Learning Objective # 5 Determine your planned retirement income.
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Learning Objective # 5 Determine your planned retirement income. LO#5
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LO#5. Learning Objective # 5 Determine your planned retirement income. LO#5. Planning Your Retirement Income. Public Pensions. Canada/Quebec Pension Plan (CPP/QPP) Provide disability benefits, retirement pensions and survivor benefits Contributions based on salary, Maximum per year - PowerPoint PPT Presentation
Transcript of Learning Objective # 5 Determine your planned retirement income.
Learning Objective # 5
Determine your planned retirement income.
LO#5
Planning Your Retirement Income
Canada/Quebec Pension Plan (CPP/QPP) Provide disability benefits, retirement
pensions and survivor benefits Contributions based on salary, Maximum per
year Can collect reduced benefits as early as 60
Old Age Security (OAS) Must be over 65 years old Residency requirement
Public PensionsPublic Pensions
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Planning Your Retirement Income
Guaranteed Income Supplement (GIS) Payable to low income OAS recipients over
65 years of age Survivor’s Allowance (SPA)
Benefits to widow, widowers and spouses of OAS beneficiaries who are between 60 - 65
Public PensionsPublic Pensions
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Planning Your Retirement Income
A plan that specifies the benefits the employee will receive at the normal retirement age
Employer’s contribution not specified
Employer makes the investment decisions for your and their contribution, but your benefit amount stays the same regardless of how the investments perform.
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Employer Pension Plans - Defined BenefitEmployer Pension Plans - Defined Benefit
Money purchase pension plan Specifies contribution from the employer
and/or employee Does not guarantee pension benefit you
will receive Vesting is employees right to at least a
portion of the benefits accrued under an employer pension plan, even if they leave employ of company before retirement.
Planning Your Retirement IncomeLO#5
Employer Pension Plans - Defined ContributionEmployer Pension Plans - Defined Contribution
Defined Contribution plans include the following; Employees can defer current taxation
on portion of their salary Money Purchase Pension Plans Employee Stock Ownership Plan Profit Sharing Plans
Planning Your Retirement IncomeLO#5
Employer Pension Plans - Defined ContributionEmployer Pension Plans - Defined Contribution
Planning Your Retirement Income
Contributions from employer only Tax-deductible for company Based on company’s net income DPSP holdings taxed when you
withdraw them Contributions to DPSP are
subtracted from allowable RRSP contributions
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Deferred Profit Sharing PlanDeferred Profit Sharing Plan
Planning Your Retirement Income
Property of employees Can take money out if you need it Participation may lower payroll tax
withholdings
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Group RRSP’sGroup RRSP’s
Pension Plan Portability
Legislations enforces right to transfer pension credits from one employer to another
Three options when changing jobs Leave credits and receive pension on
retirement Transfer to new employer Transfer benefits to locked-in RRSP
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Personal Retirement Plans
Registered Retirement Savings Plans An RRSP is an investment vehicle that
allows you to shelter your savings from income tax
Not a specific investment, but a way to register a variety of investments to shelter funds
Eligible investments include guaranteed funds, mutual funds, life insurance and life annuity products
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Registered Retirement Savings Plans
Types of RRSP’s Regular Self-directed
can invest in all categories Spousal
spouse is named as beneficiary Contribution Limits
18% of earned income to a maximum amount Maximum amount to increase in years to
come $22,000 by 2010
reduced by RPP contributions can ‘carry forward’ unused room to later years
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Options When You Deregister RRSP
Full withdrawal required to pay income tax
Annuity an investment that pays a fixed
level of income on a regular basis for either a specified period of time or until death
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Options When You Deregister RRSP
Income payments until death
Level payments Simple No record-keeping Legitimate tax
shelter No investment limits Tax-free transfers
Less control over investments
Less control over income payout
No inflation protections, unless indexed
No opportunity for growth No tax deferral No lump sums No protection for spouse,
unless joint No estate planning
benefits
Advantages of an Annuity Disadvantages of An Annuity
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Options When You Deregister RRSP
Life Annuities Full amount of your RRSP fund will be
transferred directly to the life insurance company
Convert those funds into a lifetime income payable to you
Fixed-Term Annuities Funds are converted into an income stream
to be paid out for a fixed term If you die prior to the end of the term the
remaining unpaid funds will be paid to your estate or beneficiary
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Options When You Deregister RRSP
Registered Retirement Income Funds (RRIFs) Withdraw a minimum amount from the plan
until you reach the age of 71 Increases incrementally to age 94 Can adjust the amount and frequency of the
payments you receive Life Income Funds (LIFs)
Withdraw a minimum amount every year Subject to a maximum annual withdrawal
amount Must be used to purchase a life annuity by
end of year you turn 80
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Options When You Deregister RRSP
Segregated Funds Sold exclusively through life insurance
companies The purchase of units representing a share
in a pool of assets supervised by a fund manager
The funds are kept separate from the company’s other assets
Advantages over mutual funds include; If you die your fund’s assets go directly to your
beneficiary Percentage of your capital is guaranteed
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