Deck 15: Retirement and Estate Planning - Retirement Planning

Question 1

When you contribute to a defined-contribution retirement plan, you are able to deduct the contributions.from your income.

Answer 1

True

Question 2

Old Age Security is funded by contributions made by you.

Answer 2

False

Question 3

Vesting means that employees have a claim to a portion of the retirement money that has been contributed to an RPP for them by their employer.

Answer 3

True

Question 4

In retirement, you can still earn income and receive Old Age Security benefits.

Question 5

The Old Age Security system allows withdrawal of reduced benefits at an early retirement age.

Question 6

Old Age Security is funded by taxes you and your employer pay.

Question 7

The quality and timing of your retirement depends mainly on the quality of your employer's retirement plan.

Question 8

Individual Canada Pension Plan contributions amount to 7 percent of all income.

Question 9

Both CPP and OAS are funded by the tax dollars of all Canadians.

Question 10

Defined-contribution employer-sponsored retirement plans provide you with a specific amount of income when you retire, based on factors such as your salary and years of employment.

Question 11

The amount of income you receive from Old Age Security when you retire is dependent on the number of years you were a resident of Canada, a minimum of 10 to a maximum of 40 for full benefits.

Question 12

In the past 10 years or so, many employers have shifted from defined-benefit to defined-contribution retirement plans.

Question 13

In Canada, employees who are members of defined-benefit programs cannot contribute more than 50 percent toward their pensions.

Question 14

Old Age Security provides sufficient income to support the lifestyles of most individuals.

Question 15

An employee must be employed by the same company for two years to be"vested."

Question 16

To be eligible for Old Age Security retirement benefits, a person must be 65 years old.

Question 17

Old Age Security income will be clawed back or reduced if you earn more than $35 000 in retirement.

Question 18

If your employer offers a retirement plan, that should be the first plan you consider because your employer will match your contributions to the plan.

Question 19

To be eligible for Old Age Security retirement benefits, you will need to have worked in Canada for at least 10 years since turning 18 and be a resident of Canada as defined by Canada Revenue Agency.

Question 20

Self-employed individuals pay the employee and employer portions of CPP, totalling 9.9 percent on earnings over the YBE and below the YMPE.

Question 21

An employee who resigns must transfer his or her pension to a LIRA.

Question 22

Withdrawals from an RRSP are non-taxable.

Question 23

A life annuity is a financial contract that provides a fixed sum of money at regular intervals for the annuntant until age 90.

Question 24

The RRSP contribution room is reduced by the pension adjustment for those who have a pension plan at work.

Question 25

RRSP contribution limits and eligibility requirements are increasing over the next few years to encourage more retirement savings by individuals.

Question 26

Saving a lump sum of $10 000 when you are 45 years old is better than saving $1000 per year from age 25.

Question 27

If your employer contributed $5000 to your RPP, you will have to reduce your maximum RRSP contribution room by the same amount.

Question 28

A traditional RRSP requires an individual to convert it to an RRIF and make withdrawals at age 70.

Question 29

If you are only able to save smaller amounts, the length of time you save money is very important.

Question 30

Your RRSP can supplement RPPs from an employer.

Question 31

You can make tax-free withdrawals from your RRSP to fund education for you or your spouse.

Question 32

Once you leave a job with an employer, you will probably forfeit your pension plan unless you have been with the company for 15 or more years.

Question 33

An RRSP allows tax-deductible contributions of up to 18 percent of gross income even if you are enrolled in a pension plan at work.

Question 34

A Lifelong Learning Plan (LLP)is available for full-time and part-time students who temporarily would like to use an RRSP to finance their educations.

Question 35

Contributions to RPPs and RRSPs are not tax deductible initially, therefore very few people are interested in using them.

Question 36

The three main types of RRSP accounts are individual, self-directed, and group RRSPs.

Question 37

All of your contributions to RPPs and RRSPs are tax deductible dollar for dollar against gross earned income.

Question 38

According to a 2005 study, more than 69 percent of Canadians age 65 or older owned a home.

Question 39

A registered annuity is better than an RRIF because you are no longer exposed to the risk that your investment may decrease in value.

Question 40

It is often a good idea to invest most or all of your retirement savings in the stock of your employer so that you will demonstrate your loyalty.

Question 41

Payments made to you by Old Age Security are based on your

A)residency in Canada older than 16.
B)the length of time you worked in Canada.
C)both employee and employer contributions.
D)adult residency in Canada between 10 and 40 years.

Question 42

A pension assignment occurs when a married or common-law couple decides to share their CPP retirement pensions in order to reduce their income taxes.

Question 43

John is now 57 years old and he still has a minimum of three years before receiving his OAS.

Question 44

If your sole source of income at retirement is OAS (based on 2010 figures),

A)you will also receive the CPP supplement of $890 monthly.
B)you will also receive the GIS of about $650 monthly.
C)you will receive the GIS allowance, but it prevents you from earning other income.
D)you will receive the supplement that will increase your income to about $20 000 per year.

Question 45

In 2010, the maximum monthly OAS benefit payment received by retired individuals was approximately

A)$600.
B)$700.
C)$500.
D)$800.

Question 46

Usually, OAS and CPP on their own do not provide sufficient income to support the lifestyles of most individuals.

Question 47

Once Peter is qualified to receive OAS, the money will automatically deposit into his bank account.

Question 48

OAS is a provincial program, funded by income tax and other tax revenues.

Question 49

In addition to OAS, low-income pensioners may also qualify for supplemental benefits called GIS.

Question 50

Your Old Age Security retirement benefits are determined primarily by the amount of your

A)average annual earnings.
B)OAS contributions.
C)time as resident of Canada.
D)lifetime income tax contributions.

Question 51

Peter argues that CPP contributions are deducted by the employee at each pay period.

Question 52

What was the approximate maximum annual CPP when applying at retirement age in 2010?

A)$11 000
B)$12 000
C)$6000
D)$8000

Question 53

Both OAS and CPP require the pensioners to apply for the benefits.

Question 54

If you were 28 years old when you moved to Canada and became a resident, at age 65 you would be entitled to

A)a full OAS pension.
B)a partial OAS pension of 27/40.
C)a partial OAS pension of 12/40.
D)a partial OAS pension of 37/40.

Question 55

John is now 57 years old and he still has a minimum of three years before he could receive his CPP.

Question 56

For each Canadian, or resident of Canada, their CPP payments are calculated on their

A)total employment earnings.
B)income earned between the YBE and YMPE.
C)total income taxes paid.
D)income earned below the YBE.

Question 57

Which of the following applies to the CPP?

A)You will collect more total CPP if you claim it at age 60.
B)You can apply between the ages of 60 and 70.
C)All Canadians are entitled to it.
D)It is a tax free benefit.

Question 58

At what approximate income level does the OAS claw-back start (as of 2010)?

A)$56 000
B)$66 000
C)$46 000
D)$76 000

Question 59

The maximum monthly OAS pension for the period July 2010 to September 2010 was $324.07.

Question 60

Old Age Security benefits

A)cannot be claimed before age of 65.
B)are clawed back for people whose income is above $50,000.
C)can be claimed at age 60, but at a reduced amount.
D)are a non taxable benefit.

Question 61

The year's maximum pensionable earnings (YMPE)will

A)change each year based on a calculation of average incomes in Canada.
B)change each year based on an inflation formula.
C)stay the same since the CPP is a base pension plan to build other plans upon.
D)stay the same when GDP is negative but increase in positive GDP years.

Question 62

If your retirement plan has a vesting requirement, it must be

A)an employer sponsored retirement plan.
B)a defined-benefit plan.
C)a defined-contribution plan.
D)a locked-in retirement plan.

Question 63

In the last 10 years many employers have shifted from

A)defined-contribution to defined-benefit pension plans.
B)defined-benefit to defined-contribution pension plans.
C)OAS to CPP pension plans.
D)registered retirement income funds to defined-contribution pension plans.

Question 64

CPP offers

A)a full survivor benefit to the spouse of a recipient who was receiving CPP on death.
B)a pension assignment option for spouses to split benefits and reduce their taxes.
C)an exclusions of 30 percent of your lowest earning years in the calculation of your CPP entitlement.
D)a recovery financing plan when the bulk of the Canadian population will be retired in 2030.

Question 65

Roscoe is entitled to a full CPP benefit of $863.75 but wants to retire on his 63rd birthday. How much CPP will he receive?

A)$863.75
B)$734.19
C)$760.10
D)$811.93

Question 66

You have worked for a company for 20 years and it provides a two percent final average earnings defined-benefit plan. Your average income on retirement was $70 000. What will your annual pension be?

A)$35 000
B)Unknown
C)$42 000
D)$28 000

Question 67

Luigi and Maria are 65 and have been married for 20 years. Luigi is entitled to a CPP pension of $796 per month. He has been working and paying into CPP ever since he came to Canada 25 years ago. How much of his CPP can he allocate to Maria, who did not work at all?

A)$636.80
B)$318.40
C)$796.00
D)$398.00

Question 68

Allred Corporation's retirement plan will pay $250 a month for each year worked for the company commencing on the employee's 65th birthday. People must work for the company for 10 years to qualify for the pension. This plan is a

A)defined-benefit plan.
B)defined-contribution plan.
C)LIRA.
D)registered income fund.

Question 69

Most defined-contribution plans allow some investment flexibility and allow you to choose

A)individual mortgages.
B)commodity futures.
C)real estate building rental.
D)large-cap mutual fund units.

Question 70

One difference between CPP and OAS is that

A)CPP is a taxpayer-funded benefit program.
B)OAS is covered by a separate account in government revenues.
C)CPP can be taken early at a reduced amount.
D)OAS has no survivor benefit.

Question 71

Rollie is entitled to a partial CPP benefit of $778. If inflation is 3 percent, what will he receive monthly in two years?

A)$825.38
B)931.64
C)$801.34
D)$819.763

Question 72

If Ramzi earned $46 000 from employment, what will be his CPP contribution? (YMPE $43 700; YBE $3500)

A)$2103.75
B)$1989.90
C)$3979.80
D)$2277.00

Question 73

If you have been in a employer-sponsored pension plan for three years and you leave your employer well before retirement,

A)you are not entitled to the employer's contribution to your plan.
B)you can transfer the funds to a RRIF.
C)you can transfer the plan to your new employer if the RPP is similar.
D)you can withdraw the funds tax-free within 30 days of departure.

Question 74

Which of the following investments is least likely to be acceptable with most defined-contribution plans?

A)Stock mutual funds
B)Bond mutual funds
C)Money market funds
D)Individual corporate bonds

Question 75

You are a member of a defined-benefit plan that pays a two percent benefit for each year of service based on your best five year's earnings. If you qualify for an unreduced pension and have worked for the company for 30 years, your pension will be

A)The answer is unknown because the benefit must be calculated by an actuary.
B)60 percent of the average of your best five years' earnings.
C)50 percent of the average of your best five years' earnings.
D)60 percent of the average of your last five years' earnings.

Question 76

Morley is retiring on his 66th birthday. How much of a CPP pension will he receive if he is entitled to the maximum monthly benefit of $863.75?

A)$915.58
B)$811.93
C)$863.75
D)$941.49

Question 77

If the average income in Canada maintains a 2.5 percent annual growth rate, how much will the YMPE be in four years? YMPE is $43 700.

A)47 752
B)$47 060
C)$48 236
D)$43 700

Question 78

Which of the following is a tax-free benefit?

A)OAS
B)CPP
C)GIS
D)RRIF

Question 79

A self-employed individual pays

A)both the employer and the employee portions of CPP deductions, or about 9.9 percent.
B)both the employer and the employee CPP contributions plus an OAS premium.
C)both the employer and the employee CPP contributions, or about 7.6 percent.
D)the same CPP contributions that an employee would pay.

Question 80

With which of the following plans will you be able to most accurately predict in advance your retirement income?

A)Defined-contribution plan
B)RRSP
C)Traditional LIRA
D)Defined-benefit plan