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Q: I am a teacher in my 22nd year of teaching in Ontario and I’m thinking of retiring in about four years. I would like to move to the East Coast of Canada and continue my retirement there. With my assets and pension income, I could buy a property without having to take out a mortgage. I want to get an idea of pros and cons, and what I should consider when moving to a different part of the country for retirement.
We asked Jennifer Watson, CFP, CIM, and managing partner of Watson Investments, and portfolio manager with Watson Securities of Aligned Capital Partners Inc., to answer this one.
Before committing to a move across the country, Ms. Watson recommended that it’s worth stepping back and asking a practical question: Is this likely to be at least a five-year move? That’s a useful rule of thumb when considering the transaction costs of buying and selling property. If you’re unsure, renting for a year or two can be a prudent way to test before fully making the move.
“If you do buy, the fact that you can purchase without a mortgage is a significant advantage,” she noted. Being mortgage-free will improve cash flow and provide a strong sense of financial security.
Ms. Watson advised arranging a home equity line of credit secured against your property before you stop working, as lenders often find it easier to approve credit while employment income is still present. The intention is to keep the balance at zero and use it only in emergencies; it is a lower-cost backstop than relying on credit cards.
Should we help our son buy a home even though we’re on the verge of retirement?
Moving to another province also brings several administrative and financial considerations, according to Ms. Watson. Here’s her checklist of what to consider before making the move:
Taxes: Provincial tax rates differ, and Atlantic provinces generally have higher marginal tax rates than Ontario. While your employment income will disappear after retirement, pension income and withdrawals from investments will be taxable. Pension withholding rates may differ, and eligibility thresholds for income-tested benefits, such as the Guaranteed Income Supplement (GIS) can also vary slightly depending on total income.
Canada Pension Plan (CPP) and Old Age Security (OAS) themselves do not change when you move provinces. You simply need to notify Service Canada of your new address.
Investment accounts: If you work with an investment adviser or portfolio manager, confirm whether they are licensed in the province you plan to move to. Many advisers can continue working with clients across provinces if they are licensed in that province or willing to be.
Estate planning: Laws governing wills and powers of attorney vary between provinces. After relocating, it’s advisable to have a lawyer in your new province review your will and prepare new powers of attorney for property and personal care to ensure they comply with local legislation.
Health coverage: If you currently live in Ontario, your OHIP coverage will end shortly after you move to your new province. You will need to apply for provincial health coverage in your new location. There might be a gap in coverage; if so, short-term health insurance may be worth considering.
Do you want advice on a financial planning or retirement issue that’s affecting you? Send us an e-mail.
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