Q&A: Mom’s money is running out

Question: My mother is going to be 80 this year and has recently moved into an assisted living complex. She is one of the rare women of her age who worked until the age of 65 and provided a RRIF income for herself after retirement. Since her income was limited, so was the amount she was able to put away. She took the minimum amount out until recently and now finds she needs another $300 a month on top of that to make the monthly obligation to the facility (which includes amenities as well as lunch and dinner each day).

At the rate she is going, she will have used up all of her savings in three years at which point my sister and I will contribute to the shortfall. We decided this because the money will be taxed at a lower rate as a RRIF withdrawal in her hands than if we paid the shortfall now and had the amount bequeathed to us when she is deceased.

My mother is understandably concerned about this. In B.C. she qualifies for a SAFER allowance (Shelter Aid for Elderly Renters) if her income is low and would receive the maximum if she was only getting government pensions when her RRIF investment runs out. The investment people were questioning tis but I feel this is what the money was saved for.

Are we doing the best for our mother and, if not, can you suggest other options? One of my concerns is that at 52 years of age I could be retired in a few years and while I have planned for my retirement I didn’t plan to be contributing for my mother’s as well. – S.K.

Gordon Pape answers: One possible alternative would be to review the securities in the RRIF to determine whether it would be possible to increase the return on the remaining funds without unduly adding to the risk. You don’t say how the money is invested but if, for example, most of it is in GICs your mother could get more cash flow by moving the money into monthly income mutual funds, conservative income trusts, and the like. It’s probably not feasible to find another $300 a month in this way but it may be possible to extend the life of the RRIF for another few years.

If the returns on the RRIF cannot be increased with reasonable risk, then your plan sounds like the best course. The tax on the RRIF withdrawals will be very low in your mother’s hands. When the money runs out, her SAFER allowance will increase and she may also qualify for a payment under the federal government’s Guaranteed Income Supplement (GIS). Check out the details of the program. You may find that the financial burden on you and your sister will be less than you expect.

I suspect your mother is concerned about two things, which are related. One is the fear of being left penniless. The other is the reluctance to be a burden to her daughters. It sounds like she was always an independent woman who looked out for herself and now, at 80 years of age, that independence is threatened.

So the issue here is probably as much psychological as it is financial. You may need professional assistance in easing your mother’s mind, whatever course you take.

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