Retirement Planning

Question 1

RIFF withdrawal

Answer 1

Min RIF withdrawal % = 1/ 90-age

Question 2

OAS

Answer 2

Qualifies after40 years of residency in Canada after the age of 18.

Otherwise the pensioner may be eligible for a partial or pro rated pension after min of 10 years of residency after age 18

Question 3

OAS and residency

Answer 3

If pensioner lived in Canada for at least 20 years after reaching 18 OAS payments will continue even if they leave Canada.

July 1, 1977 - Will receive full pension if they were 25 years old or over or resided in Canada before and from age 18 or possessed valid immigration visa on that date

Question 4

OAS clawback

Answer 4

net income [(including OAS) - $79,845 OAS threshold)] x OAS clawback rate of 15%

Full clawback at $126,058 in 2021

Question 5

GIS

Answer 5

Exemption on first $3500 of employment.

application no longer required.

Allowance is for 60-64 spouses

GIS and Allowance are reported as total income but later deducted - not taxable income

Question 6

DC Plan

Answer 6

Annual contribution limit is lesser of 18% of earnings or MPP - $29,210.

Will kick in if earning more than 167K

Employer contributions are a tax deductible expense and not a taxable benefit to the plan member

Employee contributions are tax deductible the year they are made

Question 7

DB Plan

Answer 7

Total annual pension entitlement = earnings x unit percent x years of service

Maximum dollar limit is 1/9 the Money Purchase Limit for 2021 = $29,210/9 = $3245.56

Question 8

IPP

Answer 8

Creditor proof except in relationship breakdown situations

Contributions are fully tax deductible

Neither individual or company is taxed on the contributions

Interest on funds borrowed to top up IPPs is fully tax deductible

Higher contribution limits than RSPs

The Company can make contributions for the individual

Question 9

Profit sharing plan

Answer 9

After vesting period: funds must transfer to a locked in plan or a deferred annuity

Before vesting: the employee can take contributions & interest in cash

Contributions by employer and employee cannot exceed money purchase limit = $29,210

Question 10

DB Plan

Answer 10

Earliest retirement age = age at which employee joined plan + Qualifying factor/2

Question 11

Spousal RSP

Answer 11

Three year attribution rule:

Example:
Contribution on Dec 17, 2018.

Any withdrawals made prior to Jan 1, 2021 with be taxable to contributor

Question 12

Earned income

Answer 12

Net income from employment not including union or professional dues
self employment income
allocations from employee profit sharing plans
taxable benefits from wage loss programs, eg disability plan paid for by employer
royalties
taxable alimony and maintenance receipts
research grants
net rental income on real property
Canadian source business or employment income while non resident

Question 13

Calculating RRSP contribution limit

Answer 13

1. 2021 limit = $27,830
2. 18% of earned income previous year
3. Use lower of the 2
4. Minus PA previous year
5. Minus PSPA for current year
6. Add PAR for current year
7. = RRSP contribution limit
8. Add carryforward room
9. = Total RSP contribution limit
10. Add $2,000 lifetime allowable over contribution
11. Maximum allowable contribution

Question 14

Earned income does not include

Answer 14

investment income
taxable cap gains
pension benefits
retiring allowance and severance pay
payments from RSP, RIF or DPSP

Question 15

Deductions from earned income

Answer 15

current year net rental losses on real property

current year business losses

Question 16

EAP

Answer 16

$5000 max for first 13 weeks in full time qualifying educational program

$2500 max for first 13 weeks in part time qualifying educational program

Taxed in hands of bene

Question 17

RESP basics

Answer 17

Lifetime limit of $50,000 per bene

Maximum term is 35 years

Bene can be the subscriber themselves

Specified plan - single bene entitled to DTC

Question 18

Budgeting strategies

Answer 18

Strategy recommendations:

1. Reduce discretionary expenses
2. Reorganize investments
3. Seek to increase income

Question 19

Personal savings - key ratios

Answer 19

Solvency ratio =- net worth/total assets

Savings ratio = cash surplus/after tax income

Question 20

RESP 16 & 17 can receive CESG if

Answer 20

min of $2,000 contribution has been made before the year the bene attains 16 years of age
OR
a minimum of $100 of annual contributions has been made e in at least 4 years before the bene attains 16 years of age

Question 21

LLP

Answer 21

Max limit of $20,000 over 4 years

Max annual limit of $10,000

Question 22

LLP repayment

Answer 22

repay over 10 years

beginning no after than 60 days following the 5th year