Chapter 13

Question 1

Sources of income at retirement can be grouped into one of three categories:

Answer 1

Government plans, Employer-sponsored pension plans, and Personal savings plans.

Question 2

What percentage of Canadians contribute to RRSPs every year?

Answer 2

two-thirds

Question 3

At its most basic level, retirement planning process involves five steps:

Answer 3

1. Determine retirement objectives.
2. Determine the current financial status.
3. Estimate total retirement income sources and needs.
4. Establish an investment plan to meet the retirement needs.
5. Monitor and evaluate the progress to plan.

Question 4

Once a financial plan has been established, how often should you go through all of the planning steps to determine whether the plan should be modified?

Answer 4

At least once a year or whenever significant life changes occur

Question 5

Wealth conversion, however, is concerned with these three things. It requires a different, more holistic approach

Answer 5

the discovery process, goal setting, and client education

Question 6

The retirement discovery process is strengthened if you have a sound understanding of the potential issues people face as they approach the end of work, enter retirement, and age through their retired years. These issues include

Answer 6

workplace transitions, health challenges and their impact on lifestyle, and psychological turmoil such as empty nest
syndrome, caregiver stress, and bereavement

Question 7

At no other time in a client’s financial planning life

does education on life issues play such a key role in their decision-making.

Answer 7

In retirement

Question 8

In wealth conversion, however, the time horizon is _____ and the margin for error is ______

Answer 8

short

small

Question 9

Financial planning shifts both to anticipating life changes and reacting to changes that occur in the present. As a result, the most valuable questions an advisor can ask during the discovery process

Answer 9

are open-ended questions that get clients thinking about themselves, their loved ones, and their goals

Question 10

Retirement is as much a _____________concern as it is a financial or workplace issue.

Answer 10

psychological

Question 11

You can help your clients prepare mentally for retirement by guiding them through six steps:

Answer 11

1. set overall goals and plans
2. discuss their goals and plans with those who will share their retirement.
3. Ask about the things they have always wanted to do
4. Try new activities
5. Treat all problems or crises as opportunities
6. Help your clients understand how to create a successful and personalized retirement lifestyle that is right for them.

Question 12

To be effective, a retirement plan must consider the major lifestyle issues that will make up the client’s post-retirement life. A retirement plan should address five general areas:

Answer 12

• Family issues
• Health challenges
• Lifestyle goals
• Work options
• Legacy opportunities

Question 13

A sound retirement plan ensures that clients will have

Answer 13

sufficient income to meet their retirement goals.

Question 14

For many retirees, money has five useful aspects, as described below:

Answer 14

• Protection, comfort, and safety
• Independence
• Desired Lifestyle
• Assistance for family members
• Legacy

Question 15

To reduce longevity risk, some advisors suggest investing some of one’s accumulated assets in a ____ _________.

Answer 15

life annuity

Question 16

If a client has insufficient savings or a very low risk tolerance, the most appropriate option for lifelong income is to

Answer 16

purchase a life annuity

Question 17

If the client has sufficient savings and a low tolerance for risk, a combination of a

Answer 17

life annuity and an investment portfolio may be suitable.

Question 18

If the client has abundant savings and sufficient risk tolerance,

Answer 18

an investment portfolio alone, with an optimal asset mix, can generate lifelong income

Question 19

Retirement income normally comes from three sources:

Answer 19

• Employer and private pension plans, such as registered pension plans (RPPs) or RRSPs
• Government programs (OAS, GIS, CPP, or QPP)
• Accumulated savings

Question 20

As for expected retirement expenses, a generally accepted estimate is ___% of pre-retirement expenses

Answer 20

70

Question 21

To create projections, it helps to divide expenditures into

Answer 21

fixed (non-discretionary) and flexible (discretionary) components

Question 22

The age credit is provided to those ____ years of age and older and will provide tax savings of 15% on $7,713 in 2021 (federal only).

Answer 22

65

Question 23

The age amount begins declining when net income reaches $_________(for 2021) and is fully eroded
when net income is $_________or more.

Answer 23

$38,893

$90,313

Question 24

Withdrawals from a RRIF can be made based on the age of the

Answer 24

younger spouse.

Question 25

What is the tax advantage of donating publicly traded securities to charity?

Answer 25

They receive a non-refundable tax credit on the fair market value of the securities donated, and if those securities have unrealized capital gains, the gain is not subject to tax upon contribution to the charity

Question 26

In addition, taxpayers who are in the top tax bracket – that is, having taxable income of more than $216,511 in 2021 – could receive an extra tax credit on charitable donations of ____%.

Answer 26

33%

Question 27

Regarding tax credits on charitable donations, normally one would receive ____% on the first $200 donated, and then ____% on the remainder, unless you are in the top tax bracket, then you could be entitled to a tax credit of 33%

Answer 27

15%

29%

Question 28

Clients who are 65 or older are eligible for a $_____ pension income tax credit on income from a company pension plan, a registered annuity, or a RRIF.

Answer 28

$2,000

Question 29

Couples can minimize their combined tax liability by ________ their eligible retirement income during retirement.

Answer 29

splitting

Question 30

Canadian residents who receive income that qualifies for the pension income tax credit can allocate up to ___% of that income to a resident spouse or common-law partner.

Answer 30

50%

Question 31

For clients who are 65 years of age or older, pensions qualifying for income splitting include

Answer 31

RPP payments, RRSP annuity payments, and RRIF payments.

Question 32

Four credits, in particular, can be passed to a client’s spouse:

Answer 32

the age credit, the disability credit, the pension credit, and, the tuition credit.

Question 33

Perhaps the simplest technique for splitting income is

Answer 33

to have the higher-income spouse pay household expenses, thus freeing up the other spouse’s income for investment.

Question 34

If you are married or in a common-law relationship, you may be able to claim a spousal tax credit for federal purposes. For example, in 2021, you could claim a spousal tax credit if your spouse earned less than $__________.

Answer 34

$13,808

Question 35

In certain circumstances, it can make sense for the higher-taxed spouse to report all of the other spouse’s dividends on his or her tax return. By doing so, the client will reduce the lower-taxed spouse’s income and increase the spousal tax credit entitlement. In fact, the client will be allowed to make this election only if it

Answer 35

increases the spousal tax credit.