1. Chapter 15 In-Class Notes

2. Old Age Security and Canada Pension Plan Old Age Security (OAS) pension Guaranteed Income Supplement (GIS) Allowance and allowance for the survivor benefits Old Age Security benefits are subject to a “means test” 15-2Copyright © 2009 Pearson Education Canada

3. Old Age Security and Canada Pension Plan (Continued) Benefit reduction: 0.5% per month between age 60 and 65 Benefit increase: 0.5% per month between age 65 and 70 You must apply to receive benefits Taxation of benefits OAS and CPP are taxable GIS, allowance, and allowance for the survivor are tax-free 15-3Copyright © 2009 Pearson Education Canada

4. Employer-Sponsored Retirement Plans: Defined-benefit pension plans 15-4Copyright © 2009 Pearson Education Canada Guarantees you a specific amount of income when you retire Flat, final average, best average, or career average benefit formula Actuarial valuation required every three years

5. Does not guarantee you a specific amount of income when you retire Contribution rate is based on a specific formula particular to each plan Two types: money purchase plans and profit sharing plans 15-5Copyright © 2009 Pearson Education Canada Employer-Sponsored Retirement Plans (Continued): Defined-contribution pension plans

6. Plans may or may not be contributory Employer-sponsored retirement plans must be vested with the employee within two years of membership Taxation of benefits: Employer-sponsored retirement benefits are taxable to the employee Employee contributions are tax-deductible 15-6Copyright © 2009 Pearson Education Canada Employer-Sponsored Retirement Plans (Continued):

7. Your Retirement Planning Decision Which retirement plan should you pursue? How much should you contribute? Determine your potential savings How much retirement income will you need to live comfortably? Compare your savings to your needs How should you invest your contributions? Investment decisions should take into account the number of years until your retirement 15-7Copyright © 2009 Pearson Education Canada

8. Individual Retirement Savings Plans Registered retirement savings plans (RRSPs) Various types (individual, self-directed, group, spousal) Taxation of benefits Withdrawals from an RRSP are taxable Contributions are tax-deductible Locked-in Retirement accounts (LIRAs) Created from the lump-sum transfer of vested employer-sponsored pension benefits Withdrawals are not permitted 15-8Copyright © 2009 Pearson Education Canada

9. Retirement Income Conversion Options Retirement income conversion options Cash in Registered retirement income fund (RRIF) Registered term annuity Registered life annuity Life income fund (LIF) Locked-in retirement income fund (LRIF) Reverse mortgage 15-9Copyright © 2009 Pearson Education Canada

10. Estimating Your Future Retirement Savings The more you save today, the more money you will have at the time of your retirement. The longer your savings are invested, the more they will be worth at retirement. Retirement savings are highly sensitive to your annual rate of return. 15-10Copyright © 2009 Pearson Education Canada