.5% in October and then as low as 1.25% in April of 2021.  During that same period of time, my so-called “high interest account” with Simplii Financial was paying 0.01%!  In 2022, EQ Bank’s rates started to slowly rise again and as of September 2022, they are paying 2.5%.  With Simplii Financial, my high-interest savings account is currently paying $0.4% for balances up to $50,000.  Note that it is offering a teaser rate of 5% for new accounts, payable only between November 1, 2022 to January 31, 2023.  Guess which rate is touted in large black letters and which one is only found in tiny print if you persistently to search for it deep within the website.

Even more exciting than EQ Bank’s Canadian savings account interest rate is the 2% that it pays for US dollar savings accounts, again with no minimum balance requirement!  Prior to opening a US account with EQ Bank, I had a TD Bank US Daily Interest Chequing account that paid 0.01% (equivalent of 10 cents annually on $1000) and required a $1500 minimum balance to have the monthly transaction $1.25USD fee waived.  I used this TD US account to accumulate US cash from the US dividends paid by some of our stocks. This provides me with a physical bank where I can withdraw US cash for travel without incurring foreign exchange rates. 

I have always wanted a US credit card so that I could make purchases in US funds and pay off the balance with the US cash from my bank account. To achieve this, I switched over to the TD Borderless US Dollar account which pays no interest (but I was getting just about no interest anyway) and requires a $3000 minimum balance to have the $4.95USD transaction fee waived.  But this account also waives the annual $39USD fee for owning a TD US Dollar VISA card.  So now I transfer any US dividends that we receive into my EQ Bank US savings account where my money is finally growing due to the great interest rate.  When I purchase anything from the States using my US credit card, I then transfer money from EQ Bank to TD to pay it off.  This year we plan to start traveling abroad again, starting with a trip to New York City.  I will be able to pay for our accommodations, meals, theatre tickets and other expenses using my US credit card and US cash.

Although our portfolio is set for the most part and we don’t really do much trading anymore, we still had some interesting events happen to some of our holdings. In May, CIBC issued a 2 for 1 stock split. While I don’t really care about stock prices, I do check on dividend payouts quite regularly to determine whether any of our stocks have raised or cut their dividends.  When I noticed that our payout for CIBC reduced by half, I was able to quickly confirm that our number of shares had doubled accordingly and then googled to confirm the stock split.  I was not really that concerned because if one of the big banks ever did cut its dividend (let alone slash it by 50%), that would have been big news!  In June, BIP.UN and BIPC.T had a 3 for 2 stock split and I went through the same exercise to confirm.  Starting July 2022, PKI moved from monthly to quarterly dividend payouts.  The annual net result is still the same, but I miss getting a bit of income every month!

At the beginning of 2021, Cenovous Energy bought Husky Oil, which I held in my RRIF.  As part of that transaction, I received a “purchase warrant” for the right to buy extra Cenovous shares at a given price.  Through a complex formula that I wrote about earlier, I could either buy the shares if the market value exceeded the strike price or sell the warrant (which has its own stock ticker CVE.WT) before it expires in 2026.  In May 2022, the price of CVE.WT rose to $22.62 from an initial value of $3.62.  I could have held on longer to see if the price would continue to rise, but I knew that as we got closer to the expiry date of the warrant, the value of it would start to drop.  Not wanting to worry about this anymore, I decided to cash out and make a small profit.  So far this has looked like a good move, since the current price of the warrant is $18.19.

Since 2019, Rich and I have been actively trying to reduce the sizes of our RRIF accounts so that we can minimize CPP and OAS clawback when we hit age 70.  To accomplish this goal, we pay extra withholding tax from cash within our RRIFs to pay for the year’s income tax, rather than using the dividend income generated from our non-registered account or from our savings account to pay in the new year.  An additional benefit of pre-paying our taxes via withholding tax is that it eliminates the need for CRA-enforced “installment payments” that are required if you owed more than $3000 in tax the previous year.

To estimate how much tax we might have to pay, I use the previous year’s tax program and guess at how much the dividend income in our non-registered account might grow.  I then control how much we withdraw from each RRIF including the withholding tax to reach our desired net incomes. Since 2021, I have even tried to pay enough withholding tax to give each of us a small refund.  We are therefore incented to file as soon as possible in order to receive our refunds.  NETFILE makes this really quick and easy.  Last year we filed on February 23 and had money refunded to our bank accounts by March 3.

Because we filed so early, I did not realize that I qualified for the Digital Subscription Credit, since our Globe and Mail Saturday paper delivery subscription qualified us for a complimentary digital subscription.  The tax receipt arrived after I had already filed, so I did an online REFILE and got the extra refund a week later.  I now know to claim this on my tax return going forward.

We took multiple overnight trips within Ontario during 2022 in order to take advantage of the Ontario Staycation tax credit, which applies to money spent on accommodations during the calendar year.  An individual can claim up to $1000 and a family up to $2000 in order to receive a tax credit of 20% on these expenses.  This worked out great for us since we were still hesitant to travel or fly abroad, given all the travel horror stories we heard about delays, lost luggage and intermittent COVID resurgence.  Instead, we had lovely times spent in Stratford, Ottawa, Perth, and Fergus/Elora Ontario, keeping track of our receipts so that I can claim this tax credit.

Part of the analysis that we did before retiring at age 48 in 2012 was deciding whether we should purchase medical insurance to replace the coverage that we each had when we were working.  It would be another 17 years before we qualified for the Ontario Drug Benefit at age 65. After reviewing multiple plans and calculating the annual premiums vs. estimated claims, we decided that it was not worth it. Especially given the fact that most medical insurance policies have annual caps on claims, we were better off self-insuring and paying for our expenses out of pocket.  This turned out to be a good choice since in almost every one of our 10 years of retirement so far, we did not accumulate enough medical expenses to claim a credit on our tax returns.  That changed in 2022 when we incurred some extra dental and drug expenses. Once we realized that that our combined medical expenses had exceeded the threshold of $2421, we tried to front-load as much as possible into 2022 in order to maximize our benefit claim. This included refilling all of our prescriptions and scheduling Rich’s eye doctor and dentist appointment before the end of 2022.  Had I been more on the ball, I would have scheduled an eye appointment for myself as well. But by the time I thought of it, I was too late to get an appointment.  We transferred all of Rich's expenses to me (his spouse) in order to consolidate all the expenses in one tax return.  

Finally, in terms of personal interests, 2022 felt like the first “almost normal” year after all the COVID years.  In addition to our Ontario Staycation trips, we went on the longest vacation since before the pandemic when we took a 15-day driving trip out to the Nova Scotia and Cape Breton Island. We still haven’t resumed trips that involve flying yet, but probably will start in 2023. In preparation for more international travel to the States and Europe, we finally applied for NEXXUS cards, although it will probably be over a year before they are processed.  2022 was a time for re-socialization where we spent more time dining out, visiting and entertaining friends and family, going to more theatre and museums, like we used to do pre-COVID.  I wonder if all milestones will now be designated as "pre" and "post" pandemic?  All this additional activity showed up in our year-end spending analysis as our discretionary spending has increased again, now that the opportunities to spend money have reappeared.  And finally, we have joined the Pickleball craze, purchasing racquets and playing both outdoors in the summer and indoors at community centres through the colder months.

Updating Retirement Spreadsheet to Reflect Current Realities

Those who follow this blog or have read my book Retired at 48 - One Couple's Journey to a Pensionless Retirement know that we use a Retirement Spreadsheet which both estimated and tracked our portfolio growth progress during the savings phase prior to retirement, and created a spending plan to track against during the "draw-down" phase (post retirement) to ensure we do not prematurely run out of funds.  At the beginning of every new year, I update our actual year end portfolio balance in the "Actual Ending Balance" column for the previous year.  This causes the rest of the projections going forward to recalculate, thus providing a more accurate view of the future.  In creating my spreadsheet, I reverse-engineered from a online small app and then expanded upon it to support the extra data and functionality that I desired in my retirement plan.

Since we first started using this spreadsheet and in the sample spreadsheet that I distribute for anyone who requests it from me, I have used 2% as the estimated average inflation rate within cell J9.  In the spreadsheet's predictive estimate, the following fields are increased annually by that rate of inflation.

• Income Sources
• Canada Pension Plan (CPP) - Indexed to Inflation
• Old Age Security (OAS) - Indexed to Inflation
• Expenses
• Retirement Spending

This rate had been relatively stable for so many years (especially during our retirement years) that I not really given it much thought. Unfortunately in 2021, driven by stresses caused by the pandemic which show no sign of easing, the rate of inflation has risen to almost 5%.  It seems short-sighted not to reflect this in our ongoing projections for the future.

I have updated the latest version of the spreadsheet that I distribute to reflect this by increasing the predicted rate of inflation to 4% in cell J9 (couples examples) or I9 (individual example).  This is an input field that you can update to whatever you want, but I thought I would put something more realistic in the sample for now.  Given that the same rate will be used to predict all future years until you change it, I did not use 4.8% which is the current rate as of January 19, 2022.  I tempered the prediction a bit with the hopes that after the pandemic is done, the rate will ease a bit.  Anyone requesting my retirement spreadsheet going forward will get the version with this new rate (unless things radically change again).  

Anyone who already has my spreadsheet but would like to address this issue themselves have the following options:

1. Update Inflation rate in Cell J9 (or I9 for individuals) to 4%.  
• Unfortunately this will affect all the previous years' calculations which in turn will affect the estimates going forward
• This does not matter to anyone still in the savings phase since you will not have started using CPP/OAS/Retirement savings yet.
• For those in retirement spending phase, you may want to use the next option although if you have been updating the spreadsheet with your actual ending balance each year, the impact is negligible.
2. Update inflation rate only the years going forward starting from a given year
• Make a copy of the spreadsheet before you start so you can try again if you make a mistake
• Enter 1.04 (or whatever you want your going forward inflation estimate to be) in cell AD4
• Click on the first Retirement Spending calculation cell (e.g. Cell AF21 for couples examples, AB21 for singles example)
• Change the last part of the formula in that cell from $AC$4 to $AD$4 (couples) or from $AB$4 to $AD$4 (singles)
• Click and hold from the bottom right corner of your starting cell and drag down to the end to update the formula for all subsequent Retirement Spending years.
• Repeat the previous 3 steps for CPP and OAS (if desired)
3. I can send you a new spreadsheet but you would have to re-input all of your previous data.

In order to have an even more conservative estimate in our own personal spreadsheet to make sure we don't run out of money, I only updated the retirement spending estimate to use the higher inflation rate but left the OAS and CPP estimates with the lower rate.  By increasing our spending estimates but keeping our income estimates lower, I generate an extra buffer to make sure we don't overspend.

As Rich and I creep closer to the age where we might start taking OAS, I realize that based on the amounts remaining in each of our RRIF accounts, we may qualify for different amounts of OAS.  I have therefore updated my spreadsheet to split out the OAS estimate for Person 1 vs Person 2 in the couples examples.  Currently there is only one field to represent both people.  I should have done this from the start.  I also found an error in the starting year of taking OAS for Person 1 which I have now fixed.  It was previously hardcoded at age 67 but now uses the age entered in the input field.

Again, for anyone who already has a spreadsheet but would like these changes, email me to let me know and I can help you modify yours or send you a new one (but you would have to replicate the inputs from your current spreadsheet).

2021 Year End In Review: After Nine Full Years of Retirement

Another year has gone by and we are still dealing with COVID.  But from a market perspective, the initial shock and panic seems to be a thing of the distant past.  While there was a big dip in the stock market in March 2020 when the impact of the pandemic was first felt, the S&P/TSX index quickly recovered and has continued to climb steadily ever since.  At the end of 2020, although we had mostly recovered from the massive dip, the total value of our portfolio was still 3% lower than the start.  By the end of 2021, we were almost 18% higher than the start of the year.  Once again the common wisdom of not panic-selling during temporary adversity continues to hold true.

As always, it is a bit easier for us to follow that common wisdom since we do not rely on the value of our portfolio to fund our income.  After many years of allowing them to grow and compound, we are now very comfortably living off our dividends without the need to touch our capital (other than for exceptional cases - more on that later).  

Even in the difficult year of 2020, our dividend income still rose by 2.6% in our non-registered account, almost keeping up with the soaring inflation rate. The picture improved slightly in 2021 as by December of that year, our dividends had increased by a further 3.2%.  This was driven by the stocks we owned in non-financial sectors such as Telcom (Bell, Telus), Transportation (Canadian National Railway), Utilities (Emera, Fortis, Canadian Utilities, Atco, etc.), and miscellaneous stocks including Premium Brands and various Brookfield subsidiaries.  AW.UN raised their dividends twice in 2021 and end the year at about 97% of their pre-pandemic payout. In December they paid out a special dividend to disburse extra cash, similar to what they did twice in 2020, despite needing to slash their payouts due to lockdowns that year.  I like their slow and steady strategy of rewarding investor loyalty without over-committing.

Throughout most of 2021, we were still not getting any dividend increases from the financial sector.  At the start of the pandemic, the OFSI (Office of the Superintendent of Financial Institutions) put a freeze preventing any banks or insurance companies from raising their dividends. This ban was finally lifted on November 4, 2021.  Immediately after, all the financial institutions announced their intention of declaring larger than usual dividend raises, in order to make up for a 1.5-2 year period where they were held back while still racking up huge sums of excess cash.  Because the ban was lifted so late in the year, the banks had already paid out their 4th quarter distributions.  This meant that the raises for the banks will not be paid out until first quarter of 2022.  We are expecting a huge boon in dividend income by the end of March 2022 since we own shares in all of the big six Canadian banks.  Toronto Dominion, Royal, Bank of Nova Scotia and CIBC each raised their dividends between 10-13%.  Bank of Montreal and National Bank raised their dividends in the 23-25% range, probably to make up for the gap in their yield relative to the other big banks.

The three insurance companies that we own all pay out at the end of December, so we received the dividend raises in 2021.  Great West Life raised its dividend 12%, Manulife Financial 18% and Sunlife Financial 20%, in each case either double or almost double their normal annual increases.  Because of these last minute raises, by the end of 2021 our dividend payout had increased by 5.11%.  With the large bank raises still to come, things continue to look up for 2022!

In filing our 2020 taxes this past April, I misunderstood how one of my husband Rich's tax receipts should be interpreted and he ended up claiming an incorrect deduction and under-paying the tax owed.  In 2020 Rich took advantage of the pandemic induced temporary market crash to collapse his Life Income Fund (LIF) under the "Small Amount Rule".  He took out the remaining cash and moved it to his RRIF account, receiving a "Self-Directed Retirement Savings Plan Official Contribution Tax Receipt" for the same amount.  I assumed that he could use it all as a tax deduction to offset the income generated when withdrawing from the LIF, resulting in a tax-free transfer from one registered account to another.  This seemed like a reasonable assumption since that is what happened when we first converted our LIRAs into LIFs and were able to move 50% of the value into our RRIFs.  Unfortunately, in his notice of assessment, Rich was informed that his RRSP contribution room did not match the amount on the tax receipt and he had overcontributed.  This would result in a 1% monthly tax on the excess contributions until more room would be generated.  Given that we are retired and would not earn any further employment income, we did not have a way to generate more contribution space.  In addition, he still owed more income tax than what he paid at the time of filing.

Paying the excess tax owed was not an issue, but rectifying the situation so that Rich would not be penalized in an ongoing manner for the over-contribution was a different matter.  To address this, in April 2021 he filled in a paper T1 Adjustment Request form to apply the correct RRSP contribution amount, mailed it to Service Canada and paid the outstanding tax owed. While writing this blog, I logged onto his Service Canada account to confirm that that the adjustment was applied.  To our dismay, we do not see any record of the adjustment and instead on the Service Canada website, there is a notice of "COVID-19: Processing delays for T1 paper adjustment requests"!!  Instead it advises that we should have submitted an online "ReFILE" request using the same tax software that we originally used to file.  He has now re-filed online and has a confirmation number to prove that the filing has been received.  We won't know for sure until we see an official reassessment record on Rich's Service Canada account, but hopefully this puts an end to this situation.  We now also know about the online ReFILE option if we ever need to do something like this again.

As previously mentioned, we have accumulated enough dividend payouts for each month from our non-registered account so that we can cover the normal day to day expenses.  We also have two separate "high-interest" savings accounts with EQ Bank.  One is for unexpected/emergency expenses such as the need to repair or replace a broken appliance.  The other is to save up for planned major expenses such as vacations (remember those?!?), renovations or large purchases.  In 2021 we decided that it was finally time to replace our 16-year-old car which had given us many good miles but was on its last legs and would start to become a money-pit to continually repair.  Funding our desired new car would include not only clearing out our planned expenditures account but also selling some capital from our portfolio.

We considered what would be the best way to extract the extra funds that we needed.  We knew for sure that we did not want to sell good dividend-paying stock from our non-registered account since we would be both decreasing the income that we used to pay our day to day expenses, as well as generating capital gain. Should we sell losers from our RRIF accounts that were not paying good dividends?  This would help our long term goal of decreasing the size of our registered accounts before we hit 70 in order to minimize OAS claw back.  But it would also trigger extra income that we would need to pay tax on.  Alternately, should we sell winners from our TFSA, locking in profits and withdrawing them tax free?  If we did this, we would still have the opportunity to contribute back the funds in future years once we accumulated more savings again.

In the end, we ended up selecting a combination of the two strategies.  I sold some losers from my RRIF account that were not generating much income for us and which we didn't feel the need to hold on to long term in hopes of a recovery.  I withdrew some of the resultant funds as cash while also paying extra withholding tax to cover the additional income tax that I generated.  I made sure that the extra income would not push me into the next tax bracket.  At the same time, Rich sold the shares of Granite Real Estate Investment Trust (GRT.UN) from his TFSA, locking in the tax free capital gains that he had made since purchasing this stock.  While this had been an excellent stock that rose in both value and dividend payouts, we had purchased it in the wrong place.  This is because part of Granite's distribution is paid in US funds and unlike the RRSP/RRIF accounts, there is no agreement with the US to waive withholding tax in a TFSA account.  Every month Rich would lose a little bit of his dividend payout to US withholding tax, which was a pain to keep track of.  While we like this stock, if we decide to repurchase it, we will do so within our RRIF accounts.  In the meantime, selling from Rich's TFSA provided us with the cash we needed and opened up contribution room to buy something else in the future.

In terms of vacation (or lack thereof), we had canceled a couple of major trips to Europe in 2020 at the start of the pandemic and for the rest of 2020, we hunkered down at home.  Although we were double-vaccinated and despite COVID numbers starting to decline in the summer/early fall of 2021, we still did not feel comfortable flying or even traveling outside of the country.  Instead we were early adopters of what the provincial government has recently titled "Staycation in Ontario".   We started with same day road trips exploring areas a couple of hours outside of Toronto, including Kleinburg, Barrie, Guelph, Mono Cliffs, Uxbridge, Goodwood, Durham Forest and Paris, Ontario.  A silver-lining of the pandemic has been our discovery of fabulous places to explore right within "our own backyard".  Dipping our toes into overnight trips, we visited some friends in the Haliburton Highlands and stayed over for a few days.  In September we rented a house in Niagara on the Lake for 2 nights and enjoyed 3 days of cycling, hiking, wineries, dining out and even watching a show at the Shaw Festival.   Finally we went on a 4 day road trip which Rich sold to me as "Europe in Ontario" where we would drive a big loop in western Ontario and visit a bunch of little towns and communities named after European cities, including Vienna, Brussels, Dublin, Zurich, Copenhagen and Lisbon.  If you are interested in reading more about our travels, visit my travel blog http://arenglishtravels.blogspot.com

For 2022, there will actually be an "Ontario Staycation Tax Credit" that encourages Ontarians to vacation in their own province, allowing individuals to claim up to $1000 and families up to $2000 in travel accommodation expenses.  We already have a new slew of places that we are anxious to explore once the weather warms up.

As a final note, this blog, which supports my book Retired at 48 - One Couple's Journey to a Pensionless Retirement, was recognized as one of the top 15 Canadian Early Retirement blogs by the organization Feedspot, an amalgamation website that allows you to access your favourite blogs, podcasts, news sites, Youtube channels and RSS feeds from one place.