Investing with your gut + MORE Jul 22nd

Q: I’ve just started to collect Social Insurance benefits from the United States. I’m a Canadian citizen who worked in the U.S. (with a green card) for over 26 years. I’ve learned that my benefit was reduced due to my CPP; the reduction is the result of the “Windfall Elimination Act”. I understand that this Act is controversial due to its extra-territorial reach? Please advise the status regarding the “elimination” of the Windfall Elimination Act. Would it be worth my time to challenge the deduction of my benefit? The exchange rate these days certainly compensates for the reduction due to the Windfall Elimination Act but there is a principle involved.
—Ken
A: The Windfall Elimination Provision (WEP) is designed to prevent people who didn’t pay Social Security tax on the majority of their income from receiving disproportionately high Social Security payments. In general, when you work for an employer in the U.S., Social Security tax is taken out of your pay cheque, but if you worked for government organizations or were employed by a foreign company, then this may not be the case…

Q: I am 84 and many years ago my wife and I arranged to receive equal payments of CPP and OAS for tax benefit purposes. She has now died and of course her payments are cancelled.
As I paid more into the system when working, I was entitled to larger payments.
Now that her payments are stopped am I eligible for receipt of larger payments than the equalized payments received while she was still alive?
—Keith
A: I’m sorry for your loss, Keith. The death of a spouse can be a difficult time, both emotionally and financially.
With regards to your pensions, I’ll try to clarify the options and implications going forward.
You mention that you arranged pension sharing when you applied for your government pensions. Pension sharing is an option available to spouses applying for their Canada Pension Plan (CPP) retirement pensions. The intention is to reduce tax payable as a family by equalizing taxable incomes.
Due to Canada’s marginal tax system, with higher tax rates payable on higher incomes, to the extent that you can have a comparable income to your spouse in retirement, you can pay less combined income tax…

This week, Natixis Global Asset Management released its fifth annual Global Retirement Index (GRI), which looks at key factors that drive retirement security across 43 countries. The GRI’s aim is to provide a measure of how well retirees are set up to succeed across various countries in the developed world.
So how did Canada do? According to the summary, Canada ranked 11th in the world for retirement security, slipping one spot from last year’s results. The reason for the decline? In part, it was because prosperity has lagged behind for lower-income Canadians.
The Index creates an overall security score based on four factors that affect the lives of Canadians. According to the report, Canada’s score this year was 76% and several factors affected the outcome:

A decline in prosperity. Canada ranks 21 for income inequality—indicating that many Canadians are missing out on economic growth and may be struggling to save for retirement.
Robust finances. Although Canada finishes among the top 10 countries for financial stability, it’s old-age dependency ratio, which measures the proportion of people age 65 and older to those of working age, has increased, which stresses the government programs that support retirees…

(Shutterstock)
Most Canadians are boring investors; they sock their money away in plain vanilla mutual funds or Exchange Traded Funds (ETFs) inside of Registered Retirement Savings Plans (RRSPs) or Tax Free Savings Accounts (TFSAs). And that’s exactly how it should be—saving for retirement isn’t about blowing the light out with a hot stock.
Some people, though, have saved up enough money that spending $20,000 on an outside-of-the-box investment won’t ruin their futures, even if it all disappears. The point is not to squander the money, but to cash in on outsized returns that don’t come around every day.
Think about consequences
So, what’s the best way to put your “play money” to work? The first step is to think about how risky you want to be, says Allan Small, a senior investment advisor at HollisWealth. “It may sound silly when talking about ‘play money’, but understand the meaning of high risk,” he says.
In other words, what might be risky for one person may not be risky enough for another…