Faced With a Weaker Loonie, Snowbirds Are Weathering the Economic Headwinds. Here's How
Carson Hamill CIM®, CRPC®, FCSI® Associate Portfolio Manager & Assistant Branch Manager had the chance to discuss “Faced with a weaker loonie, snowbirds are weathering the economic headwinds. Here’s how” with The Globe and Mail. CLICK HERE to visit their site or see below for the article.
Sixty-eight-year-old Valerie Anderson still recalls the rush of humid Florida air that greeted her in 1992, a stark contrast to the biting winter of her hometown in Calgary.
“I said, ‘Oh, this is beautiful because Calgary is so dry,’” she said.
That first family vacation with her husband and two young kids ignited a love for the Sunshine State. Thirty years and three grandkids later, the Andersons proudly wear the “snowbird” badge, escaping Canada’s harsh winters to a rental property off the Florida coast.
But they’re unsure how much longer they can afford to live out their dream. Like many snowbirds, they’ve been feeling a chill on their wallet as the Canadian dollar CADUSD +0.30% increase dropped about 4 per cent against the greenback in recent months, pushing up prices for everything from food to rent.
“It’s definitely getting to be very expensive – food has gone up everywhere,” Ms. Anderson said.
Compared with last year, she said it costs her and her husband about $25 more per person a meal. A recent glance at the menu of their favourite restaurant showed a single dish of sea bass priced at the equivalent of $80 Canadian. “We both just said, ‘I don’t think so!’”
Norman Seawright, who also decamps to Florida in the winter, owns a condo there and said he’s paying “easily 20 to 25 per cent more” for everything.
But while many snowbirds agree the weak loonie is weighing on them, most are reluctant to change their travel plans. Experts say those weathering the economic headwinds are offsetting losses with U.S. investments and getting strategic about taxes, exchange rates and insurance fees.
“The dollar just sucks right now – clients are asking a lot of questions,” said Carson Hamill, a cross-border associate portfolio manager at Raymond James Canada. “People come to us that are renting permanently in the U.S., they’re going, ‘Oh, is it worth keeping this place?’”
It might not be. Anyone who was renting a dozen years ago when the loonie was at par is now paying 40 per cent more, taking inflation and currency fluctuations into account.
The unfavourable numbers can work in reverse for snowbirds who purchased property back then. If they haven’t rented out their property before, now might be the time to start – they’d be raking in that 40 per cent more in Canadian dollars, Mr. Hamill said.
But homeowners have other worries. Their expenses are further weighed down by maintenance and insurance costs – the latter has surged by about 30 per cent between 2021 and 2023 in places like Florida, according to Insurify. Bankrate found that as of September 2024, the average insurance policy in Florida for US$300,000 in coverage was US$5,531 – 142 per cent higher than the national average.
Kris Rossignoli, a cross-border tax and financial planner at Cardinal Point Capital Management ULC in New York, said his firm has seen many snowbirds selling larger properties and purchasing smaller homes as one way to cut costs.
Evan Rachkovsky, director of research and communications at the Canadian Snowbird Association, said snowbirds who want to offset insurance costs often pick a destination in Central Florida – Lakeland and Winter Haven are two popular choices – farther from the coast and less susceptible to extreme weather.
Whether or not they own property, snowbirds will see additional costs tied to the exchange rates offset through well-performing U.S. investments in savings and retirement accounts.
John Woodfield, a senior wealth adviser and portfolio manager at SWAN Wealth Management, Raymond James, in Kelowna, B.C., said snowbirds should, and often do, hold American investments in their portfolios in U.S. currency to generate income stream in U.S. dollars, as a hedge against currency drops. “The dividends and your growth would all be in USD – as the Canadian dollar falls, the value of those stocks actually go up.”
He said the recent currency moves have added roughly 6 per cent to Canadian client returns this year.
Investors, however, need to keep in mind that dividends paid by U.S. companies into non-registered accounts held by non-residents of the U.S. face a withholding tax, though Mr. Woodfield said the benefits generally outweigh this.
Another thing snowbirds often overlook is that if they own real estate in the U.S. and they die, their property will be subject to U.S. estate taxes, which are costlier with the current exchange rates.
“As the lawyers down there say, ‘It’s great to own U.S. property, but it’s not great to die owning U.S. property,” said Mr. Woodfield, adding that Canadians can dodge this by setting up and purchasing property through a corporation in Canada.
Beyond leveraging the U.S. dollar and reducing taxes, snowbirds should think about mitigating day-to-day costs by optimizing their travel credit cards or exploring prepaid cards. The majority of credit cards used for purchases outside the country will charge a foreign transaction fee adding up to about 2.5 per cent of the purchase cost in Canadian – that’s $125 in fees on $5,000.
Marty Firestone, a travel insurance specialist, warns credit card-based insurance wields heavy restrictions for older travellers and won’t have as comprehensive coverage as they need. He said medical costs in the U.S. have increased about 25 per cent year-over-year with premiums climbing in tandem.
He recommends no snowbird leave the country with less than $2,000,000 in coverage, and cut costs with a multi-trip annual policy.
“They can travel up to a prescribed amount of days, come back home, for even a minute, and go back down again and they don’t pay for the amount they go back down again for,” he said, adding that this can save thousands.
Still, some travellers might want to avoid the U.S. altogether. Lindsay Kipp, a travel expert at Flight Centre Canada, said Nicaragua and Panama are becoming popular alternative destinations for snowbirds at a fraction of the usual costs.
Though Ms. Anderson has been reluctantly eyeing deals in Mexico and Portugal, she said she’d sooner cut discretionary spending and dining out than change travel plans any time soon.
About Snowbirds Wealth Management
Gerry Scott is a portfolio manager and founder of Snowbirds Wealth Management, an advisory firm focussed on the cross-border market. Together with Dean Moro and Carson Hamill, associate portfolio managers with Snowbirds Wealth Management, they provide investment solutions for Americans living in Canada, and Canadians residing in the United States. Licensed in both Canada and the US, they provide tailored investment solutions to minimize the tax burden when moving assets across borders.To schedule an introductory call, please click here.
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