Chapter 6

Question 0

Flat benefit plan

Answer 0

Specified dollar amount for each year of service

Question 1

Defined benefit plans (3)

Answer 1

Flat benefit
Career average
Final average

Question 2

Career average plan

Answer 2

% of an employees earnings over their career

Question 3

Final average plan

Answer 3

% of earnings over a stated period of time example 10 years

Question 4

Defined contribution plans

Answer 4

Employer contributes fixed % based on employees annual earnings

Question 5

Registered retirement savings plan (RRSP)

Answer 5

Defers tax
Taxed when withdrawn
Can include bonds, stocks, mutual funds, foreign securities
Max contribution limit is 18% prev years income or 22,970

Question 6

Registered retirement income funds

Answer 6

Used after RRSP to keep tax shelter
Annual minimum withdrawal amount
Can include stocks, bonds, MF, mortgages

Question 7

Locked in retirement account

Answer 7

Cannot withdraw until reach a certain age

Question 8

Tax free savings account

Answer 8

Contribution limit is 5000$
Can carry forward contribution room
Can include stocks, bonds, MFs
No tax on withdrawal

Question 9

Dividend tax credit

Gross up by 38%
Tax credit 15.02%

Answer 9

300x1.38=414
414x 22%= 91.08
414x 15.02%= 62.18
91.08-62.18=28.90
Pay 28.90 in taxes on dividend

Question 10

Capital gains tax

Answer 10

50% is taxed.

100$ gain. 50$ taxed at 22% = 11$ on taxes