By Barry Rueger
Published: Globe and Mail
October 7, 2022
1140 words
When my mother died last year her estate was small: clothing, knick-knacks, photos and the small bungalow, in Kelowna, B.C., that she bought for herself when my father died. My brother, sister and myself knew that a three-bedroom house in Kelowna’s Rutland neighbourhood wouldn’t afford us an early retirement, but Cameron McIntosh, an old high-school friend, now selling real estate for Royal LePage Kelowna, guessed that it might sell for as much as $650,000.
After decades working in small non-profit groups and charities, and then as a freelance writer, my savings are still pretty small. Like many Canadians, my investment background included two things: buying a home with a hefty mortgage, then selling it for marginal gains after a divorce, and a small registered retirement savings plan. For me, this inheritance will be about the biggest amount of money I will ever see.
My goal some time this year is to put my one-third share – say about $210,000 – toward a country home in France, where I now live. In the meantime, my question is: Between the time when I receive the cheque and when I’m ready to close my French house purchase, what should I do with what is a pretty large bit of money? It could just sit in my savings account, but is there a better route that might make me a little bit of money before we move it to France, and into euros, and buy that house?
I’ve never been in a position to do investing, so I asked some people who know that field. After talking to experts about what I should do, the answer turns out to be “not much” – but with a heavy proviso that we do live in interesting times. Between rising inflation, a war in Ukraine, rising interest rates and falling house prices, it seems that nothing is simple.
Andy Eisenbock is an investment adviser with Odlum Brown Ltd. in Vancouver, and someone my wife has worked with for several years. His advice was simple:
If the money is being held for my home purchase it should be in some form of liquid investment I can access at any time, and I should stay out of the stock market. He suggests that I need to watch the exchange rates between the Canadian dollar and euro, and investigate how best to make that currency conversion. He was right. At the moment the euro is at a historic low compared with the Canadian dollar. I’m crossing my fingers that it stays that way for a while longer, but am also comparing rates at my bank, and at money transfer services such as Wise.
Even though interest rates are rising, Mr. Eisenbock said that, for me, it was better to stay low risk, and liquid, than to try and chase a few hundred more dollars in potential income. That advice was echoed by Mark Tremblay, founder and director of Cinq, a French company that specializes in insurance and investments. I talked to Mr. Tremblay about what my options would be if I moved my money over to France instead of keeping it in Canada. His advice about liquidity and risk is much the same, but his suggestion is that in France many people would invest in l’assurance vie – life insurance. Savings plans based around life insurance are still very popular in France. As well as protecting your family should you die, they allow ordinary people to save for retirement over the term of their working lives.
L’assurance vie investments are very liquid – important if we’re buying a home. The safest place for my money would be a euro fund, a type of investment specific to life insurance, which provides significant security. It will give you a low fixed interest rate (around 1 per cent at the moment), but you will be sure to get your money back without any possible losses; the return is virtually zero-risk. We could get a slightly better rate with life insurance that includes a Unité de compte, or unit of account, an investment vehicle with more risk but better returns. And if more than 40 per cent of your life savings are in a UC, the interest rate is increased. In either a UC or a euro fund you’re encouraged by the government to keep your money there, saving for your retirement. Mr. Tremblay pointed out that after your investments have been in a euro fund for eight years, you’ll see a reduction in taxes paid on returns.
In Kelowna, I also talked with Steve Hatch, a wealth adviser with National Bank Financial. Right now interest rates are climbing, but I’m wondering whether they might come back down just as quickly. Mr. Hatch’s advice: If I believe that, I should choose the time frame I expect to park the money, and move it into a relatively safe place, such as a guaranteed investment certificate.
Or if I think rates will continue to climb, I could look at something like a money-market account with a variable rate that allow me to “reap the rewards of higher yields.” Ultimately, again, the choice is mine: more safety, or more return.
Mr. Hatch also has some Kelowna-specific advice: While home prices are dropping in major centres in Canada – in some cases by as much as 20 per cent – my mother’s modest bungalow may be immune to that drop because it still hits the sweet spot of being priced as a “starter home.”
There’s not a lot out there for single family residences between $500,000 and $750,000, he said. With that location and a price point of as much as $650,000, “I would hazard a guess that you’re probably going to get about the price that was suggested.”
The lawyer who has been handling the probate process for much of the past year says that even after the house has been sold it will likely be another two or three months before the proceeds arrive in my bank account. In the meantime, I’m left with more than enough time to choose the country where I will likely park this windfall, calculate my time frame, watch the currency exchange rates and determine the kind of security I’m comfortable with. Then I’ll need to put the cash in a safe, but income-generating, place.
The lawyer who has been handling the probate process for much of the past year says that even after the house has been sold it will likely be another two or three months before the proceeds arrive in my bank account. In the meantime, I’m left with more than enough time to choose the country where I will likely park this windfall, calculate my time frame, watch the currency exchange rates and determine the kind of security I’m comfortable with. Then I’ll need to put the cash in a safe, but income-generating, place.
It’s been almost 10 months since we arrived in France with hopes of settling here for life. Sometimes it seems incomprehensible that we could have blithely sold up and closed down everything we had going on in Canada, and set off with two suitcases and a cat on a plane to a new life in a new country on a new continent—all taken on trust, sight unseen.
Fortunately, the French government also is very generous in helping homeowners improve both of these numbers. Depending on the project, the government will pay up to 100% of the costs of an upgrade, but the specific amounts depend on several factors. First, household income, and the number of people in residence. Unlike in Canada—where equivalent funding programs only look at how much is being spent—the funding available is much greater for homeowners with less income. Second, the extent of the improvement provided by the upgrade: Will your efficiency move from the bottom-most F or G levels to something in the middle, or will you reach the topmost A or B levels?