1. Learning Objective # 5 Determine your planned retirement income. LO#5

2. 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 Pensions LO#5

3. 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 Pensions LO#5

4. 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. LO#5 Employer Pension Plans - Defined Benefit

5.  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 Income LO#5 Employer Pension Plans - Defined Contribution

6.  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 Income LO#5 Employer Pension Plans - Defined Contribution

7. 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 LO#5 Deferred Profit Sharing Plan

8. Planning Your Retirement Income  Property of employees  Can take money out if you need it  Participation may lower payroll tax withholdings LO#5 Group RRSP’s

9. 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 LO#5

10. 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 LO#5

11. 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 LO#5

12. 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 LO#5

13. 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 AnnuityDisadvantages of An Annuity LO#5

14. 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 LO#5

15. 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 LO#5

16. 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 LO#5