tag:blogger.com,1999:blog-53882549753367807412024-03-13T03:14:48.477-04:00Risk BlogManaging post-retirement risksRetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.comBlogger177125tag:blogger.com,1999:blog-5388254975336780741.post-40949489463417222912018-07-09T11:30:00.000-04:002018-07-09T11:30:09.317-04:00Using TFSAs<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoSE5QfzpqqCcqG91ozITmD7k8htecB0tW97-L0-Ys0fBPUX-u8f9JhxzWDlpW2iixwl4XxSFju9gtiQseoLacWMvBAwd0pMs20U-QjuuU6G1ME72Tecd89I9O-TNnKsqvlLTzLGOl/s1600/IMG_20180426_194658.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhoSE5QfzpqqCcqG91ozITmD7k8htecB0tW97-L0-Ys0fBPUX-u8f9JhxzWDlpW2iixwl4XxSFju9gtiQseoLacWMvBAwd0pMs20U-QjuuU6G1ME72Tecd89I9O-TNnKsqvlLTzLGOl/s320/IMG_20180426_194658.jpg" width="320" /></a></div>
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<h3>
Question:</h3>
I input a value for my TFSA but for some reason it is not showing up on the asset accumulation table. Could not figure out why. Any suggestions, could I have a wrong setting somewhere?<br />
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As a follow up to my earlier question, in the file# below for some reason the TFSA balance and earnings are not showing up on the detailed accumulations table even though I input a 15k balance.<br />
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<h3>
Answer:</h3>
Please set the savings plan allocation to max allowable TFSA, but the model does not direct excess cash flow to TFSA, but rather to the broader non-registered bucket. Is there something I am doing wrong?<br />
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You have to select TFSA as a source of retirement income on the Options page. I made this change to your file and now the TFSA numbers are showing in the results.<br />
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I looked at your file. For all years where you'll more than your goal, the excess is from non-registered investment income. So since the excess is not spent, there is no money to go to the TFSA.<br />
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The option to direct contributions in the TFSA is before retirement. After retirement, if there is an excess of income, it will be deposited in the TFSA if there is room available. If the excess is from non-registered investment income, the after-tax value stays invested in the non-registered account.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com1tag:blogger.com,1999:blog-5388254975336780741.post-63728556341493967562018-07-02T11:28:00.000-04:002018-07-02T11:28:02.205-04:00Spouse name and comments<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfsChGYL9VeFubBv4A0S4dffRC0yfcqQS4COALgh0XRrrHOhPlJ-8jo6PIO59Q44vLGMi3MPmtwx_sdxVPu0Gj2wpLoRkjz0-qXgX4F12ybCz-DOLZVbPS549wfYMycrgdK9lRuQMb/s1600/IMG_20180427_104242.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgfsChGYL9VeFubBv4A0S4dffRC0yfcqQS4COALgh0XRrrHOhPlJ-8jo6PIO59Q44vLGMi3MPmtwx_sdxVPu0Gj2wpLoRkjz0-qXgX4F12ybCz-DOLZVbPS549wfYMycrgdK9lRuQMb/s320/IMG_20180427_104242.jpg" width="320" /></a></div>
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<h3>
Question:</h3>
How do I enter the information to see the spouse's full name and my comments on the final report?<br />
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<h3>
Answer:</h3>
On the Forecast page, on the General tab, select the Option to do a calculation for both spouses. The page will refresh and show a drop down box for selecting each spouse. Select 'Spouse (2)' and enter the spouse's name.<br />
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You can add plain text commentary in the report on the Report tab of the Options page.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-50587823010719151182018-06-27T11:26:00.000-04:002018-06-27T11:26:16.967-04:00How to account for money in corporate account<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiC68RHPFm25SVTs5aFwb-dJnGVXpdYVFUNfbJ_ugts2wwUWqibXXKQPjVAWnA5dy9Y_n4ntAVYw0rEnLdVECFfGCx-N4Eh9GfYu3if7KOad0Fa9J-6xg8X_1150lkso3f1_q2U4fEW/s1600/IMG_20180427_154727.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiC68RHPFm25SVTs5aFwb-dJnGVXpdYVFUNfbJ_ugts2wwUWqibXXKQPjVAWnA5dy9Y_n4ntAVYw0rEnLdVECFfGCx-N4Eh9GfYu3if7KOad0Fa9J-6xg8X_1150lkso3f1_q2U4fEW/s320/IMG_20180427_154727.jpg" width="320" /></a></div>
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<h3>
Question:</h3>
I just signed up for the account and I am playing around with the numbers. I am currently keeping most of my earnings inside my corporation and investing inside the corporation.<br />
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Is there a way to measure the growth inside the corporation and the best way to divest in the future or is there an approximate account of how much extra tax I will be paying on withdrawing the money from the corporation so that I can properly account for it?<br />
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<h3>
Answer:</h3>
You can enter the value of your corporation in 'Business Ownership' in Other Assets on the Finances page. You can pay dividends from the business and you'll find an entry for dividend income from business ownership on the 'Other Income' tab. The two are associated, so if you sell the business, the dividends will stop in that year.<br />
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On the sale of the business ownership, the amount above the small business capital gains exemption will be taxed.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-20061490861323600792018-06-22T11:25:00.000-04:002018-06-22T11:25:19.942-04:00Monte Carlo Odds<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhC_VqfuXqgySafDj0e0gFGtSnoDWqfNo4Tb7lYEkZ7oz7xIh6dp7v5_fQGuZLsRkbK5rBQ6Se_UfcfqDWwm4edLshRKO96OOfWLa7Zg9ZdC2HsS2jacpsNP6b5OgwXqqWedVgg32IG/s1600/IMG_20180325_142450.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhC_VqfuXqgySafDj0e0gFGtSnoDWqfNo4Tb7lYEkZ7oz7xIh6dp7v5_fQGuZLsRkbK5rBQ6Se_UfcfqDWwm4edLshRKO96OOfWLa7Zg9ZdC2HsS2jacpsNP6b5OgwXqqWedVgg32IG/s320/IMG_20180325_142450.jpg" width="320" /></a></div>
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<h3>
Questions:</h3>
I modified the LIF payment, I had accidentally added the excess payment twice. which brings the LIF payment down several thousand dollars.<br />
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I still have the massive contradictory outcome of a 44 probability (Monte Carlo) and a $223,813 in her LIF at death.<br />
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<h3>
Answers:</h3>
If you look at the second chart on the Income Forecast tab of the "View" page, you'll see that because LIF withdrawals are restricted by the maximum, the client cannot meet the retirement income goal from CPP, OAS and LIF.<br />
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Either you have to reduce the goal or find another source of income to make up the small shortfall each year.<br />
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The only cases where the Monte Carlo simulations succeed are those with very high returns and the high asset balances permit higher maximum withdrawals that together with CPP and OAS meet the goal. That's why the probability is low.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-31512554277703983662018-06-16T11:20:00.000-04:002018-06-16T11:20:24.219-04:00What happens in year of death<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhodjJB8xB2DqskDlx9dyjnTxxDEYM5ZN-UVmmOqs55XfOfcplnNh0fZXRFxQVIG8oC8wcjX3IQSzzYowazxf_zwP8VQnYLr-n0p2_Xn9n9q22kmu6RkeE-80cpIklB5bXDA6vnpAQE/s1600/IMG_20180427_145058.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhodjJB8xB2DqskDlx9dyjnTxxDEYM5ZN-UVmmOqs55XfOfcplnNh0fZXRFxQVIG8oC8wcjX3IQSzzYowazxf_zwP8VQnYLr-n0p2_Xn9n9q22kmu6RkeE-80cpIklB5bXDA6vnpAQE/s320/IMG_20180427_145058.jpg" width="320" /></a></div>
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<h3>
Question:</h3>
It would be helpful to understand in some detail what the Retireware processing and assumptions are for the year of death. This is particularly so in the case of death of one spouse years before the other in a joint plan. I haven't come across this documented anywhere, and am having some difficulty interpreting our plan results.<br />
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There seem to be a range of options in the real world, particularly for the registered funds, which can be transferred to the surviving spouse without taxation.<br />
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I guess one approach for the program, the most conservative case, is to handle the death of one individual as an independent event - the remaining balance of registered funds are liquidated and the full value taxed, and the non-registered investments are liquidated and the realized capital gains taxed. The total resulting after tax value can then be handled in a variety of ways.<br />
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Then if by will and/or legal requirement some or all of that remainder is left to the surviving spouse, then that amount can be explicitly added by the user (ie me) back into the estate of surviving spouse as special case income.<br />
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In any event once I better understand what the program is assuming then I can do whatever is necessary to handle the numbers as per the will and estate plan.<br />
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<h3>
Answer:</h3>
It's as you describe, on the first death, registered and locked-in funds flow tax-free to the surviving spouse. For non-registered funds and property other than the personal residence, the after-tax value goes to the surviving spouse. So it's assuming that the spouse leaves everything to his/her surviving spouse. There is no option in the program to allocate a portion of the estate currently.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-45926455869810287152018-06-12T11:17:00.000-04:002018-06-12T11:17:07.337-04:00DIY Version<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeHInqjYWbh8ocXAj8sCl_S6oDs9MFasutzt9HVNwG5YfSc4ElpwOA86kSQerYQMLC7CWMOg5UlzJVtxRlkuYuJzb0WRjufkWYNh1ki-Lj8T4ql1o1vIDDLtovauOgbDXOYV_Da0di/s1600/IMG_20180427_104538.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgeHInqjYWbh8ocXAj8sCl_S6oDs9MFasutzt9HVNwG5YfSc4ElpwOA86kSQerYQMLC7CWMOg5UlzJVtxRlkuYuJzb0WRjufkWYNh1ki-Lj8T4ql1o1vIDDLtovauOgbDXOYV_Da0di/s320/IMG_20180427_104538.jpg" width="320" /></a></div>
<h3>
Questions:</h3>
Looking for retirement planning software for personal use, but with a level of sophistication. Does your software:<br />
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<ul>
<li>Perform detailed tax calculations based on the Canadian Income Tax Act?</li>
<li>Support income by type (earned income, investment income – dividend [Cdn and foreign], CG, CPP, OAS, etc)</li>
<li>Track assets over multiple investment accounts – registered, non-registered etc.</li>
<li>Allow for multiple family members (husband/wife) and track them separately (especially for tax purposes)</li>
</ul>
<h3>
Answers:</h3>
Yes, the tax calculations are accurate. The type of investment income calculated depends on your asset allocation. Based on this, the program allocates investment income among interest, dividends and realized and unrealized capital gains.<br />
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Your assets are divided according to type: registered, locked-in, TFSA and non-registered. You cannot enter each account separately (for example, if you have two RRSPs).<br />
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The program calculates other types of income such as pensions, CPP, OAS. However, it does not show separately the various types of investment income year by year, only as a whole.<br />
You can do a combined plan for you and your spouse.<br />
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If you subscribe, you will get a refund within the first 30 days if it does not meet your needs. In order to get your refund, simply email support@retireware.com.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-47002543383653252152018-06-07T11:15:00.000-04:002018-06-07T11:15:19.273-04:00Locked-in Funds in New Brunswick<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiozh6dd9HGjkQW3N52jZYOrDSYMwtaS0Uj4JX2SbRe_0HI2MmNlHTbexf2ur_Z1mQ0fi_QmwTKYjFuD3iW6dAFj48wZNU4HJ3BID-2-FfLq-MLYDCfeXuFy_D68v6G1vxWGyKeR9em/s1600/IMG_20180219_160638.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiozh6dd9HGjkQW3N52jZYOrDSYMwtaS0Uj4JX2SbRe_0HI2MmNlHTbexf2ur_Z1mQ0fi_QmwTKYjFuD3iW6dAFj48wZNU4HJ3BID-2-FfLq-MLYDCfeXuFy_D68v6G1vxWGyKeR9em/s320/IMG_20180219_160638.jpg" width="320" /></a></div>
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<h3>
Question:</h3>
I have a plan with locked-in funds under the New Brunswick pension legislation. It shows that LIF income will be over $12,000 in her first year of retirement, but the max allowable is around $8500 in for a NB legislated plan. Can you explain how the program appears to allow for more than the max allowable amount?<br />
<h3>
Answer:</h3>
The maximum is higher in 2017 because the program uses in this case the one-time maximum special withdrawal rule in New Brunswick pension legislation of the lesser of 3 times the maximum or 25% of the account value to meet the retirement income goal.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-35711436025074586952018-06-02T11:08:00.000-04:002018-06-02T11:08:05.692-04:00Defined Benefit Pensions<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-59fCvlQMGx45gR9MgTrE9p_pnonyh-68qzzrwKwg2bIcyQv9hmqHBN-wjK56B-WVC0LcT8-GAdWJG23THAwrH-RyZrZpX2yIakPR6QbM4ZkgfnrnaAR8VX8_JKd17kWd_HWnjlU9/s1600/IMG_20180404_061212.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi-59fCvlQMGx45gR9MgTrE9p_pnonyh-68qzzrwKwg2bIcyQv9hmqHBN-wjK56B-WVC0LcT8-GAdWJG23THAwrH-RyZrZpX2yIakPR6QbM4ZkgfnrnaAR8VX8_JKd17kWd_HWnjlU9/s320/IMG_20180404_061212.jpg" width="320" /></a></div>
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<h3>
Questions:</h3>
For the section that asks this question:<br />
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"Savings in Addition to Employer Plans - Annual Amount Saved in Registered and Non-Registered Assets"<br />
<br />
Should I be calculating this as including the amount that goes into the Defined Benefit plan since that reduces the RRSP amount that I can contribute? i.e. the amount here = Defined Benefit + my RRSP contributions + TFSA contributions<br />
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<h3>
Answers:</h3>
You should enter the defined benefit contributions on the Pensions page on the Current Employer Plan tab. The program figures out a pension adjustment that reduces the RRSP room based on the estimated annual accrual calculated for the defined benefit pension.<br />
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The amount for this field is any savings for retirement purposes other than through an employer pension, including Group RRSP, defined benefit, defined contribution.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-29077799701994066362018-05-29T11:05:00.000-04:002018-05-29T11:05:00.165-04:00Start RRIF Withdrawals at Age 62<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirH1kmQ2FPmlLw02IXpv4QhGXAtLIElcwWPWnZxrbJ3VkHd3OBXt-xopatl3JzOaxX4yfY3bCAidTdhYakfl-HTqiFnt14u67A27Sk8hKMIjXEEqjHJluJINKHEleGa9C6b4GvMft4/s1600/IMG_20180426_194658.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirH1kmQ2FPmlLw02IXpv4QhGXAtLIElcwWPWnZxrbJ3VkHd3OBXt-xopatl3JzOaxX4yfY3bCAidTdhYakfl-HTqiFnt14u67A27Sk8hKMIjXEEqjHJluJINKHEleGa9C6b4GvMft4/s320/IMG_20180426_194658.jpg" width="320" /></a></div>
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<h3>
Question:</h3>
<br />
I changed my plan to retire later when I'll be 62 years old. Now it's showing a RRIF withdrawal from age 62. I thought this was illegal - I don't even have a RRIF. Please can you tell me how to sort this out? Previously it was showing withdrawals first from non-reg funds.<br />
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I've already set the option under Source of Income under Registered to start withdrawals as late as possible to save on taxes.<br />
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<h3>
Answer:</h3>
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You can open a RRIF at any age. Check on the Options page to ensure that you selected to start RRIF withdrawals as late as possible. It's on the first tab.<br />
<br />
On the Financial Information page on the Registered tab, you have selected purchasing an annuity from a life insurance company under RRSP Options. Is this your intent? If so, the RRSP balance is used to purchase a lifetime income. So it will not work to defer the RRSP. You'd have to change it back to RRIF and it should then only be accessed when you're 71.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-55035052319648556062018-05-25T11:04:00.000-04:002018-05-25T11:04:13.434-04:00How to Determine Required Savings<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjq9P3iCbB_JB3kjXlybXfF5ovrH66Eea-3urzjrWrWNdMUi7BM_T_Oyhwbh7tJCMnrMd_oCSbs8Eq9i1ghK-mOQjrGxoQx7e7d9GaYAOwaMITs-gvEfJyBeJW0yuTygjcgww62YXxS/s1600/IMG_20180501_220148.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1030" data-original-width="1600" height="206" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjq9P3iCbB_JB3kjXlybXfF5ovrH66Eea-3urzjrWrWNdMUi7BM_T_Oyhwbh7tJCMnrMd_oCSbs8Eq9i1ghK-mOQjrGxoQx7e7d9GaYAOwaMITs-gvEfJyBeJW0yuTygjcgww62YXxS/s320/IMG_20180501_220148.jpg" width="320" /></a></div>
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<h3>
Questions:</h3>
I purchased RetireWare to derive an accurate number for annual savings for my wife and I given a set of retirement goals and lifestyle requirements.<br />
<br />
I have an account set up under the email above but feel that something isn't quite right with the calculations after playing around with the numbers.<br />
<br />
Here are my questions:<br />
<br />
1. My wife is currently not working as our kids are young. She plans on starting to earn income again next fall. That income will likely increase again once our 2yr old son goes to school full time in 3 more years. I can't seem to figure out a way to incorporate that graduated income for my wife into the calculations. Can I do that in RetireWare?<br />
<br />
2. Our plan was to have an "active" retirement until I hit 75 and my wife hits 65 (ie. 15yrs into our retirement as currently planned in RetireWare) and then switch to a less active retirement. How do I account for a graduated level of retirement expense in RetireWare?<br />
<br />
3. It seems that the "Principal Residence" under Financial Information is being double counted for my wife and I. I entered the "Current Market Value" of our house under my wife's profile *and* my profile. Should I be entering it once to avoid double counting it?<br />
<br />
<h3>
Answers:</h3>
1. You could add the income under 'Other Income' and can enter up to four periods, but this type is for after retirement and does not allow for saving for retirement. Instead you can enter the average income she'll earn between now and retirement, considering $0 for a coupe of years, a part-time wage after and full-time when the kids are in school full-time.<br />
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2. On the Forecast page under 'Retirement income target', there is a section called 'Advanced'. There you can apply reductions or increases to your retirement icnome goal for up to three periods during retirement.<br />
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3. Yes you should enter under one spouse or enter 50% of the value under both.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-61214837183243181632018-05-22T11:22:00.000-04:002018-05-22T11:22:00.143-04:00<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9BBMYeXaS7YoL7Obv9WIAUXN4WN33u0fU5uZTJxzqiLbd5_3sBRtp-AWpmZJ44vmB_MUAVqBgkF1Qbo1L2CzvLHCzgFkLk2NEGQoASGb0qb2TFikT7TRcClx4nzmgVbJzy7keS1z9/s1600/IMG_20180426_184710.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg9BBMYeXaS7YoL7Obv9WIAUXN4WN33u0fU5uZTJxzqiLbd5_3sBRtp-AWpmZJ44vmB_MUAVqBgkF1Qbo1L2CzvLHCzgFkLk2NEGQoASGb0qb2TFikT7TRcClx4nzmgVbJzy7keS1z9/s320/IMG_20180426_184710.jpg" width="320" /></a></div>
<br />
<h3>
Question:</h3>
When completing annual updates and considering inflation, is it necessary to increase the income objective, CPP and indexed pensions to the current payment amount?<br />
<br />
Considering a joint retirement plan with different time horizons, how are the assets of the person with the shorter time horizon treated? Are they treated as a spousal roll over or deemed disposed of?<br />
<br />
I notice that TFSA assets appear to be disposed of. Is there a way to have them transfer to the survivor?<br />
<br />
<h3>
Answer:</h3>
Assets are rolled over to the spouse if the plan combines the financial information of spouses. If there's life insurance, you can direct it either to the spouse or a beneficiary on the Financial Information page.<br />
<br />
First update the date of financial information on the Forecast page. If the income objective is in terms of a dollar amount, the program will project it from the date of financial information to the retirement year, so there's no need to update it.<br />
<br />
For the CPP, if you entered a monthly amount, and indexed pensions, you should update it to the current amounts.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-64906696233077858892018-05-21T11:01:00.000-04:002018-05-21T11:01:00.200-04:00Determining Optimal Savings<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyn1YIt0x6ez09FvoVV7bVj_1kKqUlCVTVyPEr2tyJq1IWObiotZ5qO9tjEnuT-hQxAjEbdzTAIa2TJda0nv0tZa7NZonkPLaV3TeYikYQikXOrPYmbATOVriufDckbTh3kpXI41k5/s1600/IMG_20180429_151756.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiyn1YIt0x6ez09FvoVV7bVj_1kKqUlCVTVyPEr2tyJq1IWObiotZ5qO9tjEnuT-hQxAjEbdzTAIa2TJda0nv0tZa7NZonkPLaV3TeYikYQikXOrPYmbATOVriufDckbTh3kpXI41k5/s320/IMG_20180429_151756.jpg" width="320" /></a></div>
<br />
<h3>
Question:</h3>
I modified our "Annual Amount Saved" until the combined (ie. me and my wife) Summary said that our assets will be sufficient. Then I changed our retirement ages to 65/55 and played with the "Annual Amount Saved" again until I saw that our assets are sufficient. Is this a good way to figure out how to make the retirement plan work?<br />
<br />
<h3>
Answer:</h3>
Yes, you go to the Forecast page and on the Savings tab to increase your annual savings. Then switch to your wife's view and increase her savings. Click the Refresh button on the View menu to see your revised results.<br />
<br />
Even with higher savings, you may need to reduce your budget slightly or plan to retire later (even one year may make a good difference). But first try to save more and it should take you close to having enough funds for retirement.<br />
<br />
if you achieve better than expected returns you can then periodically revise your plan as you get closer to retirement and have greater clarity on the feasibility of retiring at age 60.<br />
<br />
Be sure to verify that you are not hitting the maximum contribution limit in 'Savings Plan' on the Forecast page. For example, if it's set at 30% of income and you earn $80,000 per year, the program will try to find the required savings, but only up to $24,000. You can this this maximum up to 100% of income. But as I recall, you are in a higher salary range, so what you are stating is correct.<br />
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<br /></div>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-35444316457097104942018-05-17T10:57:00.000-04:002018-05-17T10:57:03.221-04:00Quick vs. Detailed Plan<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgB7qhHN41N0N-Bfx61zeM1H6efGdS2nrgF_uyVmXMyGLS4LU7sCPcxMXVH1qqcPEnsOtdcsfaJabWzhgS9tHiF4cxaAVB8Xse0MJgscQXtgTiiLo7jYu7akayj7U9sphBN7xzafcIE/s1600/IMG_20180427_102846.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgB7qhHN41N0N-Bfx61zeM1H6efGdS2nrgF_uyVmXMyGLS4LU7sCPcxMXVH1qqcPEnsOtdcsfaJabWzhgS9tHiF4cxaAVB8Xse0MJgscQXtgTiiLo7jYu7akayj7U9sphBN7xzafcIE/s320/IMG_20180427_102846.jpg" width="320" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<h3>
Questions:</h3>
In the Quick plan:<br />
<br />
1) is the Retirement Income Target gross or net?<br />
<br />
2) I don't see where I can input existing locked-in money. Can I?<br />
<br />
In the Detailed plan:<br />
<br />
1) in the Forecast/Economic Outlook/Advanced/Annual Investment Management Fees, how can I bypass the fees? Do I need to put them all to 0? It's because the planning I do is based on returns net of fees.<br />
<br />
2) in the Pensions/DC/Group RRSP the Asset Allocation defaults to 100% cash, but If I choose a Profile in the Options tab will it over-ride this default?<br />
<br />
3) in the Risk Analysis/Estate Objective, there is an amount of $50,000 as a default. Is this automatically included in the calculations, so do I need to change it to $0, or under what circumstances is it included in the calculations?<br />
<br />
<h3>
Answers:</h3>
Quick:<br />
<br />
1. It is Gross.<br />
<br />
2. You can only do this on the Detailed user interface.<br />
<br />
Detailed:<br />
<br />
1. Yes, put them at 0%, otherwise they will reduce the gross returns.<br />
<br />
2. Yes, the profile option applies to all types of funds.<br />
<br />
3. It applies the risk scenarios and looks if there will be $50,000 or more for the estate. The ratio of successful scenarios over all scenarios is the success rate for the estate objectives. If you put $0, then all will be successful.<br />
<br />RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com1tag:blogger.com,1999:blog-5388254975336780741.post-44336732781149840562018-04-13T17:22:00.001-04:002018-04-13T17:26:28.100-04:00Retirement Primer<h2>
</h2>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlkGGQ0OoqtKOWYUQyBwflBTH84dz9tb3RD_IBUae4Nxdj8-CzfWY2jnP38M9qP-C-3xkIkcmUYO7nEa8u3bwNWcdY4nq0PVGvz_9FHo-Wff-CII47oQq_8q0NtffpoJ2VxedVLqDB/s1600/IMG_20171210_170537.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhlkGGQ0OoqtKOWYUQyBwflBTH84dz9tb3RD_IBUae4Nxdj8-CzfWY2jnP38M9qP-C-3xkIkcmUYO7nEa8u3bwNWcdY4nq0PVGvz_9FHo-Wff-CII47oQq_8q0NtffpoJ2VxedVLqDB/s320/IMG_20171210_170537.jpg" width="320" /></a></div>
<h2>
Background</h2>
The retirement primer provides general information on retirement planning. For brief explanations of investment, tax and retirement planning terms,
consult the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html">Glossary</a>.
<br />
<h4>
Topics</h4>
<ul>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_networth">Net Worth</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_CPP">Canada Pension Plan</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_OAS">Old Age Security</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_DB">Defined Benefit Pension Plan</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_DC">Defined Contribution Pension Plan</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_annuity">Annuities</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_RRSP">Registered Retirement Savings Plan</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_spousal">Advantages of a spousal RRSP</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_locked">Locked-In RRSP and LIRA</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_RRIF"> Registered Retirement Income Fund</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_LIF">Life Income Fund</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_LRIF">Locked-in Retirement Income Fund</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_mortgage">Mortgage or RRSP</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_reverse">Reverse Mortgage</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_RESP">Registered Education Savings Plan</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/retirement-primer.html#_estate">Estate Planning</a></li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_networth">Net Worth</a></h4>
The net worth is a person's total assets minus total liabilities. Lending institutions require this information to approve credit. Net worth also is a measure of a person's financial well-being.
<br />
<br />
From the balance of all assets and investments is deducted any amount of debt payable, such as unpaid income or property taxes, car loan, credit card balances, personal lines of credit, unpaid bills, or other loans, debt or obligations.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_CPP">Canada Pension Plan</a></h4>
The Canada Pension Plan or CPP is a contributory, earnings-related social insurance program. It provides benefits to contributors on retirement, disability and death. The CPP applies throughout Canada except in Québec where a similar program, the Québec Pension Plan (or QPP), is in force. The two programs are coordinated under agreements between the two governments.
<br />
<br />
The program covers virtually all employed and self-employed persons in Canada (except in Québec where the QPP applies) who are between the ages of 18 and 70 and who earn more than a minimum level of earnings in a calendar year.
<br />
<br />
The CPP is financed through contributions from employees, employers and self-employed persons, as well as investment earnings from the Canada Pension Plan Fund. Starting in 1998, a new CPP Investment Board will invest all new contributions in capital markets to achieve a better return.<br />
Human Resources Development Canada administers the Canada Pension Plan through a network of Human Resource Centers of Canada located in principal cities and towns across the country.
<br />
Related topics:
<br />
<br />
<ul>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html">CPP contributions</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html">CPP death benefit</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html">CPP disability pension</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html">CPP retirement pension</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html">CPP surviving spouse's pension</a></li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_OAS">Old Age Security</a></h4>
Old Age Security or OAS is a social insurance program that provides a basic level of pension income, on application, to anyone age 65 or over who meets residence requirements. OAS is financed from the general tax revenues of the Federal Government. All benefits under OAS are adjusted quarterly each year in line with rises in the cost of living as measured by the <a href="https://www.blogger.com/KB.aspx">Consumer Price Index</a>.<br />
<br />
Persons that are Canadian residents must include the basic Old Age Security pension in their taxable income. Persons that reside outside Canada are subject to tax withholding on their basic Old Age Security pension. The usual rate of withholding tax is 25%. However, persons that live in countries with which Canada has concluded a tax treaty that specifies a rate of withholding lower than 25% are only subject to that lower rate.
<br />
<br />
A minimum of 10 years of Canadian residency after reaching age 18 is required to receive an Old Age Security pension in Canada. To receive OAS outside the country, a person must have lived in Canada for a minimum of 20 years.
<br />
<br />
The amount of a person's pension is determined by how long he or she has lived in Canada. A person who has lived in Canada, after reaching age 18, for periods that total at least 40 years will qualify for a full OAS pension. A person that cannot meet the requirements for the full OAS pension may qualify for a partial pension. A partial pension is earned at the rate of 1/40th of the full monthly pension for each complete year of residence in Canada after reaching age 18.
<br />
<br />
The amount of Old Age Security pension paid to persons with high incomes is reduced through a recovery provision of the Income Tax Act. The tax recovery applies to persons whose total income exceeds a threshold adjuted annually by the Government. For every dollar of income above this limit, the amount of basic Old Age Security pension reduces by 15¢.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_DB">Defined Benefit Pension Plan</a></h4>
A defined benefit pension plan is a registered pension plan that guarantees the employee a certain income at retirement, based on a formula that usually takes into account earnings and years of service with the employer. The employer pays the amount required to provide the promised benefits, as recommended by an actuary who assesses the pension fund's assets and liabilities. Some plans require that employees contribute a percentage of their earnings toward the cost of benefits.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_DC">Defined Contribution Pension Plan</a></h4>
A defined contribution, or money purchase, pension plan is an a registered pension plan in which each employee holds an account where employee contributions, employer contribution made on behalf of the employee, and investment income accumulate without tax until retirement. Employer and employee contributions are usually based on a percentage of the employee's earnings. At retirement, the balance of the account is used to purchase an annuity or transferred to a life income fund. The level of income provided during retirement depends on the performance of the investments held in the account.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_annuity">Annuity</a></h4>
An annuity is a contract entered upon with a life insurance company to provide periodic income for life. The purchase price of the annuity contract depends on the age of the annuitant, the benefit or survivor pension payable upon death to a beneficiary or spouse, and market rates of interest. The purchase price is lower when interest rates are high, because the amount of money paid to the insurer earns more interest, which is used to pay the monthly income.
<br />
<br />
There are several types of annuities. Life annuities provide income for life and cease on death. A joint and last survivor annuity provides income for the lifetime of the primary annuitant, and upon death a percentage of the pension (such as 50%, 60% or 100%) continues to be paid to the spouse for the remainder of his or her lifetime.
<br />
<br />
Sometimes annuities are payable for a guaranteed period such as 5, 10 or 15 years. In such cases, the pension is paid for the first 5, 10 or 15 years, whether or not the annuitant is alive. After the expiry of the guarantee period, the pension is paid as long as the annuitant is alive and ceases upon his or her death.
<br />
<br />
An indexed annuity is an annuity under which payments increase gradually every year to keep up with inflation.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_RRSP">Registered Retirement Savings Plan</a></h4>
A registered retirement savings plan or RRSP is a personal savings plan registered with Revenue Canada in which contributions and investment earnings accumulate on a tax-deferred basis. Withdrawals from an RRSP account are taxed as income. By the end of the year in which the RRSP holder reaches age 71, the RRSP must be closed, converted to a registered retirement income fund, or used to purchase an annuity from a life insurance company.
<br />
<br />
An RRSP holder may make contributions during the taxation year, or 60 days after the end of that year. Contributors who become age 71 during the year may contribute until December 31 of that year, but not beyond.
<br />
Related Topics:
<br />
<br />
<ul>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Annual RRSP dollar maximum</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Foreign content restrictions</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Notice of Assessment</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Past service pension adjustment</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Pension adjustment</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Pension adjustment reversal</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> RRSP deduction limit</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Registered retirement income fund</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Unclaimed RRSP contribution</a></li>
<li><a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html"> Unused RRSP deduction limit</a></li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_spousal">Advantages of a spousal RRSP</a></h4>
A spousal RRSP is an RRSP to which a spouse makes contributions on behalf of the other spouse. Spousal RRSP contributions are useful for couples that want to save taxes during retirement. It allows drawing smaller amounts from the spouses' respective plans, instead of one spouse drawing a larger amount – and paying more income tax. This strategy is called income splitting.
<br />
<br />
All or part of an RRSP contribution can be directed to the RRSP of a spouse, while maintaining the deductibility of the full amount in the hands of the contributor. The spouse's maximum RRSP deduction is unaffected by such contributions. However, Revenue Canada requires that withdrawals from the spousal RRSP during the current taxation year or preceding two years, be added to the contributing spouse's income in the year of withdrawal.
<br />
<br />
Contributions to the spouse's RRSP may be deposited until December 31 of the year in which the spouse becomes age 71, without regard to the age of the contributing spouse.
<br />
<br />
A spouse is defined as a person of the opposite sex who lives with and is engaged in a conjugal relationship for 12 or more months, or is the parent of natural or jointly adopted children.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_locked"> Locked-In RRSP and LIRA</a></h4>
A locked-in RRSP is an RRSP with funds that have been transferred from a registered pension plan. Provincial legislation requires that these funds be locked-in, which means that no withdrawal is allowed other than for the purpose of paying retirement income. At the time of retirement, funds in a locked-in RRSP are used to purchase an annuity or converted to a life income fund. A locked-in RRSP is also referred to as a locked-in retirement account or LIRA in certain provinces.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_RRIF">Registered Retirement Income Fund</a></h4>
A registered retirement income fund or RRIF is a withdrawal plan registered with Revenue Canada in which proceeds accumulated in an RRSP are used to provide an annual income. Investment earnings continue to accumulate on a tax-sheltered basis, but withdrawals are taxed as income.
<br />
<br />
Revenue Canada prescribes an annual minimum withdrawal, which depends on the age and market value of the RRIF at the beginning of the year. Once a RRIF is opened, payments must commence in the following year.
<br />
<br />
There is no minimum age to set up a RRIF. An individual may hold several RRIFs with different financial institutions. The RRIF holder maintains controls of the investments. Funds held in a RRIF may also be used to purchase an annuity from a life insurance company.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_LIF">Life Income Fund </a></h4>
A life income fund or LIF is a RRIF for funds originating from a locked-in RRSP or a registered pension plan. Revenue Canada prescribes an annual minimum withdrawal, which is based on age and the market value of the LIF at the beginning of the year. Provincial legislation requires that the annual withdrawal do not exceed a maximum based on age, the value of the LIF and long term interest rates.
<br />
<br />
A LIF holder subject to Newfoundland and Labrador legislation continues to maintain control on the investments until the end of the year of the 80th birthday, at which time the balance held in the fund must be used to purchase an annuity from a life insurance company. A LIF subject to other pension legislation does not have to be converted to an annuity.
<br />
<br />
The minimum age at which a LIF may be set up depends on the provincial legislation that applies to the member of the pension plan who is transferring funds to a LIF. The person holding a LIF has control over all investment decisions. As with an RRSP, funds in a LIF are tax-sheltered until withdrawn.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_LRIF"> Locked-in Retirement Income Fund </a></h4>
A locked-in retirement income fund or LRIF is similar to a life income fund, except that it does not require the purchase of an annuity when the holder of the LRIF reaches age 80. Persons whose locked-in RRSP is subject to Ontario or Alberta legislation have a choice to select either a life income fund or an LRIF at the time of retirement.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_mortgage">Mortgage or RRSP</a></h4>
Making RRSP contributions before paying down a mortgage is usually the best strategy according to many financial experts. This is because the tax-sheltered investment growth of RRSP contributions plus the tax refund applied to reduce a mortgage may exceed slightly principal and interest charges saved from applying the same amount to the mortgage. However, this depends on the investment return on the RRSP and the mortgage rate that will apply over time.
<br />
<br />
Similarly, borrowing from an RRSP for a down payment may or may not be preferable depending on the investment rates of return and mortgage rates over time. The federal government's Home Buyers Plan allows first-time buyers to borrow up to $20,000 from their RRSP on an interest and tax-free basis. The amount withdrawn must be repaid within 15 years.
<br />
<br />
One must look at the impact of the following two scenarios to determine whether one option is better than the other:<br />
<br />
<ul>
<li>Keep Money in RRSP: Amount accumulated in the RRSP plus investment earnings less taxes on withdrawal, less extra capital and interest payments.</li>
<li><br /></li>
<li>Borrow from RRSP: the after-tax accumulation of amounts repaid to the RRSP plus investment earnings, but none of the extra mortgage costs.</li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_reverse">Reverse Mortgage</a></h4>
A reverse mortgage is a loan taken by a homeowner using as collateral a real estate property. It is called a "reverse mortgage" because rather than making payments on the property, the homeowner receives income from the property, based on the amount of the loan. The person who takes a reverse mortgage continues to own and occupy the home, and benefits from any increase in the equity of the property. The principal and interest are repaid by the estate, or upon sale of the property.
<br />
A reverse mortgage allows persons with significant equity in their homes to use it as a source of income. It provides immediate access to cash, investment or annuity income or a combination thereof. Initial funds received through the program are tax-free and annuity income does not impact any senior income supplements currently available.
<br />
<br />
The amount of home equity that can be unlocked ranges between 10% and 45%, and depends on the age, gender and marital status of the applicant. An older person can access a higher percentage.
<br />
<br />
Certain types of properties, such as leasehold, co-ops and properties with larger acreage are not eligible.<br />
<h4>
<a href="https://www.blogger.com/null" id="_RESP"> Registered Education Savings Plan</a></h4>
A Registered Education Savings Plan or RESP is a government-sponsored plan that allows parents to contribute each year in an account that appreciates tax free for up to 21 years.
<br />
<br />
Contributions are not tax deductible, but investment income is not subject to income tax. There is no limit on the amount of contribution per year for each beneficiary, as long as the cumulative amount does not exceed a lifetime maximum of $50,000 per beneficiary. The government provides a grant of 20% of contributions, up to a maximum of $500 per year for each beneficiary.
<br />
<br />
When the child starts post-secondary education, the RESP provides income to pay for tuition and related expenses, taxable at the rate applicable to the child's income, not the contributor. If the child does not pursue a post-secondary education, accumulated earnings can be transferred to the contributor's RRSP, if there is sufficient contribution room available. The maximum amount that can be transferred is $50,000. If RRSP contribution room is not available, income tax must be paid plus an additional 20% penalty tax. The RESP may only be tax sheltered for 26 years.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_estate">Estate Planning</a></h4>
Estate planning is the process of developing and maintaining a plan to preserve wealth and provide an orderly transfer of assets upon death to beneficiaries. There are several objectives to estate planning, such as minimizing or deferring taxes; providing liquidity to cover taxes and other liabilities; providing income to dependents; dividing the after-tax value of the estate; and minimizing probate fees and other costs related to settling the estate. An important issue is to implement various strategies while alive with a person's assets in order to minimize taxes at death.
<br />
<br />
These various objectives are accomplished by maintaining a valid up-to-date will, which sets out the disposition of assets in accordance with the intentions of the deceased. Without a will, a person is said to die intestate, and assets are distributed in accordance with the laws of the province of residence, without regard to tax effectiveness.
<br />
<br />
The estate is responsible for covering liabilities, including taxes, in the year of death. If cash is not available, property may have to be sold. The value of a RRSP or RRIF will generally be fully taxable in the final tax return, unless the spouse is named as beneficiary.
<br />
<br />
On the date of death, any property is deemed sold at its market value. Thus, 50% of the deemed capital gain must be included in the deceased final tax return. To minimize such adverse consequences, one strategy is to ensure that the principal residence, bank accounts and other assets are jointly owned with the spouse. When one spouse dies, those assets pass to the surviving spouse without triggering a capital gains tax<br />
.
<br />
When other capital assets, such as life insurance policies or an RRSP have a idd beneficiary, this result in a direct transfer of these assets to the beneficiary, bypassing the estate and avoiding probate fees on these assets.
<br />
<br />
There are several common tax-effective strategies. One is leaving the proceeds of the RRSP to the spouse to allow a tax-free rollover of the proceeds into the spouse's RRSP and continue deferring taxes. Another consists in leaving capital assets such as stocks or mutual funds to the spouse, so there is no deemed disposition. Giving money during the lifetime will reduce probate fees payable at death, which are based on the size of the estate. Purchasing life insurance to cover taxes payable at death is another technique used to preserve the value of the estate.
<br />
<br />
Other related considerations: Upon marriage, an existing will become invalid and must be rewritten. Legislation restricts investments by executors of money held in an estate, unless the will specifically provides for it.
<br />
<br />
<br />RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-69151237010617277932018-04-13T17:03:00.000-04:002018-04-13T17:09:32.752-04:00Knowledge Base<div class="separator" style="clear: both; text-align: center;">
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<h2>
Glossary of Investment, Tax and Retirement Terms</h2>
<h2>
A</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Adjusted_Cost">Adjusted Cost Base</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Amortization">Amortization</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annual_RRSP">Annual RRSP dollar maximum</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity">Annuity</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Notice_of_Assessment">Assessment Notice</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Asset">Asset</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Asset_allocation">Asset allocation</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Asset_allocation_fund">Asset allocation fund</a><br />
<br />
<h2>
B</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Balanced_fund">Balanced fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Beneficiary">Beneficiary</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond">Bond</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond_fund">Bond fund</a><br />
<br />
<h2>
C</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Callable_bond">Callable bond</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP">Canada Pension Plan</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_calculation">Capital gain calculation</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss">Capital gain or loss</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_tax">Capital gains tax</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_carry-forward">Carry-forward</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Cash">Cash</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CSV">Cash surrender value</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Compound_interest">Compound interest</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPI">Consumer Price Index</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPI">CPI</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP">CPP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Contributions">CPP Contributions</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Death">CPP Death benefit</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Disability">CPP Disability pension</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Retirement">CPP Retirement pension</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Surviving">CPP Surviving spouse's pension</a><br />
<br />
<h2>
D</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Debt">Debt</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_DPSP">Deferred Profit Sharing Plan</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Defined_benefit">Defined benefit pension plan</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Defined_contribution">Defined contribution pension plan</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Depreciation">Depreciation</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Distribution">Distribution</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Diversification">Diversification</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend">Dividend</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend_income">Dividend income fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend_tax">Dividend tax</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend_yield">Dividend yield</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dollar_cost">Dollar cost averaging</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_DPSP"> DPSP</a><br />
<br />
<h2>
E</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Earned_Income"> Earned Income</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Equities">Equities</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Equity_fund">Equity fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Estate_planning">Estate planning</a><br />
<br />
<h2>
F</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Financial_planner">Financial planner</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Fixed_Income"> FixedIncome</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Foreign_content"> Foreign content restrictions</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Foreign_investment">Foreign investment income</a><br />
<br />
<h2>
G</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_GIC">GIC</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_GIS">GIS</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Government_pension">Government pension programs</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Group_RRSP">Group RRSP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_GIS">Guaranteed Income Supplement</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_GIC">Guaranteed investment certificate</a><br />
<br />
<h2>
H - I</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Home_equity">Home equity</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Income_fund">Income fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Income_splitting">Income splitting</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Inflation-adjusted">Inflation-adjusted dollars</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Inflation_risk">Inflation risk</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest">Interest</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest">Interest rate</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest_rate">Interest rate risk</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Intestate">Intestate</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Investment_income">Investment income</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Investment_risk">Investment risk</a><br />
<br />
<h2>
L</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LIF">LIF</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity">Life annuity</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_expectancy">Life expectancy</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LIF"> Life income fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance">Life insurance</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Liquidity_risk">Liquidity risk</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP">LIRA</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Living_trust">Living trust</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP">Locked-In retirement account</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LRIF">Locked-in retirement income fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP">Locked-in RRSP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LRIF">LRIF</a><br />
<br />
<h2>
M</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Marginal_tax">Marginal tax rate</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Market_index">Market index</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Money_market">Money market</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Money_market_fund">Money market fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mortgage">Mortgage</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mortgage_vs._RRSP">Mortgage vs. RRSP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund">Mutual fund</a><br />
<br />
<h2>
N</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_NAV">NAV</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_NAV">Net asset value</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Net_worth">Net worth</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Notice_of_Assessment">Notice of Assessment</a><br />
<br />
<h2>
O - P</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_OAS">OAS</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_OAS">Old Age Security</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PA">PA</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PAR">PAR</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PSPA">PSPA</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PSPA">Past service pension adjustment</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PA">Pension adjustment</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Permanent_life">Permanent life insurance</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Portability">Portability</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Probate_fees">Probate fees</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Profit_sharing">Profit sharing plan</a><br />
<br />
<h2>
R</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Rate_of_inflation">Rate of inflation</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest">Rate of interest</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Rate_of_return">Rate of return</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Real_return">Real return</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RESP">Registered Education Savings Plan</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP">Registered pension plans</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Registered_plans">Registered plans</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF">Registered retirement income fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP">Registered retirement savings plan</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Reinvestment_of_distributions">Reinvestment of distributions</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RESP">RESP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Retiring_Allowance">Retiring Allowance</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return">Return</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Notice_of_Assessment">Canada Revenue Agency Notice of Assessment</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Reverse_mortgage">Reverse mortgage</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Risk_tolerance">Risk tolerance</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP">RPP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_and_death">RRSP and death</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_carry-forward">RRSP carry-forward</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction">RRSP deduction limit</a><br />
<br />
<h2>
S</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Savings">Savings</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Share">Share</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Single-premium">Single-premium deferred annuity</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Spousal_RRSP">Spousal RRSP</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Standard_of_living">Standard of living</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock">Stock</a><br />
<br />
<h2>
T</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Tax%20bracket">Tax bracket</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Tax_credit">Tax credit</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Taxation">Taxation of a mutual fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill">T-Bill</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Term_insurance">Term insurance</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Term_to_100">Term to 100 investors,</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Testamentary_trust">Testamentary trust</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill">Treasury bill</a><br />
<br />
<h2>
U</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Unclaimed_RRSP">Unclaimed RRSP contribution</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Universal_life">Universal life</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Unused_RRSP">Unused RRSP deduction limit</a><br />
<br />
<h2>
V</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Variable_life">Variable life</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Volatility">Volatility</a><br />
<br />
<h2>
W</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Permanent_life">Whole life insurance</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Withholding_tax"> Withholding tax</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Will">Will</a><br />
<br />
<h2>
Y</h2>
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Yield">Yield</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_YMPE">Year's Maximum Pensionable Earnings</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_YMPE">YMPE</a><br />
<br />
<h2>
Glossary</h2>
<h4>
<a href="https://www.blogger.com/null" id="_Adjusted_Cost">Adjusted Cost Base</a></h4>
The adjusted cost base is the cost of acquiring an asset and is used to calculate a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gain</a> or loss on the purchase of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stock</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> or other type of property. It is equal to the sum of the:
<br />
<br />
Original purchase price of an investment<br />
PLUS the amount of reinvested distributions<br />
PLUS the amount of any additional purchases<br />
<br />
Capital losses can only be used to reduce or offset capital gains. When losses exceed gains in a year, they can be carried back to be applied against gains in any of the previous three years, or carried forward indefinitely.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Amortization">Amortization</a></h4>
The amortization is the number of years during which a loan is repaid.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Annual_RRSP">Annual RRSP dollar maximum</a></h4>
A taxpayer may contribute an amount up to the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction"> RRSP deduction limit</a>. Each year, the RRSP deduction limit increases by 18% of the previous year's earned income, up to a dollar limit. This dollar limit is called the annual RRSP dollar maximum.
<br />
<br />
The annual RRSP dollar maximum is currently set at $26,230 in 2018, and increases in line with annual changes in the Average Wage (a measure compiled by Statistics Canada) beginning in 2011.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Annuity">Annuity</a></h4>
An annuity is a contract entered upon with a life insurance company to provide periodic income for life. The purchase price of the annuity contract depends on the age of the annuitant, the benefit or survivor pension payable upon death to a beneficiary or spouse, and market <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> rates of interest</a>. The purchase price is lower when interest rates are high, because the amount of money paid to the insurer earns more interest, which is used to pay the monthly income.
<br />
<br />
There are several types of annuities. Life annuities provide income for life and cease on death. A joint and last survivor annuity provides income for the lifetime of the primary annuitant, and upon death a percentage of the pension (such as 50%, 60% or 100%) continues to be paid to the spouse for the remainder of his or her lifetime.
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Sometimes annuities are payable for a guaranteed period such as 5, 10 or 15 years. In such cases, the pension is paid for the first 5, 10 or 15 years, whether or not the annuitant is alive. After the expiry of the guarantee period, the pension is paid as long as the annuitant is alive and ceases upon his or her death.
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<br />
An indexed annuity is an annuity under which payments increase gradually every year to keep up with inflation.
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<h4>
<a href="https://www.blogger.com/null" id="_Asset">Asset</a></h4>
An asset is anything that has a monetary value, such as an investment, real estate, a business or a consumer durable good.
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<h4>
<a href="https://www.blogger.com/null" id="_Asset_allocation">Asset allocation</a></h4>
The asset allocation is the proportion of a portfolio invested in each of the three main types of investments – <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Cash"> cash</a> or short-term equivalents (e.g., <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill"> Treasury bills</a>), longer-term interest-bearing securities (e.g., <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a>), and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Equities"> equities</a>. An investor's asset allocation strategy depends on investment objectives, age and time horizon, tolerance to risk, and market outlook.
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<h4>
<a href="https://www.blogger.com/null" id="_Asset_allocation_fund">Asset allocation fund</a></h4>
An asset allocation fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> that invests a mix of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a> and bonds based on a sophisticated computer investment model.
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<h4>
<a href="https://www.blogger.com/null" id="_Balanced_fund">Balanced fund</a></h4>
A balanced fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> that invests in a mix of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a>. Typically, the mix is between 40 and 60 per cent of either type of assets. The objective is to have less variability than <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Equity_fund"> equity funds</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Beneficiary">Beneficiary</a></h4>
A beneficiary is a person who receives proceeds or benefits from an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> insurance policy</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a>, trust, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Will"> will</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> or other <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Registered_plans"> registered plan</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Bond">Bond</a></h4>
A bond is an investment certificate that promises to repay the purchaser at a later date the purchase price plus interest at a pre-determined rate. Interest-bearing bonds pay interest periodically. A bond will specify a maturity date, and a coupon or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest</a> rate. The rate for bonds is usually fixed. Governments, utilities, mortgage holders and many other types of institutions and corporations issue bonds to raise capital.
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<br />
The market value of a bond fluctuates based on changes in interest rates. If interest rates go up after a bond has been issued, its value goes down. This is because new bonds issued at that time will have a higher <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return"> return</a>. The market price of a bond must reflect the fact that a rational investor would pay no more than the amount that will accumulate at the prevailing interest rate over the remainder of the duration of the investment. Similarly, when interest rates are falling, bonds purchased at a higher yield will increase in value.
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<h4>
<a href="https://www.blogger.com/null" id="_Bond_fund">Bond fund</a></h4>
A bond fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> that invests primarily in a mix of government and corporate bonds. This type of fund generates interest income and also <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains or losses</a> as the market value of bonds increase or decrease with changes to interest rates.
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<h4>
<a href="https://www.blogger.com/null" id="_Callable_bond">Callable bond</a></h4>
A callable bond is a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bond</a> in which the issuer can decide to pay back the principal earlier than the stated maturity date. Callable bonds trade at a small premium over regular bonds.
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<h4>
<a href="https://www.blogger.com/null" id="_CPP">Canada Pension Plan</a></h4>
The Canada Pension Plan or CPP is a contributory, earnings-related social insurance program. It provides benefits to contributors on retirement, disability and death. The CPP applies throughout Canada except in Québec where a similar program, the Québec Pension Plan (or QPP), is in force. The two programs are coordinated under agreements between the two governments.
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The program covers virtually all employed and self-employed persons in Canada (except in Québec where the QPP applies) who are between the ages of 18 and 70 and who earn more than a minimum level of earnings in a calendar year.
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The CPP is financed through contributions from employees, employers and self-employed persons, as well as investment earnings from the Canada Pension Plan Fund. Starting in 1998, a new CPP Investment Board will invest all new contributions in capital markets to achieve a better return. Human Resources Development Canada administers the Canada Pension Plan through a network of Human Resource Centers of Canada located in principal cities and towns across the country.
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Related topics:<br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Contributions">CPP contributions</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Death">CPP death benefit</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Disability">CPP disability pension</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Retirement">CPP retirement pension</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP_Surviving">CPP surviving spouse's pension</a>
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<h4>
<a href="https://www.blogger.com/null" id="_Capital_gain_calculation">Capital gain calculation</a></h4>
This example shows the calculation of a capital gain taking into account reinvested <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Reinvestment_of_distributions"> distributions</a> and the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Adjusted_Cost"> adjusted cost base</a>:
<br />
<table class="box">
<tbody>
<tr>
<td class="box-right"><br />
<br />
Transaction </td>
<td class="box-right">Units </td>
<td class="box-right">Price/Unit </td>
<td class="box-right">Amount </td>
</tr>
<tr>
<td class="box-right">Purchase </td>
<td class="box-right">1,000 </td>
<td class="box-right">$10 </td>
<td class="box-right">$10,000 </td>
</tr>
<tr>
<td class="box-right">Reinvested Distribution </td>
<td class="box-right">50 </td>
<td class="box-right">$15 </td>
<td class="box-right">+$ 750 </td>
</tr>
<tr>
<td class="box-right">New Purchase </td>
<td class="box-right">500 </td>
<td class="box-right">$16 </td>
<td class="box-right">+ $8,000 </td>
</tr>
<tr>
<td class="box-right">Adjusted Cost Base </td>
<td class="box-right"></td>
<td class="box-right"></td>
<td class="box-right">$18,750 </td>
</tr>
</tbody></table>
<br style="clear: left;" />
If the 1550 units are sold for $23,000, the capital gain is:
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<br />
<ul>
<li>Proceeds from Sale: $23,000</li>
<li>Adjusted Cost Base: -$18,750</li>
<li>Capital Gain: $4,250</li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_Capital_gain_or_loss">Capital gain or loss</a></h4>
The sale of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stock</a> or a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> triggers a capital gain or a capital loss. A capital gain is the difference between the selling price of a stock or other equity and its <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Adjusted_Cost"> adjusted cost base</a>. If a stock is sold below the adjusted cost base, the difference is a capital loss. Amounts previously reported are added to increase or adjust the price paid for the investment. See example of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_calculation"> capital gain calculation</a>.
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A capital gain is defined as:
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<ul>
<li>Proceeds from sale</li>
<li>LESS investment charges</li>
<li>LESS Adjusted Cost Base</li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_Capital_gain_tax">Capital gains tax</a></h4>
Only 50% of a net <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gain</a> is taxable. In other words, only 50% of the net capital gain enter into income on the tax return. The net capital gain is the difference between capital gains and capital losses in a particular year.
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<h4>
<a href="https://www.blogger.com/null" id="_Cash">Cash</a></h4>
Cash are short-term assets and generally include bank accounts, term deposits, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Money_market_fund"> money market funds</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill"> Treasury bills</a>. Cash assets are liquid as they can easily be redeemed. Cash assets have generally kept pace with <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Rate_of_inflation"> inflation</a>, but have not outperformed it.
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<h4>
<a href="https://www.blogger.com/null" id="_CSV">Cash surrender value</a></h4>
The cash surrender value is the amount that the insurance company will pay if the policyholder terminates a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance policy</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Compound_interest">Compound interest</a></h4>
Compound interest is the effect of interest being earned on previously earned interest.
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<h4>
<a href="https://www.blogger.com/null" id="_CPI">Consumer Price Index</a></h4>
The Consumer Price Index or CPI is an index published by Statistics Canada each month measuring changes in the cost of living. The change in this index is called the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Rate_of_inflation"> rate of inflation</a>. The CPI is based on the average cost of a typical basket of goods and services.
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<h4>
<a href="https://www.blogger.com/null" id="_CPP_Contributions">CPP Contributions</a></h4>
Contributions to the CPP are made on the portion of an individual's annual earnings which is between the Year's Basic Exemption (YBE) and the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_YMPE"> Year's Maximum Pensionable Earnings or YMPE</a>.
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From 1966 to 1986, employees contributed 1.8 percent of covered earnings and their employer paid a matching contribution. Self-employed persons contributed at the rate of 3.6 percent of covered earnings. Since 1987, the contribution rate has increased gradually each year.
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For 2003 and future years, the contribution rate is 4.95 percent of covered earnings from the employee and a matching contribution of 4.95 percent from the employer. A self-employed person must contribute 9.9 percent.
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A contributor may request, once per year, a record of earnings, which is an account of an individual's earnings and contributions to the Canada Pension Plan.<br />
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Persons who have contributed to both the CPP and QPP are said to be "dual contributors". A dual contributor who, at the time of applying for a benefit, lives in Canada but outside Québec receives the benefit from the CPP. In turn, the CPP assesses the Québec Pension Plan for its share of the cost of the benefit. Similar provisions apply to the reverse situation.
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<h4>
<a href="https://www.blogger.com/null" id="_CPP_Death">CPP Death benefit</a></h4>
The death benefit payable under the CPP is a lump-sum payment equal to $2,500.
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<h4>
<a href="https://www.blogger.com/null" id="_CPP_Disability">CPP Disability pension</a></h4>
The CPP disability pension is a monthly benefit consisting of a flat rate component and an earnings-related component. The flat rate component is a basic amount unrelated to previous earnings and paid to all persons who are eligible. The earnings-related component is equal to 75 percent of a retirement pension, calculated as if the contributor was age 65 at the time of payment of the disability pension. The disability is payable until age 65, recovery or death.
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<h4>
<a href="https://www.blogger.com/null" id="_CPP_Retirement">CPP Retirement pension</a></h4>
Any person who has made contributions to the CPP is eligible to receive a monthly retirement pension at any time after the contributor's 60th birthday. However, for a retirement pension to be paid prior to age 65, the contributor must have substantially ceased to be engaged in paid employment or self-employment.
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The retirement pension payable to a person at age 65 is a monthly benefit equal to 25 percent of a contributor's average monthly pensionable earnings during the contributory period.
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An individual's contributory period is defined as the period starting on January 1, 1966, or when the contributor reaches age 18, whichever is later, and ending when the individual begins to receive a retirement pension from the CPP or QPP or reaches age 70.
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In calculating average monthly pensionable earnings, actual pensionable earnings from past years are adjusted to reflect current values.
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However, any month of disability is excluded from the contributory period. Also, periods of low or zero earnings (up to 15 percent of an individual's contributory period) may be excluded in calculating average monthly pensionable earnings. The intent is to compensate for periods of unemployment, illness or schooling. Months of low or zero earnings while caring for a child under the age of seven may be excluded from the contributory period, if the contributor received Family Allowances or was eligible for the Child Tax Benefit. This is called the "child-rearing drop-out provision".
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Persons who continue to work and make contributions to the CPP after age 65 may substitute periods of pensionable earnings after 65 for periods before age 65 when they had low or zero earnings.
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The amount of a retirement pension starting before age 65 reduces by 0.5 percent for each month between the date the pension commences and the date of the contributor's 65th birthday. Similarly, a pension beginning after age 65 increases by 0.5 percent for each month between the 65th birthday and the month for which the first payment is made. The maximum upward or downward adjustment is 30 percent.
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All CPP benefits are adjusted in January of each year to reflect increases in the cost of living, as measured by the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPI"> Consumer Price Index</a>. The CPP pension must be included in taxable income.
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<h4>
<a href="https://www.blogger.com/null" id="_CPP_Surviving">CPP Surviving spouse's pension</a></h4>
The pension under the CPP payable to a surviving spouse aged 65 or over is equal to 60 percent of the retirement pension which the deceased contributor could have received at age 65. The pension payable to a surviving spouse under age 65 is composed of two parts, a flat rate component and an earnings-related component. The earnings-related portion is equal to 37.5 percent of the actual or imputed retirement pension of the deceased contributor.
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If a surviving spouse is between the ages of 35 and 45, has no dependent children and is not disabled, the survivor's pension is reduced by 1/120th of the amount described above for each month his or her age is less than 45 at the time the contributor died.
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<br />
If a surviving spouse ceases to be disabled or to have a dependent child in his or her care and is between 35 and 45 years of age, the pension is reduced, as described in the preceding paragraph. If the surviving spouse is under 35 years of age and ceases to be disabled or to have a dependent child, the pension is suspended until age 65.
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<h4>
<a href="https://www.blogger.com/null" id="_Debt">Debt</a></h4>
Debt is a type of investment that includes Government and corporate <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a>, debentures and mortgages. They usually are low risk and have a higher <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return"> return</a> than <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Cash"> cash</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_DPSP">Deferred profit sharing plan</a></h4>
A deferred profit sharing plan or DPSP is a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Profit_sharing"> profit sharing plan</a>, in which the employer deposits annually contributions based on company profits to individual employee accounts. Both employer contributions and investment income remain tax-sheltered until withdrawn. At retirement or termination of employment, employees transfer the value of their account to an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a>, a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF"> RRIF</a>, or purchase an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> from a life insurance company. Employers often use this arrangement to provide a source of retirement income to their employees.
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<h4>
<a href="https://www.blogger.com/null" id="_Defined_benefit">Defined benefit pension plan</a></h4>
A defined benefit pension plan is a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a> that guarantees the employee a certain income at retirement, based on a formula that usually takes into account earnings and years of service with the employer. The employer pays the amount required to provide the promised benefits, as recommended by an actuary who assesses the pension fund's assets and liabilities. Some plans require that employees contribute a percentage of their earnings toward the cost of benefits.
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<h4>
<a href="https://www.blogger.com/null" id="_Defined_contribution">Defined contribution pension plan</a></h4>
A defined contribution, or money purchase, pension plan is an a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a> in which each employee holds an account where employee contributions, employer contribution made on behalf of the employee, and investment income accumulate without tax until retirement. Employer and employee contributions are usually based on a percentage of the employee's earnings. At retirement, the balance of the account is used to purchase an annuity or transferred to a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LIF"> life income fund</a>. The level of income provided during retirement depends on the performance of the investments held in the account.
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<h4>
<a href="https://www.blogger.com/null" id="_Depreciation">Depreciation</a></h4>
Depreciation is the loss in value of an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Asset"> asset</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Distribution">Distribution</a></h4>
A distribution is the amount credited to the unit holder of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> in respect of any <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gain</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend"> dividend</a> realized by the fund.
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<h4>
<a href="https://www.blogger.com/null" id="_Diversification">Diversification</a></h4>
Diversification is the process of spreading the number of investments across various types of investments to reduce the amount of risk in a portfolio. Diversification applies to the type of investment, industry, geographical location and currency.
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<h4>
<a href="https://www.blogger.com/null" id="_Dividend">Dividend</a></h4>
A dividend is a portion of a company's profit paid to common and preferred shareholders. A <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stock</a> selling for $20 per share with an annual dividend of $1 per share has a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend_yield"> dividend yield</a> of 5%. Dividends are usually paid quarterly.
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<h4>
<a href="https://www.blogger.com/null" id="_Dividend_income">Dividend income fund</a></h4>
A dividend income fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> that invests primarily in shares of corporations that pay regularly high dividends.
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<h4>
<a href="https://www.blogger.com/null" id="_Dividend_tax">Dividend tax</a></h4>
Dividends received from stocks of Canadian corporations or from mutual funds that invest in Canadian corporations are taxed at a rate lower than income or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest</a>. The amount of dividends grossed-up by 25% is entered into income on the tax return, but an offsetting dividend tax credit of 13.33% directly reduces the amount of provincial and federal taxes.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Dividend_yield">Dividend yield</a></h4>
The dividend yield is the total amount of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend"> dividends</a> paid over the past year per share divided by the current price of the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stock</a>.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Dollar_cost">Dollar cost averaging</a></h4>
Dollar cost averaging is a strategy to minimize risk and maximize <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return"> return</a>. By investing the same amount to purchase a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stock</a> or units of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> on a regular basis, one reduces the average cost per unit, whether the unit price goes up or down. When the unit price is low, more units are purchased. If the unit value increases, more units increase in value. If the unit value decreases, fewer units decrease in value.
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<h4>
<a href="https://www.blogger.com/null" id="_Earned_Income">Earned Income</a></h4>
Earned Income is income eligible for consideration when calculating the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction"> RRSP deduction limit</a>. It includes employment (T4) earnings (i.e., salary or wages), rental income, alimony received, net business income and disability benefits paid by the Canada Pension Plan or Québec Pension Plan. Earned income excludes <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Investment_income"> investment income</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Retiring_Allowance"> retiring allowances</a>, severance pay, taxable <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains</a> and pension income.
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<h4>
<a href="https://www.blogger.com/null" id="_Equities">Equities</a></h4>
Equities refer to preferred and common <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Share"> shares</a>, any other equity instruments of public or private corporations, and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual funds</a> in which assets are primarily invested in <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a> or marketable securities which does not provide a guaranteed <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return"> return</a>. Equities are assets that increase or decrease in value based on the demand of a market in which they are bought and sold.
<br />
Equity in a real estate property is the difference between the market value of the property and the balance of any outstanding mortgages.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Equity_fund">Equity fund</a></h4>
An equity fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> in which funds are primarily invested in <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a>. There are different types of equity funds, some that invest in large companies, and others that invest in companies with a small capitalization base.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Estate_planning">Estate planning</a></h4>
Estate planning is the process of developing and maintaining a plan to preserve wealth and provide an orderly transfer of assets upon death to <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Beneficiary"> beneficiaries</a>. There are several objectives to estate planning, such as minimizing or deferring taxes; providing liquidity to cover taxes and other liabilities; providing income to dependents; dividing the after-tax value of the estate; and minimizing <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Probate_fees"> probate fees</a> and other costs related to settling the estate. An important issue is to implement various strategies while alive with a person's assets in order to minimize taxes at death.
<br />
<br />
These various objectives are accomplished by maintaining a valid up-to-date <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Will"> will</a>, which sets out the disposition of assets in accordance with the intentions of the deceased. Without a will, a person is said to die <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Intestate"> intestate</a>, and assets are distributed in accordance with the laws of the province of residence, without regard to tax effectiveness.
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The estate is responsible for covering liabilities, including taxes, in the year of death. If cash is not available, property may have to be sold. The value of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF"> RRIF</a> will generally be fully taxable in the final tax return, unless the spouse is named as beneficiary.
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On the date of death, any property is deemed sold at its market value. Thus, 75% of the deemed <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gain</a> must be included in the deceased final tax return. To minimize such adverse consequences, one strategy is to ensure that the principal residence, bank accounts and other assets are jointly owned with the spouse. When one spouse dies, those assets pass to the surviving spouse without triggering a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_tax"> capital gains tax</a>.
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When other capital assets, such as <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance</a> policies or an RRSP have a idd beneficiary, this result in a direct transfer of these assets to the beneficiary, bypassing the estate and avoiding probate fees on these assets.
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There are several common tax-effective strategies. One is leaving the proceeds of the RRSP to the spouse to allow a tax-free rollover of the proceeds into the spouse's RRSP and continue deferring taxes. Another consists in leaving capital assets such as <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual funds</a> to the spouse, so there is no deemed disposition. Giving money during the lifetime will reduce probate fees payable at death, which are based on the size of the estate. Purchasing <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance</a> to cover taxes payable at death is another technique used to preserve the value of the estate.
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Other related considerations: Upon marriage, an existing will become invalid and must be rewritten. Legislation restricts investments by executors of money held in an estate, unless the will specifically provides for it.
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<h4>
<a href="https://www.blogger.com/null" id="_Financial_planner">Financial planner</a></h4>
A financial planner is an investment advisor who assists clients in assessing investment objectives and developing both short and long-term financial plans. Financial planners typically receive remuneration from commissions on the sale of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual funds</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Fixed_Income">Fixed Income</a></h4>
Fixed income refer to any short or long term investment which earns interest at an agreed upon <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> rate of interest</a>. This includes cash, checking or savings accounts, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_GIC"> guaranteed investment certificates</a>, term deposits, Canada savings bonds, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a> issued by the Federal, provincial or municipal government, or a corporation, Government of Canada Treasury Bills, money market or other similar investments, such as Provincial Notes, Bankers' Acceptances and high quality commercial paper. Also included are <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual funds</a> in which most or all assets are invested in bonds or other types of securities mentioned above.
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<h4>
<a href="https://www.blogger.com/null" id="_Foreign_content">Foreign content restrictions</a></h4>
In the past, the Income Tax Act imposed a limitation on the amount of foreign investments that an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF"> RRIF</a> could hold. This limitation has been removed in 2006.
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<h4>
<a href="https://www.blogger.com/null" id="_Foreign_investment">Foreign investment income</a></h4>
Foreign investment income is income from an investment outside Canada or a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> that invests in foreign securities. Foreign <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend"> dividends</a> are fully taxed in Canada, and are not eligible for dividend tax credits. However, there are foreign tax credits when tax is withheld on dividends or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Government_pension">Government pension programs</a></h4>
Government pension programs in Canada are the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPP"> Canada Pension Plan</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_OAS"> Old Age Security</a>, and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_GIS"> Guaranteed Income Supplement</a> and other provincial schemes for lower income earners. The Québec Pension Plan is an arrangement parallel to the Canada Pension Plan for residents of Quebec.
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<h4>
<a href="https://www.blogger.com/null" id="_Group_RRSP">Group RRSP</a></h4>
A Group RRSP is a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> registered retirement savings plan</a> sponsored by an employer or association. A financial institution administers the Group RRSP, and sets up an individual account for each participating employee. The Group RRSP offers the convenience of making RRSP contributions directly through payroll. Contributions to a Group RRSP are made before deductions for income taxes. In other words, the tax benefit is immediate, there is no need to wait until the following year to receive the tax refund.
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<h4>
<a href="https://www.blogger.com/null" id="_GIS">Guaranteed Income Supplement</a></h4>
The Guaranteed Income Supplement is a program of the Government of Canada designed to provide income to older persons with little or no income other than <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_OAS"> Old Age Security</a>. The amount paid is based on the person's total income in the previous year. Eligible persons must apply to Health and Welfare Canada in order to receive benefits. The Guaranteed Income Supplement is not subject to income tax. The amount payable depends on marital status and income received in the previous calendar year.
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<h4>
<a href="https://www.blogger.com/null" id="_GIC">Guaranteed investment certificate</a></h4>
A guaranteed investment certificate or GIC is an interest-bearing deposit with a term usually from one to five years. Interest on a GIC may be paid periodically (monthly, quarterly, semi-annually, annually), or paid at maturity along with the initial investment. The interest income is taxable every year whether or not it is actually received.
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<h4>
<a href="https://www.blogger.com/null" id="_Home_equity">Home equity</a></h4>
Home equity is the amount of money invested in a principal residence.
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<h4>
<a href="https://www.blogger.com/null" id="_Income_fund">Income fund</a></h4>
An income fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> in which funds are primarily invested in fixed-term securities such as <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill"> Treasury bills</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mortgage"> mortgages</a> and shares of preferred and high-quality stocks. These funds provide a steady stream of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest</a> as well as <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Income_splitting">Income splitting</a></h4>
Income splitting is a tax-planning technique of transferring income between a spouse in a higher tax bracket to a spouse or family members who are in lower tax brackets, thus reducing overall income taxes of the family. The Canada Revenue Agency set out attribution rules to limit income splitting, but contributions to a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Spousal_RRSP"> spousal RRSP</a> are still an effective tax-saving strategy.
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<h4>
<a href="https://www.blogger.com/null" id="_Inflation-adjusted">Inflation-adjusted dollars</a></h4>
$1 in two years will not purchase the same goods as $1 today. This is because of the presence of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Rate_of_inflation"> inflation</a> in the economy. If the purchase of a good costs $1 today and the rate of inflation is 3%, the same good in two years will be $1.06 (i.e., $1x1.03x1.03). Inflation-adjusted dollars is a way of expressing future dollar values in terms of today's value. This is accomplished by removing the inflation component from dollar values in the future. For example, an amount of $100,000 payable in 20 years is the same as $55,368 today, if we assume an annual rate of inflation of 3%. In other words, $100,000 in 20 years will have the same buying power as $55,368 today.
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<h4>
<a href="https://www.blogger.com/null" id="_Inflation_risk">Inflation risk</a></h4>
The inflation risk is the risk that the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Real_return"> real return</a> of an investment will be negative.
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<h4>
<a href="https://www.blogger.com/null" id="_Interest">Interest</a></h4>
Interest is the amount of money paid by a borrower to a lender in exchange of a loan. The interest on a loan is at an agreed rate and for a specified period of time. Interest is usually expressed as an annual percentage.
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<h4>
<a href="https://www.blogger.com/null" id="_Interest_rate">Interest rate risk</a></h4>
The interest rate risk is the risk that proceeds from an investment received in the future will have to be reinvested at a lower <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest rate</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Intestate">Intestate</a></h4>
Intestate is the condition of a person dying without a will. If a person dies intestate, the succession laws of the province in which the deceased resided determine how the assets will be distributed.<br />
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Ontario provides that the spouse receives the first $200,000 of assets, and any excess is split with one third going to the spouse, and the remaining two thirds to the children. Where there is only one child, assets in excess of $200,000 are split equally between the surviving spouse and the child.
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<h4>
<a href="https://www.blogger.com/null" id="_Investment_income">Investment income</a></h4>
Investment income is a general term referring to any type of revenue earned from a single investment or a portfolio of invested <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Asset"> assets</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Investment_risk">Investment risk</a></h4>
Investment risk is the potential for loss when making an investment. There are four common types of investment risks: <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Liquidity_risk"> liquidity</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Volatility"> volatility</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Inflation_risk"> inflation</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest_rate"> interest rate</a> risk. Generally, stocks have high volatility, but have offered historically the best protection over the long term from the inflation risk. On the other hand guaranteed investments have no volatility, but carry a significant interest rate risk.
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<h4>
<a href="https://www.blogger.com/null" id="_Life_expectancy">Life expectancy</a></h4>
Life expectancy is the average number of years that a person can expect to live based on statistics.
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<h4>
<a href="https://www.blogger.com/null" id="_LIF">Life income fund</a></h4>
A life income fund or LIF is a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF"> RRIF</a> for funds originating from a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP"> locked-in RRSP</a> or a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a>. The Canada Revenue Agency prescribes an annual minimum withdrawal, which is based on age and the market value of the LIF at the beginning of the year. Provincial legislation requires that the annual withdrawal do not exceed a maximum based on age, the value of the LIF and long term interest rates.
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A LIF under the Newfoundland and Labrador jurisdiction continues to maintain control on the investments until the end of the year of the 80th birthday, at which time the balance held in the fund must be used to purchase an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> from a life insurance company. A LIF subject to other pension legislation does not have to be converted to an annuity.
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The minimum age at which a LIF may be set up depends on the provincial legislation that applies to the member of the pension plan who is transferring funds to a LIF. The person holding a LIF has control over all investment decisions. As with an RRSP, funds in a LIF are tax-sheltered until withdrawn. See also <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LRIF"> locked-in retirement income fund</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Life_insurance">Life insurance</a></h4>
Life insurance is a contract that pays a specified amount upon death to a designated <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Beneficiary"> beneficiary</a>, in exchange for the payment of periodic premiums.
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<h4>
<a href="https://www.blogger.com/null" id="_Liquidity_risk">Liquidity risk</a></h4>
The liquidity risk is the risk of not being able to sell an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Asset"> asset</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Living_trust">Living trust</a></h4>
A living trust, or inter vivo trust, is an arrangement whereas a person gives full control of their assets to a trust while living. Assets in a living trust pass directly to the trust's beneficiaries, upon the person's death, avoiding <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Probate_fees"> probate fees</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Locked-In_RRSP">Locked-In RRSP</a></h4>
A locked-in RRSP is an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> with funds that have been transferred from a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a>. Provincial legislation requires that these funds be locked-in, which means that no withdrawal is allowed other than for the purpose of paying retirement income. At the time of retirement, funds in a locked-in RRSP are used to purchase an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> or converted to a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LIF"> life income fund</a>. A locked-in RRSP is also referred to as a locked-in retirement account or LIRA in certain provinces.
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<h4>
<a href="https://www.blogger.com/null" id="_LRIF">Locked-in retirement income fund</a></h4>
A locked-in retirement income fund or LRIF is similar to a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_LIF"> life income fund</a>, except that it does not require the purchase of an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> when the holder of the LRIF reaches age 80. Persons whose <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP"> locked-in RRSP</a> is subject to Ontario, Alberta or Saskatchewan legislation have a choice to select either a life income fund or an LRIF at the time of retirement.
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<h4>
<a href="https://www.blogger.com/null" id="_Marginal_tax">Marginal tax rate</a></h4>
The marginal tax rate is rate of tax paid on the highest band of earnings of a taxpayer. The federal income tax rates in Canada for the four <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Tax%20bracket"> tax brackets</a> are currently in 2003 of 16% of the first $32,183 of earnings, 22% of earnings between $32,183 and $64,368, 26% of earnings between $64,368 and $104,648, and 29% of earnings in excess of $104,648. In addition, each province has its own tax brackets and tax rates. These rates are reviewed annually and brackets are indexed in line with inflation in most provinces
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<h4>
<a href="https://www.blogger.com/null" id="_Market_index">Market index</a></h4>
A market index is a sampling of different holdings in the asset class it represents. For example, the S&P/TSX Composite Index measures the performance of 300 different stocks of stocks of publicly traded Canadian companies representing different sectors of the economy. Its intent is to show trends in the market and provide a benchmark to measure the performance of a portfolio.
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The Scotia McLeod Universe Bond Index reflects the performance of corporate and government bonds.
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<h4>
<a href="https://www.blogger.com/null" id="_Money_market">Money market</a></h4>
Money market is <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Debt"> debt</a> with a term of three years or less. Investments include government <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill"> Treasury bills</a> and commercial paper from banks and corporations.
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<h4>
<a href="https://www.blogger.com/null" id="_Money_market_fund">Money market fund</a></h4>
A money market fund is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> that invests only in short term securities, such as bankers' acceptances, commercial paper and short-term government <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Treasury_bill"> Treasury bills</a>. The emphasis for these funds is on safety and liquidity.
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<h4>
<a href="https://www.blogger.com/null" id="_Mortgage">Mortgage</a></h4>
A mortgage is a loan secured by the collateral of a real estate property. The loan is usually payable over a fixed term during which the principal and interest are paid in regular installments.
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<h4>
<a href="https://www.blogger.com/null" id="_Mortgage_vs._RRSP">Mortgage vs. RRSP</a></h4>
Making <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> contributions before paying down a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mortgage"> mortgage</a> is usually the best strategy according to many financial experts. This is because the tax-sheltered investment growth of RRSP contributions plus the tax refund applied to reduce a mortgage may exceed slightly principal and interest charges saved from applying the same amount to the mortgage. However, this depends on the investment <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return"> return</a> on the RRSP and the mortgage rate that will apply over time.
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Similarly, borrowing from an RRSP for a down payment may or may not be preferable depending on the investment rates of return and mortgage rates over time. The federal government's Home Buyers Plan allows first-time buyers to borrow up to $20,000 from their RRSP on an interest and tax free basis. The amount withdrawn must be repaid within 15 years.
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One must look at the impact of the following two scenarios to determine whether one option is better than the other:
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<ul>
<li>Keep Money in RRSP: Amount accumulated in the RRSP plus investment earnings less taxes on withdrawal, less extra capital and interest payments.</li>
<li>Borrow from RRSP: the after-tax accumulation of amounts repaid to the RRSP plus investment earnings, but none of the extra mortgage costs.</li>
</ul>
<h4>
<a href="https://www.blogger.com/null" id="_Mutual_fund">Mutual fund</a></h4>
A mutual fund is a pool of securities, usually <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> stocks</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Bond"> bonds</a>, held in a trust. An investment manager decides which individual securities are bought and sold. Ownership is acquired by purchasing units of the trust based on the market value of investment held in the pool on the day of purchase.
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Some funds assess a sales charge, or load, on the purchase or sale of units, while other funds have no sales charge. The value of the unit fluctuates daily, based on the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_NAV"> net asset value</a> of the fund.
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The trust receives <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend"> dividends</a> from the pool of securities, and realizes <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains or losses</a> when the manager sells securities. The trust avoids taxation by distributing income net of expenses to unit holders. Interest, dividends and capital gains are taxable every year based on the number of units held and are reported on a T3 slip, and must be declared on the tax return.
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Each mutual fund has its own investment objectives, depending on the type of fund and its investment charter. Some funds seek to generate income on a regular basis. Others seek aggressive growth by investing in young companies with a low level of capitalization.
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<h4>
<a href="https://www.blogger.com/null" id="_NAV">Net asset value</a></h4>
The net asset value or NAV is the current fair market value of each unit of a mutual fund. The NAV is the total value of the fund's investments plus other assets less liabilities, divided by the number of units outstanding.
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<h4>
<a href="https://www.blogger.com/null" id="_Net_worth">Net worth</a></h4>
The net worth is a person's total assets minus total liabilities. Lending institutions require this information to approve credit. Net worth also is a measure of a person's financial well being.
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From the balance of all assets and investments is deducted any amount of debt payable, such as unpaid income or property taxes, car loan, credit card balances, personal lines of credit, unpaid bills, or other loans, debt or obligations.
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<h4>
<a href="https://www.blogger.com/null" id="_Notice_of_Assessment">Notice of Assessment</a></h4>
The Notice of Assessment is the summary that the Canada Revenue Agency sends after filing to confirm the income, credits and other information stated in the personal income tax return. It also states any errors made on the return, and the amount of tax or refund owing.
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The notice includes a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> Registered Retirement Savings Plan</a> (RRSP) Deduction Limit Statement for the current year which provides a reconciliation of the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction"> RRSP deduction limit</a> between the previous year and current year.
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<h4>
<a href="https://www.blogger.com/null" id="_OAS">Old Age Security</a></h4>
Old Age Security or OAS is a social insurance program that provides a basic level of pension income, on application, to anyone age 65 or over who meets residence requirements. OAS is financed from the general tax revenues of the Federal Government. All benefits under OAS are adjusted quarterly each year in line with rises in the cost of living as measured by the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPI"> Consumer Price Index</a>.<br />
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Persons who are Canadian residents must include the basic Old Age Security pension in their taxable income. Persons who reside outside Canada are subject to tax withholding on their basic Old Age Security pension. The usual rate of withholding tax is 25%. However, persons who live in countries with which Canada has concluded a tax treaty that specifies a rate of withholding lower than 25% are only subject to that lower rate.
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A minimum of 10 years of Canadian residency after reaching age 18 is required to receive an Old Age Security pension in Canada. To receive OAS outside the country, a person must have lived in Canada for a minimum of 20 years.
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The amount of a person's pension is determined by how long he or she has lived in Canada. A person who has lived in Canada, after reaching age 18, for periods that total at least 40 years will qualify for a full OAS pension. A person who cannot meet the requirements for the full OAS pension may qualify for a partial pension. A partial pension is earned at the rate of 1/40th of the full monthly pension for each complete year of residence in Canada after reaching age 18.
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The amount of Old Age Security pension paid to persons with high incomes is reduced through a recovery provision of the Income Tax Act. For 2018, the tax recovery applies to persons whose total income exceeds $75,910. For every dollar of income above this limit, the amount of basic Old Age Security pension reduces by 15¢.
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<h4>
<a href="https://www.blogger.com/null" id="_PSPA">Past Service Pension Adjustment</a></h4>
A past service pension adjustment or PSPA is an adjustment to previously reported <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PA"> pension adjustments</a> in respect of pensionable service after 1989 to reflect an improvement in the pension benefits provided under a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a>.
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For each year of participation since 1990, there has been a pension adjustment reported for the pension benefits earned under the plan. If the pension is improved for some or all these years of service, the employee should have had higher pension adjustments. The PSPA is the difference between the pension adjustments after the improvement and the pension adjustments before the improvement.
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<h4>
<a href="https://www.blogger.com/null" id="_PA">Pension adjustment</a></h4>
A pension adjustment or PA is an amount that reduces the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction"> RRSP deduction limit</a> of persons who are in a company-sponsored <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a>. This is an attempt to equalize the various tax deferred savings programs in Canada and ensure that persons who participate in a company pension plan do not have the same level of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> contributions as those who do not.
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Thus, persons who are not in a pension plan do not have a pension adjustment. Those who participate in a registered pension plan or a deferred profit sharing plan have a pension adjustment reported for each year of participation on their T4 slip (Statement of Remuneration Paid). The pension adjustment reported in a calendar year reduces allowable contributions to an RRSP for the next calendar year.
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<br />
The PA is the amount contributed by an employee and/or employer to an employee account in a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Defined_contribution"> defined contribution pension plan</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_DPSP"> deferred profit sharing plan</a>, or the deemed value of pension benefits accrued during the year in a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Defined_benefit"> defined benefit pension plan</a>.
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<br />
If a person is a member of a defined benefit pension plan, the PA is calculated as 9 times the benefit accrued during the year less $600. For example, a person who earned $40,000 would be able to contribute $7,200 or 18% of earnings to the RRSP in the following year if there were no company pension. However, if the person earned a pension of, say, $500 last year in a company pension plan, then there would be a PA of $3,900 (9 times $500 less $600). The PA reduces the maximum allowable RRSP contribution to $3,300 ($7,200 less $3,900).
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<h4>
<a href="https://www.blogger.com/null" id="_Permanent_life">Permanent life insurance</a></h4>
Permanent life insurance, also called whole life insurance, is a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance</a> policy with level premiums that provide coverage for the entire duration of life, and pay the stated amount upon death of the insured. This type of policy has an investment component, a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CSV"> cash surrender value</a>, that increases in value over time. The policyholder can borrow against the policy or redeem it. However, redeeming the full cash surrender value will usually cause a cancellation of the policy.
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<h4>
<a href="https://www.blogger.com/null" id="_Portability">Portability</a></h4>
Portability is an option to transfer the value of a terminating employee's pension from a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a> to a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP"> locked-in RRSP</a>, to the pension plan of another employer, or to an insurance company for the purchase of an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Probate_fees">Probate fees</a></h4>
Probate fees are an amount charged by the province upon death to certify a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Will"> will</a>. Fees vary by province, but are generally of 0.5% of the first $50,000 of the deceased person's assets, and 1.5% of the excess.
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<h4>
<a href="https://www.blogger.com/null" id="_Profit_sharing">Profit sharing plan</a></h4>
A profit sharing plan is a compensation arrangement that distributes annually to employees a specified percentage of a company's profits in addition to their income. Each employee's share of the overall distribution usually depends on seniority and income level.
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<h4>
<a href="https://www.blogger.com/null" id="_Rate_of_inflation">Rate of inflation</a></h4>
The rate of inflation is the annual rate of increase in the general price level of goods and services. Year after year, each dollar buys less as the prices of goods and services sold in the market increase. This is how inflation erodes the purchasing power of someone who receives a fixed income. Inflation is measured as the increase over time in the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CPI"> Consumer Price Index</a>. (See <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Inflation-adjusted"> Inflation-adjusted dollars</a>.)
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<h4>
<a href="https://www.blogger.com/null" id="_Rate_of_return">Rate of return</a></h4>
The rate of return is the percentage change in the value of an investment over a period of time.
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<h4>
<a href="https://www.blogger.com/null" id="_Real_return">Real return</a></h4>
The real return is the rate of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Return"> return</a> on an investment after adjusting for inflation. For example, if the rate of return is 8% and the rate of inflation is 3%, the real rate of return is 4.85% (1.08 / 1.03 – 1).
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<h4>
<a href="https://www.blogger.com/null" id="_RESP">Registered Education Savings Plan</a></h4>
A Registered Education Savings Plan or RESP is a government-sponsored plan that allows parents to contribute each year in an account that appreciates tax free for up to 21 years.
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<br />
Contributions are not tax deductible, but investment income is not subject to income tax. There is no limit on the amount of contribution per year for each beneficiary, as long as the cumulative amount does not exceed a lifetime maximum of $50,000 per beneficiary. The government provides a grant of 20% of contributions, up to a maximum of $500 per year for each beneficiary.
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<br />
When the child starts post-secondary education, the RESP provides income to pay for tuition and related expenses, taxable at the rate applicable to the child's income, not the contributor. If the child does not pursue a post-secondary education, accumulated earnings can be transferred to the contributor's RRSP, if there is sufficient contribution room available. The maximum amount that can be transferred is $50,000. If RRSP contribution room is not available, income tax must be paid plus an additional 20% penalty tax. The RESP may only be tax sheltered for 26 years.
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<h4>
<a href="https://www.blogger.com/null" id="_RPP">Registered pension plan</a></h4>
A registered pension plan or RPP is an arrangement sponsored by an employer for the purpose of providing income to their employees after retirement. RPPs are registered with the Canada Revenue Agency to obtain tax-deductibility of employee and employer contributions and accrued investment income. Money accumulates in a fund held in a trust that is separate from the company's assets. RPPs are also subject to provincial pension legislation that sets out minimum standards to ensure equitable treatment, prudence and due diligence.
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<br />
There are two main types of RPPs: <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Defined_benefit"> defined benefit pension plans</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Defined_contribution"> defined contribution pension plans</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Registered_plans">Registered plans</a></h4>
Registered plans is a general term referring to <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> registered retirement savings plans</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_DPSP"> deferred profit sharing plans</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Locked-In_RRSP"> locked-in RRSPs</a>. (Company pension plans - either a defined benefit or a defined contribution pension plan - are <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plans</a>.)
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<h4>
<a href="https://www.blogger.com/null" id="_RRIF">Registered retirement income fund</a></h4>
A registered retirement income fund or RRIF is a withdrawal plan registered with the Canada Revenue Agency in which proceeds accumulated in an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> are used to provide an annual income. Investment earnings continue to accumulate on a tax-sheltered basis, but withdrawals are taxed as income.
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The Canada Revenue Agency prescribes an annual minimum withdrawal, which depends on the age and market value of the RRIF at the beginning of the year. Once a RRIF is opened, payments must commence in the following year.
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<br />
There is no minimum age to set up a RRIF. An individual may hold several RRIFs with different financial institutions. The RRIF holder maintains controls of the investments. Funds held in a RRIF may also be used to purchase an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> from a life insurance company.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_RRSP">Registered retirement savings plan</a></h4>
A registered retirement savings plan or RRSP is a personal savings plan registered with the Canada Revenue Agency in which contributions and investment earnings accumulate on a tax-deferred basis. Withdrawals from an RRSP account are taxed as income. By the end of the year in which the RRSP holder reaches age 71, the RRSP must be closed, converted to a registered retirement income fund, or used to purchase an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> from a life insurance company.
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<br />
An RRSP holder may make contributions during the taxation year, or 60 days after the end of that year. Contributors who become age 71 during the year may contribute until December 31 of that year, but not beyond.
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Related Topics:
<br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annual_RRSP"> Annual RRSP dollar maximum</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Foreign_content"> Foreign content restrictions</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Notice_of_Assessment"> Notice of Assessment</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PSPA"> Past service pension adjustment</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PA"> Pension adjustment</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction">RRSP deduction limit</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF"> Registered retirement income fund</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Unclaimed_RRSP"> Unclaimed RRSP contribution</a><br />
<a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Unused_RRSP"> Unused RRSP deduction limit</a>
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<h4>
<a href="https://www.blogger.com/null" id="_Reinvestment_of_distributions">Reinvestment of distributions</a></h4>
Distributions from a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Mutual_fund"> mutual fund</a> are usually reinvested, and more units are credited to each unit holder's account. The tax treatment is the same as if each unit holder received the money and used it to purchase more units of the fund.
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<h4>
<a href="https://www.blogger.com/null" id="_Retiring_Allowance">Retiring Allowance</a></h4>
A retiring allowance is an amount of money paid to a terminating or retiring employee in recognition of service, accumulated sick leave or loss of employment. A portion of funds payable as a retiring allowance may be transferred directly to an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> without being subject to income tax. This is in addition to the normal limits for RRSP contributions.
An individual may transfer up to $2,000 for each year of service before 1996 plus up to $1,500 for each year of service before 1989 in which no pension or deferred profit-sharing plan benefits were earned.
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<h4>
<a href="https://www.blogger.com/null" id="_Return">Return</a></h4>
The return is the percentage change in the value of an investment over a period of time. This may or may not include any distributions, such as <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend"> dividends</a> or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Reverse_mortgage">Reverse mortgage</a></h4>
A reverse mortgage is a loan taken by a homeowner using as collateral a real estate property. It is called a "reverse mortgage" because rather than making payments on the property, the homeowner receives income from the property, based on the amount of the loan. The person who takes a reverse mortgage continues to own and occupy the home, and benefits from any increase in the equity of the property. The principal and interest are repaid by the estate, or upon sale of the property.
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A reverse mortgage allows persons with significant equity in their homes to use it as a source of income. It provides immediate access to cash, investment or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> income or a combination thereof. Initial funds received through the program are tax-free and annuity income does not impact any senior income supplements currently available.
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The amount of home equity that can be unlocked ranges between 10% and 45%, and depends on the age, gender and marital status of the applicant. An older person can access a higher percentage.
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Eligible persons must be 62 or over (for couples, both spouses must be age 62 or over) and be a resident of British Columbia or Ontario in a geographic location that meets underwriting requirements. Certain types of properties, such as leasehold, co-ops and properties with larger acreage are not eligible.
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<h4>
<a href="https://www.blogger.com/null" id="_Risk_tolerance">Risk tolerance</a></h4>
Risk tolerance is a term describing the degree of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Investment_risk"> investment risk</a> an investor is willing to accept.
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<h4>
<a href="https://www.blogger.com/null" id="_RRSP_and_death">RRSP and death</a></h4>
On death, the proceeds of an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> are distributed to a idd <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Beneficiary"> beneficiary</a>, or to the estate, as designated in the RRSP or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Will"> will</a>. If a spouse is the designated beneficiary, the RRSP is transferred tax-free to the spouse's RRSP or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRIF"> RRIF</a>. Proceeds can also be transferred tax-free to provide a term annuity to dependent children or grandchildren until adulthood. If dependent children or grandchildren are physically or mentally handicapped, the RRSP can be transferred to an RRSP in their name.
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<h4>
<a href="https://www.blogger.com/null" id="_RRSP_deduction">RRSP deduction limit</a></h4>
The RRSP deduction limit is the maximum amount that a taxpayer can deduct in the tax return of a given year for contributions made to an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> after 1990 and before the first 60 days of the following year. This deduction limit applies to RRSP contributions to the taxpayer's RRSP, or to a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Spousal_RRSP"> spousal RRSP</a>, for which the taxpayer did not previously obtain a deduction.
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The RRSP deduction limit for the current year is equal to:
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<ul>
<li>The <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Unused_RRSP"> unused RRSP deduction limit</a> at the end of the previous year</li>
<li>Plus: 18% of previous year's <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Earned_Income">earned income</a> up to the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annual_RRSP"> annual RRSP dollar maximum</a></li>
<li>Minus: previous year's <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PA"> pension adjustment</a>, if any</li>
<li>Minus: net <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_PSPA"> past service pension adjustment</a>, if any</li>
</ul>
Each year, the Canada Revenue Agency provides a statement of this amount in the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Notice_of_Assessment"> Notice of Assessment</a>. This information is also available from the Canada Revenue Agency's Tax Information Phone System (TIPS) listed in the blue pages of the phone book.<br />
<h4>
<a href="https://www.blogger.com/null" id="_RRSP_carry-forward">RRSP carry-forward</a></h4>
The Canada Revenue Agency allows an indefinite carry-forward of the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Unused_RRSP"> unused RRSP deduction limit</a>. This means that contributors can make up in the future for years during which they were unable to make maximum RRSP contributions.
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<h4>
<a href="https://www.blogger.com/null" id="_Savings">Savings</a></h4>
Experts give the following advice in order to maximize accumulation of savings at retirement: start saving at the earliest possible age, save each and every year, and contribute the maximum allowable amount to an RRSP. The keys to maximizing wealth are time, deferring taxes, savvy shopping and having expenses that are lower than income.
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Time is an essential ingredient because of the leveraging effect of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Compound_interest"> compounding</a>. Also, investment fluctuations tend to smooth out over time, especially with <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dollar_cost"> dollar cost averaging</a>.
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Deferring taxes means paying taxes later, but before that day arrives, the money can grow completely tax-free. With compounding, tax-free growth of investments is even more leveraged.
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<h4>
<a href="https://www.blogger.com/null" id="_Share">Share</a></h4>
A share is a certificate representing ownership in a corporation or similar entity. <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Stock"> Stock</a> is also used interchangeably.
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<h4>
<a href="https://www.blogger.com/null" id="_Single-premium">Single-premium deferred annuity</a></h4>
A single-premium deferred annuity is an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Annuity"> annuity</a> purchased for a lump sum from a life insurance company by the sponsor of a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RPP"> registered pension plan</a>. In return, the insurer will pay a lifetime pension when the policyholder retires.
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<h4>
<a href="https://www.blogger.com/null" id="_Spousal_RRSP">Spousal RRSP</a></h4>
A spousal RRSP is an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> to which a spouse makes contributions on behalf of the other spouse. Spousal RRSP contributions are useful for couples who want to save taxes during retirement. It allows drawing smaller amounts from the spouses' respective plans, instead of one spouse drawing a larger amount – and paying more income tax. This strategy is called <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Income_splitting"> income splitting</a>.
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All or part of an RRSP contribution can be directed to the RRSP of a spouse, while maintaining the deductibility of the full amount in the hands of the contributor. The spouse's maximum RRSP deduction is unaffected by such contributions. However, the Canada Revenue Agency requires that withdrawals from the spousal RRSP during the current taxation year or preceding two years, be added to the contributing spouse's income in the year of withdrawal.
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Contributions to the spouse's RRSP may be deposited until December 31 of the year in which the spouse becomes age 71, without regard to the age of the contributing spouse.
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A spouse is defined as a person of the opposite sex who lives with and is engaged in a conjugal relationship for 12 or more months, or is the parent of natural or jointly adopted children.
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<h4>
<a href="https://www.blogger.com/null" id="_Standard_of_living">Standard of living</a></h4>
The standard of living is an expression that refers to the degree of wealth and luxury that a person experiences in everyday life. One objective for building net worth during income-earning years is to maintain one's standard of living during retirement.
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<h4>
<a href="https://www.blogger.com/null" id="_Stock">Stock</a></h4>
Stock is ownership of a corporation, represented by <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Share"> shares</a> of capital in the corporation.
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<h4>
<a href="https://www.blogger.com/null" id="_Tax bracket">Tax bracket</a></h4>
A tax bracket is a specific range of income to which a particular tax rate applies. The federal income tax rates in Canada for the
four tax brackets are currently 15.5% of the first $36,000 of earnings, 22% of earnings between $36,000 and $72,000, 26% of earnings between $72,000 and $118,000, and 29% of earnings in excess of $118,000 (Note: amounts are rounded to nearest thousand). See also <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Marginal_tax"> marginal tax rate</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Tax_credit">Tax credit</a></h4>
A tax credit is an amount that can be claimed in the income tax return by all taxpayers that reside in Canada.
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<h4>
<a href="https://www.blogger.com/null" id="_Taxation">Taxation of a mutual fund</a></h4>
Tax on a mutual fund only occurs when a mutual fund makes a <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Reinvestment_of_distributions"> distribution</a>, or when units are sold or transferred. There is tax on the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest</a>, <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Dividend"> dividend</a> and <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Capital_gain_or_loss"> capital gains</a> realized by fund in proportion to the number of units held. There is no tax if the mutual fund is held in an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a>.
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<h4>
<a href="https://www.blogger.com/null" id="_Term_insurance">Term insurance</a></h4>
Term insurance is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance</a> that does not have a savings component or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CSV"> cash surrender value</a>. The premium remains constant only for a specified term of years. Term policies are renewable, in periods of one to 20 years, and are usually not available to persons age 75 or older. Premiums rise significantly with each renewal.
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<h4>
<a href="https://www.blogger.com/null" id="_Term_to_100">Term to 100 insurance</a></h4>
Term to 100 is a type of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance</a> that is permanent, but unlike <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Permanent_life"> whole life insurance</a>, does not have a cash accumulation or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_CSV"> cash surrender value</a>. This life insurance is usually cheaper than permanent insurance but more expensive than term insurance. Premiums are fixed and guaranteed to age 100, whereas <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Term_insurance"> term insurance</a> premiums rise with each renewal.
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<h4>
<a href="https://www.blogger.com/null" id="_Testamentary_trust">Testamentary trust</a></h4>
A testamentary trust is a trust that takes effect upon death. A trust is a pool of assets managed by a trustee according to the terms set out by the person who created the trust. Professional trustees charge an annual fee for their services based on a percentage of the assets in the trust. Testamentary trusts are subject to <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Probate_fees"> probate fees</a>, but have the same tax status as individuals. Accordingly, they have attractive income-splitting opportunities, because the trust pays tax on amounts distributed, not the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Beneficiary"> beneficiary</a> receiving payments. The main purpose of a testamentary trust is to ensure that assets are distributed in accordance with the deceased person's intentions.
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<h4>
<a href="https://www.blogger.com/null" id="_Treasury_bill">Treasury bill</a></h4>
A Treasury bill or T-bill is a short-term security issued by a government, with a maturity generally between 30 to 364 days. T-bills have a face value and sell at a discount based on current <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Interest"> interest rates</a>. The difference between the discounted price and the face value is the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Yield"> yield</a> of the Treasury bill.
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<h4>
<a href="https://www.blogger.com/null" id="_Unclaimed_RRSP">Unclaimed RRSP contribution</a></h4>
An RRSP over-contribution is the amount of <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a> contributions in excess of the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction"> RRSP deduction limit</a>. Such amounts are not tax deductible and could be of up to $8,000 in the past. This buffer was put in place to provide leeway for taxpayers who contributed unintentionally above their limit.
<br />
The Canada Revenue Agency reduced this buffer to $2,000 in 1996. Taxpayers who over-contributed by more than $2,000 must claim the difference between their over-contributions and $2,000 before claiming any tax deduction for RRSP contributions. This difference is called the unclaimed RRSP contribution.
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<br />
Schedule 7 of the Income Tax Return contains the amount of Unclaimed RRSP contributions, if any.
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<h4>
<a href="https://www.blogger.com/null" id="_Universal_life">Universal life</a></h4>
Universal life is <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Life_insurance"> life insurance</a> that has an investment component in addition to a death benefit. The policyholder has the flexibility to change the death benefit and amount or timing of premium payments, and this increases or decreases the investment component.
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<h4>
<a href="https://www.blogger.com/null" id="_Unused_RRSP">Unused RRSP deduction limit</a></h4>
The unused RRSP deduction limit is the maximum amount which, at the beginning of the year, can be contributed to an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a>.
<br />
<br />
The unused RRSP deduction limit is equal to:
<br />
<br />
<ul>
<li>RRSP deduction limit for the previous year</li>
<li>Minus: allowable RRSP contributions deducted in previous year</li>
</ul>
The Canada Revenue Agency shows this amount in the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Notice_of_Assessment"> Notice of Assessment</a>. A taxpayer may choose to make RRSP contributions in a given year up to the maximum allowable amount, or <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_carry-forward"> carry forward</a> indefinitely in the future any amount below the <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP_deduction"> RRSP deduction limit</a>.<br />
<h4>
<a href="https://www.blogger.com/null" id="_Variable_life">Variable life</a></h4>
Variable life is <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_Permanent_life"> whole life insurance</a> that provides a death benefit dependent on the market value of the portfolio of invested premiums of the policyholder at the time of death. The insurer invests premiums in common stocks. Variable life insurance is sometimes referred to as equity-linked insurance.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Volatility">Volatility</a></h4>
Volatility is the risk of market price fluctuations, or the potential for a loss when an investment is sold at a market price that is lower than the purchase price. It is a measure of the fluctuation in the market price of the security.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Withholding_tax">Withholding tax</a></h4>
Withholding tax is the amount a financial institution must withhold by law and remit to the Canada Revenue Agency on funds withdrawn from an <a href="https://retireware.blogspot.ca/2018/04/knowledge-base.html#_RRSP"> RRSP</a>. The table below sets out the withholding tax:
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Will">Will</a></h4>
A will is a legal document detailing the distribution of a person's assets upon death. A will may address other arrangements, such as the naming of a guardian for the children. A person who dies without a will is said to die intestate.
<br />
<br />
The process of setting up a will begins with an inventory of all assets of the person making the will. This includes real estate, bank accounts, registered plans and any other investments. The next step is to decide who will be the children's guardian if both spouses die at the same time. Experts recommend retaining the services of a lawyer to help draft a will. Another option is using software packages available on the market. A valid will must be signed by the person who makes the will and by two witnesses who are present at the time of signing. It is important to maintain current the will as life circumstances change over time.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_Yield">Yield</a></h4>
The yield is the annual rate of return of an investment, expressed as a percentage.
<br />
For stocks, yield refers to the rate of return on dividends, and for bonds or other fixed income investments, it is the interest paid on the invested amount.
<br />
<h4>
<a href="https://www.blogger.com/null" id="_YMPE">Year's Maximum Pensionable Earnings</a></h4>
The Years Maximum Pensionable Earnings or YMPE are eligible earnings used in determining maximum benefits and contributions under the Canada or Québec Pension Plan. For 2018, the YMPE is $55,900. The employee and employer contribution rate is currently set at 4.95% of earnings between the YBE and the YMPE. The Government set the contribution rate to meet future funding requirements.
<br />
<br />
The YBE or Years Basic Exemption is $3,500. The Canada Pension Plan does not cover earnings below the YBE. The YMPE is linked directly with the average Canadian wage, and the Year's Basic Exemption is equal to $3,500. and remains unchanged.
<br />
<br />
<br />
<br />RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-64369175508535975172018-04-12T20:30:00.000-04:002018-04-13T08:46:41.416-04:00Old Age Security Clawback<br />
<div class="separator" style="clear: both; text-align: center;">
</div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf2FehrctWYPnU9hbPs2bZVvInsul_k0t1monAZysWVoNXZV2iv0S-_Me7JmnCrZJL5HsOKO1aMdl4Q9tZLqvHJ5B-5jgjOL_OnUOJcxqLTUKenuKGxdbhdmrnWVcH3bT2D8CV038c/s1600/IMG_20171210_160559.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1200" data-original-width="1600" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjf2FehrctWYPnU9hbPs2bZVvInsul_k0t1monAZysWVoNXZV2iv0S-_Me7JmnCrZJL5HsOKO1aMdl4Q9tZLqvHJ5B-5jgjOL_OnUOJcxqLTUKenuKGxdbhdmrnWVcH3bT2D8CV038c/s320/IMG_20171210_160559.jpg" width="320" /></a></div>
<br />
<h2>
What is Old Age Security Clawback?</h2>
Old Age Security ("OAS") is a social insurance program that provides a basic level of pension income, on application, to anyone age 65 or over who meets residence requirements.
<br />
The amount of Old Age Security pension is part of taxable income. OAS is reduced for persons with high income through a recovery provision of the Income Tax Act.
<br />
<br />
For 2018, the tax recovery applies to persons whose net income exceeds $75,910. For each $1 of income above this limit, the amount of basic Old Age Security pension reduces by 15¢.<br />
Repayment of "clawed-back" OAS pension is made through deductions at source. If net income is more than $75,910, one-twelfth of the total estimated repayment for the year will be deducted from your monthly OAS payments. The estimated repayment is based on your previous year's tax return.
<br />
<h2>
Background</h2>
Various sources of income are necessary for a comfortable retirement, including a registered retirement savings plan (RRSP), locked-in retirement account (LIRA), the Canada (or Quebec) Pension Plan, a company pension and non-registered investment income and/or capital.
<br />
<br />
OAS recovery is based on net income, that is income after deductions. One way to minimize clawback is by earning types of income that have less than a 100% inclusion rate. Another way is by using all possible tax deductions.
<br />
<h2>
Generate Tax-Efficient Investment Income</h2>
Income from a company pension or the Canada Pension Plan is fully taxable. There is no flexibility there. However, with a registered retirement income fund (what are RRSPs converted to after age 69), you have the ability to take a minimum withdrawal each year to minimize your net income.
<br />
<br />
When it comes to investment income from non-registered investments, different types of income are taxed differently. Interest income from Guaranteed Income Certificates (GICs) and term deposits are fully taxed. However, capital gains enjoy a much lower tax rate. While dividend income is taxed at a lower rate after taking into account the dividend tax credit, the "grossed-up" amount actually increases net income and will cause to increase OAS recovery payments.
<br />
<br />
One strategy is to minimize GICs and term deposits, and instead purchase income funds, that have a lower inclusion rate.
<br />
<h2>
Use Part of your Non-Registered Funds to Purchase an Annuity</h2>
Using part of your non-registered funds to purchase an annuity not only provides you with a lifetime stream of income, only a portion of each payment is taxable. This is because a portion of each payment is considered a return of capital and is therefore tax-free. Only the portion that is interest is taxable, and is generally less than half of each payment.
<br />
<h2>
Look for all Available Tax Deductions</h2>
Seek professional advice when preparing your income tax return to ensure that you claim all available deductions for your situation.
<br />
<br />
If you are not yet age 69 and have unused RRSP deduction room, make a final RRSP contribution. You don’t have to take your deduction all at once, you can spread it overtime, even beyond age 69.
<br />
For example, a $40,000 deduction taken over 8 years will reduce your net income by $5,000 each year. You get a tax savings of up to about $2,500 depending on your marginal tax rate, and your lower net income may result in an increase in Old Age Security of as much as a $750 per year, if your net income is still above the threshold.
<br />
<h2>
Borrow to Invest</h2>
If you have discretionary income, take an interest-only loan. Loan Interest for investment purposes is fully deductible and you use the discretionary to pay the interest. The loan interest reduces your net income dollar-for-dollar, and at the end of the loan, you pay the principal on the loan and keep the after-tax investment income. This strategy can increase significantly the value of your estate.
<br />
<h2>
What is Net Income?</h2>
Net Income is Total Income reported on your tax return less certain deductions.
<br />
Total Income includes employment income, Old Age Security, Canada or Quebec Pension Plan benefits, pension income, dividends, taxable capital gains, rental income, RRSP income and other revenues.
<br />
<br />
Deductions include Registered Pension Plan contributions, RRSP contributions, union and professional dues, business losses, carrying charges, interest expenses and other items.
<br />
<h2>
Government of Canada's OAS Repayment Web Page</h2>
You can find more information on the Government of Canada website at <a href="http://www.canada.ca/">www.canada.ca</a> by searching "Old Age Security Recovery Payments".
<br />
<br />RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-60972654070899237652018-03-29T18:07:00.001-04:002018-04-12T20:10:19.430-04:00Quick Retirement Risk Primer<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhByDzpJFG5Q6b7ogT7OB8YKcqFVVyMhzO98-y-_x9C7TbuEeJuJA84nk-MhaOjUDoCPtQtylJpi42Gp8ZYIVvGHYdnBbmAXXfZ84etjHpbio4I1K055KyEV6qsZs_rNtRBmhbAFcVg/s1600/IMG_20180327_143236.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1069" data-original-width="1600" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhByDzpJFG5Q6b7ogT7OB8YKcqFVVyMhzO98-y-_x9C7TbuEeJuJA84nk-MhaOjUDoCPtQtylJpi42Gp8ZYIVvGHYdnBbmAXXfZ84etjHpbio4I1K055KyEV6qsZs_rNtRBmhbAFcVg/s320/IMG_20180327_143236.jpg" width="320" /></a></div>
<br />
<h2>
Risk Management Framework</h2>
A risk management framework consists of the following elements:<br />
<ul>
<li>Identify, characterize, and assess threats,</li>
<li>Assess the vulnerability to specific threats,</li>
<li>Determine the risk (i.e. the expected consequences of each threat),</li>
<li>Identify ways to reduce those risks, and</li>
<li>Prioritize risk reduction measures.</li>
</ul>
<h2>
Assessing Risk</h2>
Risks must be assessed as to their potential severity of loss and to the probability of occurrence.<br />
Perhaps the most widely accepted formula for risk quantification is:<br />
Risk = Rate of occurrence X impact of the event<br />
Three approaches can be used to assess post-retirement risks:<br />
<ul>
<li>Determining the odds for the occurrence,</li>
<li>Gauging the impact of an occurrence with stress testing, or</li>
<li>Evaluating the impact of a risk to a moderate change in outcome using sensitivity testing.</li>
</ul>
<h2>
Potential Risk Treatments</h2>
Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories:<br />
<ul>
<li>Avoidance (eliminate)</li>
<li>Reduction (mitigate or control)</li>
<li>Transfer (outsource or insure)</li>
<li>Retention (accept and budget)</li>
</ul>
Some risks fall in a "qualitative" category as to their treatment.<br />
All risks that are not avoided or transferred are retained by default. Some approaches to managing risk fall into multiple categories.<br />
<h4>
Risk management plan</h4>
A risk management plan summarizes the approaches selected for managing the risks and documents the decisions<br />
Implementation means following all of the planned methods for mitigating the effect of the risks, purchasing insurance policies for the risks that have been decided to be transferred to an insurer, avoiding all risks that can be avoided, reducing others and retaining the rest.<br />
<h4>
Review and evaluation of the plan</h4>
Risk analysis results and management plans should be updated periodically to evaluate whether the approaches are still applicable and effective, and to determine any changes in the possible risk level.<br />
<h4>
Post-retirement Risks</h4>
Here's a list of the most important post-retirement risks:<br />
<ul>
<li>Longevity</li>
<li>Interest rate</li>
<li>Sequence of returns</li>
<li>Stock Market</li>
<li>Inflation</li>
<li>Loss of spouse</li>
<li>Declining health</li>
<li>Medical costs</li>
<li>Employment risk</li>
<li>Unforeseen expenses</li>
<li>Estate preservation</li>
<li>Liquidity</li>
</ul>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-41120252812652037202016-11-25T17:09:00.000-05:002016-11-25T17:09:00.149-05:00How to enter defined benefit pension amounts<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUjLAaAJY-_r2uDQCTyNFgSJmyxIjTsWagdpYHnEreIwzI0B_SAA6IIzny45JUr8lXv-_B-lOgwgn7oKiPdswWa47N-VNSqgxKr86yosdf9LgDtmy-vzNTc36nRJSfera4TarC_gfJ/s1600/Image28.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUjLAaAJY-_r2uDQCTyNFgSJmyxIjTsWagdpYHnEreIwzI0B_SAA6IIzny45JUr8lXv-_B-lOgwgn7oKiPdswWa47N-VNSqgxKr86yosdf9LgDtmy-vzNTc36nRJSfera4TarC_gfJ/s320/Image28.png" width="320" /></a></div>
<br />
<b>Question:</b><br />
<br />
I have entered defined benefit company plans for me and my spouse. My report is showing much higher pension amounts.<br />
<br />
It seems accurate for current 2016, but much too high starting next year 2017: ($105,620 for 2016, and $178,211 for 2017 combined).<br />
<br />
Here is my input:<br />
<br />
For me:<br />
<br />
<ul>
<li>Bridge Pension Payable Until Age 65: $74,655</li>
<li>Lifetime Pension Payable at Age 65: $61,895</li>
</ul>
<br />
For my spouse:<br />
<br />
<ul>
<li>Bridge Pension Payable Until Age 65: $31,200</li>
<li>Lifetime Pension Payable at Age 65: $23,520</li>
</ul>
<br />
Can you help, do you see where I may be entering inaccurately?<br />
<br />
<b>Answer:</b><br />
<br />
The lifetime pensions are correct.<br />
<br />
For you, the bridge should be $12,760 (74,655 - 61,895). If it's in payment, enter it as a "Former Employer Plan", otherwise there will be accruals between now and retirement. The way you have it should be OK, as you are already 60.<br />
<br />
The same comments apply to your spouse, please enter the annual bridge only (31,200 - 23,520).<br />
<br />
Note that you can see detailed cash flow tables for each spouses and both combined at the bottom of the 'Accumulations' and 'Income Forecast' tabs.<br />
<div>
<br /></div>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-33826169324543796232016-11-22T17:06:00.000-05:002016-11-22T17:06:00.159-05:00Using RetireWare for fee-only practice<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhulULsar4qujyuxV-RNWW79FmzpsmvlGgnEWvrcgg42HBlyuxbNwb5sKCPh9vt_MoU9ozaaBB7OxqYbu086frk1YR7GvSzbEHMERpGWxBPxIxqHyaaQDEALjJUKb6IDYMxrdMT4-_c/s1600/Image101.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhulULsar4qujyuxV-RNWW79FmzpsmvlGgnEWvrcgg42HBlyuxbNwb5sKCPh9vt_MoU9ozaaBB7OxqYbu086frk1YR7GvSzbEHMERpGWxBPxIxqHyaaQDEALjJUKb6IDYMxrdMT4-_c/s320/Image101.png" width="320" /></a></div>
<br />
<b>Question:</b><br />
<br />
I'm in the process of trying to scale my fee-only/advice-only planning practice. With enough clients that I'm reaching significant overload, I'm looking into Canadian planning software that I can use for my clients - but not necessarily with my clients.<br />
<br />
<b>Answer:</b><br />
<br />
If you use the professional version, you create and control the files and your clients do not have any access.<br />
<br />
The collaborative version has more CRM functionality, such as exportable client lists, but not to the extent of exchanging information with billing and other CRM systems. For the collaborative, you can turn off the social media and referral components.<br />
<div>
<br /></div>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-78837964649654343382016-11-18T17:03:00.000-05:002016-11-18T17:03:00.153-05:00Update Wizard<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhazX3cKoB4KiljG8D-HOClHKZBakzyQm6HPC3dDlzvo6-DttfLU1irXerTjMzzMIiRqQyyn580JYeHyQPZoR8Ux_MPyh_AwrpngevSjbDQNROUWyswQ6hSU0V5vXD9jownukM8vG9m/s1600/Image8.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhazX3cKoB4KiljG8D-HOClHKZBakzyQm6HPC3dDlzvo6-DttfLU1irXerTjMzzMIiRqQyyn580JYeHyQPZoR8Ux_MPyh_AwrpngevSjbDQNROUWyswQ6hSU0V5vXD9jownukM8vG9m/s320/Image8.png" width="320" /></a></div>
<br />
<b>Question:</b><br />
<br />
One question on the “Update” feature. I haven’t used it yet but just trying to figure out what happens when you use it. So say you update all the financial information and any changes that might need to be done with assumptions, etc., does the program then use those numbers and the date (for example if I updated the financial info for Feb 28th, next week) and project the year end results for this year based on 10 months of returns / expenses?<br />
<br />
If you use the update feature I assume it changes the “date of financial information” to the current month. If you just go in and make changes to the data then it will be using the previous date for calculations unless you manually change the “date of financial information”. <br />
<br />
Basically the update feature seems to be an automated feature that adjusts the date for calculations and allows you to update the financial information. If you need to do more than that then you can go into the other sections to do that.<br />
<br />
So it will use 10 months of data for projection for year 1 when I use March as my start date for instance?<br />
<br />
<b>Answer:</b><br />
<br />
What you said is correct. The Update Wizard groups all main and changing inputs in one location (mostly asset values), and updates the date of calculation automatically.<br />
<br />
If you use the Detailed or Quick retirement calculations, you must change the date manually.<br />
<br />
If you go through the Update Wizard, you can always go to the main program at any time and change the date back if you wish. It is not cast in stone. However, it's best to align the date with the date of the most current account balances.<br />
<br />
The projection for year one is for 10 months, and all other years are twelve months, except the last. The last year, i.e. grimly called "year of death", is from January 1 to the birthday month.<br />
<div>
<br /></div>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-80804747898828301472016-11-15T17:01:00.000-05:002016-11-15T17:01:00.152-05:00Purchasing an annuity with RRSP<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHUasYVwrriPeim2UK6SGq0BCfdqqdv0p4nXPK-sDJFm_NobRLLaW2vxe6BktPQILR40kU1wmcJD7l1GNx3sgQOS2e8JTLdDV-gobPIhDRKccF93jmf-2YvrxM1BC9mHn6UV7LjyTs/s1600/Image28.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiHUasYVwrriPeim2UK6SGq0BCfdqqdv0p4nXPK-sDJFm_NobRLLaW2vxe6BktPQILR40kU1wmcJD7l1GNx3sgQOS2e8JTLdDV-gobPIhDRKccF93jmf-2YvrxM1BC9mHn6UV7LjyTs/s320/Image28.png" width="320" /></a></div>
<br />
<b>Question:</b><br />
<br />
How do I purchase an annuity in 2020 with my my RRSP?<br />
<br />
<b>Answer:</b><br />
<br />
There is a section in 'Registered Investments' on the 'Financial Information' page where you can select to purchase an annuity with the proceeds of your RRSP.<br />
<div>
<br /></div>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-60072525163211213882016-11-10T16:59:00.000-05:002016-11-10T16:59:00.157-05:00Asset allocation and sources of income<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZE_2LOYZft77m1S_SWWYyP_x9xn8gXHjkl768mGuFVb0gjuJMa6vZIGTPLSveAgLvJFt4BGTMp7HQYJsFj_LU-YXftCYsF1jB1TmuF0H2SHwpbpgxOi_gQd1Vqi7e77cUOcrLgsES/s1600/Image263.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiZE_2LOYZft77m1S_SWWYyP_x9xn8gXHjkl768mGuFVb0gjuJMa6vZIGTPLSveAgLvJFt4BGTMp7HQYJsFj_LU-YXftCYsF1jB1TmuF0H2SHwpbpgxOi_gQd1Vqi7e77cUOcrLgsES/s320/Image263.png" width="320" /></a></div>
<br />
<b>Questions:</b><br />
<br />
Looking at the Report I have a few questions:<br />
<br />
Under Asset Allocation it states “The Investor Profile Questionnaire established that the following portfolio: Security might be the most …” Do I assume that the RetireWare used a “Security” mix for my investments listed under Finances or will it use the “Selection of Rates in Economic Outlook?” I deliberately left all RRSPs in the “Finances – Registered Investments – Market Value” as “Cash” so the projected growth would utilize a low return (2.25% as noted on the Assumptions and Disclosures).<br />
<br />
Under the “Sources of Retirement Income” it has “yes” next to Personal Residence even though I indicated for both my wife and me “Never” under “Financial Information – Principal Residence – Sell Principal Residence.” Are the income projections using the value of our personal residence or not?<br />
<br />
<b>Answer:</b><br />
<br />
The calculations use the asset allocation basis selected on the 'Asset Mix for Projections' tab on the 'Options' page. You can select an asset allocation based on one of the profiles, the current asset mix, or your own custom allocation.<br />
<br />
Since you selected 'Never', there will be no sale taking place. If you had selected a year for the sale but left the personal residence unselected in 'Sources of Retirement Income', then the funds would not be used for retirement.<br />
<br />
<div>
<br /></div>
RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-88720420182112059692016-11-08T16:58:00.000-05:002016-11-08T16:58:00.170-05:00Cash Flow Forecast<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdS_PEQ2HiiJysxjmrJQzwkgg30iL6t7liM6RxUCBXpyNldbpDH_w2eYkWB36ox67LRZFm5jLs7OPulpdf2dZxdviKo4aTIhJ9Mhn4E7vkLrOUw0SS6qxY6KhdtvOWokO-A_k96fmi/s1600/Image272.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhdS_PEQ2HiiJysxjmrJQzwkgg30iL6t7liM6RxUCBXpyNldbpDH_w2eYkWB36ox67LRZFm5jLs7OPulpdf2dZxdviKo4aTIhJ9Mhn4E7vkLrOUw0SS6qxY6KhdtvOWokO-A_k96fmi/s320/Image272.png" width="320" /></a></div>
<br />
<b>Question:</b><br />
<br />
In the Cash Flow Forecast Detailed Data Table, there is a column of data called "Retirement Objective Net". From what I can see it includes the Post retirement expenses that I setup along with special expenses according to the parameters on the "retirement income target" tab.<br />
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However I can't seem to reconcile the data in that column against the budget, it is always higher. Can you tell me what data is included in the (net) retirement income objective column?<br />
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<b>Answer:</b><br />
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The expenses you entered are in "today's dollars". So if it's payable in. say, 10 years, the annual expenses are increased by the rate of inflation applicable during that period. This is to ensure that your assets can pay for the expenses when they are incurred in the future. Look in the Help file, under Forecast Menu | Retirement Income Target | Adjustments to Retirement Income. There is more information and an example about the impact of inflation.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-6384482225167801622016-11-03T16:57:00.000-04:002016-11-03T16:57:00.166-04:00MonteCarlo calculations<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhr3aJinb_IcZQcP1E4hDnndBqbBufd5_W6hGYhF5Vw_NWvO7Dbhh9QgbKJdt7hrdpfvRI6Hd6lkH_IZ-AKHb-0JEa2DWJ7GY87-c4PZLRvLnUpbrDnxq1VqWXNMM1BDyzqfR5sEu50/s1600/Image228.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhr3aJinb_IcZQcP1E4hDnndBqbBufd5_W6hGYhF5Vw_NWvO7Dbhh9QgbKJdt7hrdpfvRI6Hd6lkH_IZ-AKHb-0JEa2DWJ7GY87-c4PZLRvLnUpbrDnxq1VqWXNMM1BDyzqfR5sEu50/s320/Image228.png" width="320" /></a></div>
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<b>Questions:</b><br />
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I have a dilemma. Hopefully you can help. My investment adviser recently provided me with a retirement plan using another product.<br />
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Income, future assets etc. were comparable to what I calculate using RetireWare.<br />
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However, for the same scenario, RetireWare is indicating a 100% probability of success. The competing software shows a 14% failure. The adviser recommends up to 10% failure as acceptable.<br />
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I assume that both programs should yield generally comparable Monte Carlo results?<br />
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<b>Answer:</b><br />
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Please note that there is a setting in the Options page that counts small shortfalls as a success, so by setting the threshold to $0, the probability may go down.<br />
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Also note that Naviplan probably uses a different approach for their simulations. For example, they may use only one expected return and volatility, or maybe only fixed income and equities for asset classes. In any case, with such calculations resting heavily on assumptions and methodologies, one may view a 14% failure as equivalent to a 10% failure. Also, since this is the product of an advisor, there is an incentive to err on the conservative side since your success is at stake, so he may be extra careful to recommend higher spending.<br />
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One way to assess your plan is to look at the various results produced by the software. You have the odds of success, a deterministic projection based on your selected expected returns (or RetireWare's standard, which is fairly conservative). You also have a projection assuming you earn poor investment returns in the future. Then there is the risk analysis that "stress tests" the plan against the main risks under various economic conditions.<br />
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Our idea in making decisions when facing an uncertain future is to take a "holistic" approach. If you see that most indicators are favourable, then you probably are OK.<br />
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One last thought. If you find you experience lower than expected returns or higher expenses after a year or two, you are able to correct the course by monitoring your plan and adapting your spending going forward to set you back on solid footing to meet your expenses throughout retirement.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0tag:blogger.com,1999:blog-5388254975336780741.post-86005011977611418492016-11-01T16:55:00.000-04:002016-11-01T16:55:00.175-04:00A few product questions<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRxS1XuAznQk3nDFcjF_q5QCxqv2B_BJv_yCo5jUCxwXNX0KAE3Cv7325UeLmjFK3ixD_d-x4xPIX-EyeRR9shMD0TF0D35T6aGuSk6nyfXNgc1_wZFslPOd5h3GctqddJOuDEforv/s1600/Image11.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiRxS1XuAznQk3nDFcjF_q5QCxqv2B_BJv_yCo5jUCxwXNX0KAE3Cv7325UeLmjFK3ixD_d-x4xPIX-EyeRR9shMD0TF0D35T6aGuSk6nyfXNgc1_wZFslPOd5h3GctqddJOuDEforv/s320/Image11.png" width="320" /></a></div>
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<b>Question:</b><br />
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I have a few questions about some inputs that I cannot resolve on my own. I am a new subscriber but I think I have everything figured out now except the below.<br />
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Is there a way to model a spousal loan? for example, if I have lent my spouse $1 Million at 1% until death there is a $10,000 deductible interest expense for one and interest income for the other.<br />
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I don't quite understand the "dividend yield" and "increase in earnings" fields in the economic forecast. If I input all the nominal equity asset class returns as 7% for example, what happens when I manipulate the other two variables? it seems to effect the Monte Carlo simulation significantly so I want to be more certain as to their meaning.<br />
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For the Monte Carlo simulation, how conservative are the input volatility? I am trying to get more comfortable on the simulation and how I manipulate the variables to get an 85% chance of success or a 35% chance (or everything in between).<br />
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<b>Answer:</b><br />
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To model the loan, you could add an 'Other Income; of $10,000 per year for you, and a $10,000 interest expense on her budget.<br />
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The "dividend yield" adds a constant dividend on the share of assets invested in equities (based on the profile selected in 'Asset Mix for Projections' on the 'Options' page. So if you select 2% and have $100,000 in equities, it will add $2,000 in the following year of dividend income taxed assuming they are eligible dividends. In future years, it will be based on the market value of equities, so as they grow, so does the dividends.<br />
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The "increase in earnings" field in the economic forecast is an assumption for annual wage increase. So if you are not retired and earn $100,000 per year with a 3% annual increase in earnings, the program will calculate earnings of $103,000 next year and increase it by 3% each year up to retirement. This is the only purpose of this assumption. In turn, your annual earnings are used to estimate the CPP.<br />
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The increase in earnings and dividend rate are not subject to volatility in the simulation. In other words they are assumed to be constant.<br />
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The default volatility for each asset class are based on historical experience adjusted to recent trends. In a nutshell, cash and fixed income are assumed to be less volatile than historically, and equities are in line with their historical volatility (based on the last 20 years), with International equities experiencing the most volatility. These are revisited annually.<br />
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RetireWare / Equisofthttp://www.blogger.com/profile/06607520562232346165noreply@blogger.com0