1. 12 - 1 COPYRIGHT © 2008 by Nelson, a division of Thomson Canada Ltd Chapter 12 – Planning for Retirement

2. 12 - 2 Chapter 12 – Planning for Retirement Chapter 12 - Learning Goals LG 1-Recognize the importance of retirement planning and identify the three biggest pitfalls to good planning. LG 2-Establish your income needs in retirement, and estimate your retirement income. LG 3-Explain the public pension system in Canada. LG 4-Describe the different types of employer- sponsored pension plans. LG 5-Describe the various types of self-directed retirement plans. LG 6-Choose the right type of payout plan for your retirement. Learning Goals

3. 12 - 3 Chapter 12 – Planning for Retirement Internet Links and On-Line Resources Life Expectancy Calculator at Dinkytown.Life Expectancy Calculator Canada Online Retirement Finances site includes articles and resources on key topics affecting retirement plans.Canada Online Retirement Finances Services Canada comprehensive retirement income calculator.Services Canada Social Development Canada website for more information concerning the Canada Pension Plan.Social Development Canada See your Statement of Contributions to the Canada Pension Plan at Social Development Website.Statement of Contributions to the Canada Pension Plan Retirement planning and pension decisions information on the Investor Education Fund Website.Investor Education Fund Website A good introduction to annuities from Hughes Trustco Group Ltd.Hughes Trustco Group Ltd Loan calculator at Dinkytown to calculate the size of the payment you will need to create a certain monthly annuity payment.Dinkytown Web Links

4. 12 - 4 Chapter 12 – Planning for Retirement Key Chapter Terms and Definitions Contributory earnings Registered pension plan Noncontributory pension plan Contributory pension plan Vested rights Locking in Portability Defined contribution plan Defined benefit plan Deferred profit-sharing plan Earned income Pension adjustment Contribution room Annuity Accumulation period Distribution period Registered annuity Term certain annuity Pure life annuity Life annuity guaranteed term Joint life annuity Joint and last survivor annuity Terms

5. 12 - 5 Chapter 12 – Planning for Retirement Definitions Contributory Earnings The employment earnings of an individual for the purpose of calculating benefits under the Canada Pension Plan. Terms

6. 12 - 6 Chapter 12 – Planning for Retirement Definitions Registered pension plan A pension plan that has been registered with the Canada Revenue Agency and the appropriate federal and provincial pension regulatory agencies. Terms

7. 12 - 7 Chapter 12 – Planning for Retirement Definitions Non contributory pension plan A pension plan in which the employer pays the total cost of the benefits. Terms

8. 12 - 8 Chapter 12 – Planning for Retirement Definitions Contributory pension plan A pension plan in which the employee bears a portion of the cost of the benefits. Terms

9. 12 - 9 Chapter 12 – Planning for Retirement Definitions Vested rights An employee’s non-forfeitable right to receive benefits under a pension plan. Terms

10. 12 - 10 Chapter 12 – Planning for Retirement Definitions Locking in The requirement under a pension plan that accumulated benefits for an individual must only be available as a pension. Terms

11. 12 - 11 Chapter 12 – Planning for Retirement Definitions Portability A provision of a pension plan that permits the transfer of benefits under the plan to be transferred to another pension plan. Terms

12. 12 - 12 Chapter 12 – Planning for Retirement Definitions Defined contribution pension plan A pension plan that specifies the amount of the contributions that both employer and employee must make; it makes no promises concerning the size of the benefits at retirement. Terms

13. 12 - 13 Chapter 12 – Planning for Retirement Definitions Defined benefit pension plan A pension plan in which the formula for computing benefits is stipulated in the plan provisions. Terms

14. 12 - 14 Chapter 12 – Planning for Retirement Definitions Deferred profit-sharing plan A profit-sharing plan registered with CRA in which the employees of a firm participate in the company’s earnings on a tax-deferred basis. Terms

15. 12 - 15 Chapter 12 – Planning for Retirement Definitions Earned income Income from employment, business and rent for an individual, the sum of which is used to calculate amounts that may be contributed to an RRSP. Does NOT include investment income – capital gains, dividends or interest. Terms

16. 12 - 16 Chapter 12 – Planning for Retirement Definitions Pension adjustment The amount contributed to a registered pension plan in a year by employee and employer. Terms

17. 12 - 17 Chapter 12 – Planning for Retirement Definitions Contribution room The term used to describe the allowable amount that an individual could have contributed to an RRSP in prior periods that remain unused and is carried forward from the preceding tax year. Terms

18. 12 - 18 Chapter 12 – Planning for Retirement Definitions Annuity An investment product that provides a series of payments or receipts on a periodic basis. Terms

19. 12 - 19 Chapter 12 – Planning for Retirement Definitions Accumulation period The period during which premiums are paid for the purchase of an annuity. Terms

20. 12 - 20 Chapter 12 – Planning for Retirement Definitions Distribution period The period during which annuity payments are made to an annuitant. Terms

21. 12 - 21 Chapter 12 – Planning for Retirement Definitions Registered annuity An annuity purchased with the proceeds from a registered retirement plan (RPP or RRSP) Terms

22. 12 - 22 Chapter 12 – Planning for Retirement Definitions Term certain annuity An annuity where payments are made for a fixed period of time that is independent of the age of the annuitant. Terms

23. 12 - 23 Chapter 12 – Planning for Retirement Definitions Pure life annuity contract An annuity payable for the life of the annuitant. Terms

24. 12 - 24 Chapter 12 – Planning for Retirement Definitions Life annuity guaranteed term An annuity based on the age of the annuitant that will make payments for as long as the annuitant lives or for a guaranteed term, whichever is longer. Terms

25. 12 - 25 Chapter 12 – Planning for Retirement Definitions Joint life annuity An annuity based on the age of two individuals that will make payments for as long as both of the individuals are alive. Terms

26. 12 - 26 Chapter 12 – Planning for Retirement Definitions Joint and last survivor annuity An annuity based on the age of two individuals that will make payments for as long as one of the individuals is alive. Terms

27. 12 - 27 THE END!