Chapter 14: Retirement Planning

Question 1

Why start retirement saving early?

Answer 1

• Time value of money grows savings over time
• Starting at 25 vs 35 vs 45 drastically changes your retirement fund

Question 2

What should you include in a retirement financial analysis?

Answer 2

• Assets: Home equity, RRSPs, life insurance, investments
• Liabilities: Debts, loans
• Consider reverse mortgages, cashing in life insurance, or investment income

Question 3

What programs assist seniors with housing?

Answer 3

CMHC programs:
- Home Adaptations for Seniors Independence
- Emergency Repair Program
- Residential Rehabilitation Assistance Program

Question 4

What are the major sources of retirement income?

Answer 4

1) Public pensions (CPP/QPP, OAS, GIS)
2) Employer pensions (Defined Benefit & Defined Contribution)
3) Personal plans (RRSPs, TFSAs, RRIFs, annuities)

Question 5

What is the Canada/Quebec Pension Plan (CPP/QPP)?

Answer 5

• Provides retirement, disability, and survivor benefits
• Contributions based on income
• Can start as early as age 60 (reduced benefits)

Question 6

What is Old Age Security (OAS) and GIS?

Answer 6

OAS: Monthly payments to those 65+ who meet residency rules

GIS: Extra support for low-income seniors

SPA: Help for
widows/widowers and spouses aged 60–65

Question 7

What is a Defined Benefit Pension Plan?

Answer 7

• Guarantees a fixed pension based on salary & years worked
• Employer is responsible for investment performance

Question 8

What is a Defined Contribution Plan?

Answer 8

• Contributions by employee/employer
• Retirement income depends on investment performance
• Vesting ensures your right to some/all funds even if you leave early

Question 9

What is a Deferred Profit Sharing Plan (DPSP)?

Answer 9

• Employer-only contributions
• Based on company profit
• Taxed when withdrawn

Question 10

What is a Group RRSP?

Answer 10

• Offered through employer
• May reduce payroll tax deductions
• Still owned by the employee

Question 11

What is an RRSP?

Answer 11

• A tax-deferred savings vehicle
• Can hold GICs, mutual funds, stocks, insurance, etc.
• Contributions up to 18% of income (max $30,780 in 2023)
• Contribution room can carry forward

Question 12

What are the RRSP special programs?

Answer 12

Home Buyers’ Plan: Withdraw up to $35,000 tax-free for first home

Lifelong Learning Plan: Withdraw up to $10,000/year ($20,000 total) for education

Question 13

What is a TFSA?

Answer 13

• Tax-Free Savings Account
• Not tax-deductible, but grows tax-free and withdrawals are tax-free
• Must be 18+ with SIN
• Annual limits apply