Deck 5: Retirement and Estate Planning - Retirement Planning

Question 1

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

Answer 1

True

Question 2

If you earn the maximum pensionable earnings (YMPE)amount in a given year,you and your employer will have funded the maximum amount to the Canada Pension Plan for that year.

Answer 2

True

Question 3

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

Answer 3

False

Question 4

Old Age Security is funded by general tax revenues.

Question 5

If you had lived in Canada for 30 years,had $50 000 income from various pensions and were old enough to receive Old Age Security benefits,you would qualify for seventy five percent of the maximum OAS benefit.

Question 6

If you are age 65 and were in a defined-benefit pension plan for 22 years which was based on earning a benefit of 1.8 percent of your best three years earnings,you would receive around 39.6 percent of your salary from your pension.

Question 7

Sally can use the Home Buyers Plan (HBP)to withdraw $50 000 from her RRSP for a down payment on a home as long as it is her first home and she can pay it back in ten years.

Question 8

Pending rule changes from the government will require you to be 67 years old (instead of 65)before you can begin collecting Old Age Security retirement benefits.

Question 9

On average,a final average earnings plan and a career average plan will generate the same level of pension income.

Question 10

Old Age Security can be deferred for five years,which would increase ones benefit by an additional 36 percent.

Question 11

A pensioner who only receives Old Age Security income will also receive the maximum Guaranteed Income Supplement.

Question 12

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

Question 13

If you earned $66 000 in the previous year and received a pension adjustment of $8200,then you would have $3680 RRSP room left for that year.

Question 14

Saving $2000 per year from age 25 to 35 will give you more money at age 65 than saving $4000 per year from age 40 to 50,if all your funds grow at five percent.

Question 15

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

Question 16

Once you are 'vested' in your company's pension plan,you can cash in the funds in if you decide to leave the company.

Question 17

In the past 10 years or so,many employers have shifted from defined-benefit to defined-contribution retirement plans to reduce their financial risk in funding employees' retirements.

Question 18

The Old Age Security system allows you to receive reduced benefits if you retire up to five years early.

Question 19

The combination of Old Age Security and the Canada Pension plan provide sufficient income to support the retirement lifestyle of most individuals.

Question 20

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.

Question 21

Defined contribution pension plans are not worth taking advantage of because they are essentially the same as an RRSP.

Question 22

According to a 2007 study,two thirds of Canadians who are expecting to retire in in 2030 are not saving enough to cover necessary living expenses.

Question 23

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 inflation as measured by the CPI.
C)be adjusted periodically based on government fiscal policy.
D)be adjusted every few years based on average Canadian incomes and CPI.

Question 24

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

Question 25

The Lifelong Learning Plan (LLP)allows full-time students to withdraw $20 000 per year for two years from their RRSPs to finance their educations.

Question 26

Payments made to you by Old Age Security are based on

A)your residency in Canada between ages 16 and 65.
B)the length of time you worked in Canada prior to age 65.
C)your average YMPE earnings between ages 18 and 65.
D)your adult residency in Canada between 10 and 40 years.

Question 27

A TFSA is not as good for retirement funding as an RRSP.

Question 28

If,at regular retirement age,you would have qualified for $1000 CPP income and $500 OAS income,what monthly income would you receive if you deferred them both by five years?

A)$1950
B)$2100
C)$2130
D)$2040

Question 29

Which of the following applies to the CPP?

A)You will collect more total CPP if you claim it at age 60.
B)The amount you qualify for can be increased by up to 42% if you defer claiming it.
C)Most Canadians qualify for the maximum CPP retirement income.
D)It is a tax-free benefit that provides an income of roughly $16 000 per year.

Question 30

Old Age Security benefits

A)can be deferred five years which would increase your benefit by 36%.
B)begins to be clawed back for people whose income reaches $50,000.
C)can be claimed at age 60,but at a reduced amount.
D)are a nontaxable benefit.

Question 31

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 if your income is below $74 000.
B)an OAS pension of 27/30 if your income is below approximately $115 000.
C)an OAS pension depending on your life time YMPE earnings.
D)an OAS pension of 37/40 if your income is below approximately $74 000.

Question 32

For each resident of Canada,their CPP entitlement is calculated based on their

A)number of years as working adult resident of Canada with income under $70000.
B)income earned each year between the YBE and YMPE.
C)number of years up to age 65 as an adult resident of Canada.
D)income earned above the YMPE each year.

Question 33

A registered life annuity has an advantage over a RRIF because you will no longer be exposed to the risk that your funds could run out before your death.

Question 34

In 2017,if you were a resident of Canada from age 24 to 65,the monthly OAS benefit payment you would have received would have been approximately

A)$590.
B)$680.
C)$780.
D)$880.

Question 35

What was the approximate maximum annual CPP when applying at retirement age in 2017?

A)$13 400
B)$10 000
C)$16 000
D)$18 000

Question 36

Once a pensioner reaches age 71,she is able begin withdrawing money from her RRSP tax free.

Question 37

Saving $100 per month from age 20 to age 70 with an eight percent return (compounded monthly)will give you over three quarters of a million dollars.

Question 38

For retirees,the most important difference between CPP and OAS is that

A)Only OAS can be taken early at a reduced amount.
B)Only OAS is based on income earned each year relative to the YMPE.
C)Only CPP can be taken early at a reduced amount.
D)Only CPP can be deferred to receive an increased monthly amount.

Question 39

LIRAs and locked-in RRSPs are a lot less flexible than RRSPs because they convert to LIFs and LRIFs and have limits on the amounts that can be withdrawn each year.

Question 40

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

Question 41

Even though you expect to receive OAS and CPP,a common rule of thumb is in order to be able to retire comfortably is

A)to save an additional 10 percent of gross earnings in a variety of pension investments.
B)to save at least 10 percent of after-tax earnings in retirement accounts.
C)to make sure you are in a long-term pension plan.
D)to maximize OAS and CPP and GIS.

Question 42

If you are far from retirement age and wish to maximize your income in retirement,you should consider investing in

A)government bonds or bond funds.
B)guaranteed investment certificates.
C)mutual funds with high-growth stocks.
D)corporate bonds.

Question 43

If you have been in an 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 has a plan the permits the transfer.
D)you can withdraw the funds tax-free within 30 days of departure,if the amount is under $30000.

Question 44

CPP offers

A)a full survivor benefit to the spouse of a recipient who was receiving CPP on death.
B)the option of collecting it up to five years early with a reduced benefit.
C)an exclusions of 30 percent of your lowest earning years in the calculation of your CPP entitlement.
D)the GIS benefit for low income seniors.

Question 45

The retirement benefit you receive from a money purchase defined-contribution plan will be based on

A)a certain percentage of your income in the later years of employment.
B)a formula that guarantees a set amount to support a modest retirement lifestyle.
C)the performance of the funds contributed on your behalf.
D)the performance of your company's shares.

Question 46

If Ramzi earned $46 000 from employment,approximately how much will his employer deduct for his CPP contribution? (YMPE $52 500; YBE $3500)

A)$207.
B)$1912
C)$3825
D)$4140

Question 47

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)flat benefit defined-benefit plan.
B)defined-contribution plan.
C)LIRA.
D)unit benefit defined benefit plan.

Question 48

In an employer-sponsored retirement plan,you should contribute at least

A)the amount that maximizes what the employer contributes.
B)three percent of your gross income in middle age.
C)one percent of your net income in your early working years.
D)nine percent of your gross income.

Question 49

How much you can contribute to your RRSP depends on your

A)earned income from the current year.
B)tax bracket and previous contributions.
C)accumulated room and the performance of your RRSP holdings.
D)earned income and pension adjustments from previous years.

Question 50

You have earned income of $56 000 for last year.You have a defined-contribution plan to which your employer contributes 50 percent.The employer contributed $3500.How much of an RRSP contribution can you make this year,assuming you have no accumulated RRSP room?

A)$3500
B)$10 080
C)$3080
D)$6580

Question 51

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

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

Question 52

When you are young you should likely invest in investments that have

A)lower risk and thus have higher growth potential.
B)higher risk and thus have lower growth potential.
C)lower risk and thus have lower growth potential.
D)higher risk and thus have higher growth potential.

Question 53

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 approximately

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 54

Which of the following is true about RRSPs?

A)You can withdraw funds tax free once you are over age 71.
B)There is no limit on the dollar amount you can contribute.
C)Your investment income is tax-sheltered in the plan.
D)You can transfer the funds to your children tax-sheltered.

Question 55

Which of the following is a tax-free benefit?

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

Question 56

A financial contract that provides guaranteed payments until one's death is

A)a life pension.
B)a life annuity.
C)a guaranteed RRIF.
D)a life GIC.

Question 57

Which of the following is an important factor to consider in deciding between saving in a TFSA account or an RRSP account?

A)Your tax bracket
B)The appropriate risk level
C)Tax sheltering of investment income
D)The types of investment vehicles

Question 58

Which of the following is true regarding pension plans?

A)A defined contribution pension plan is the same as an RRSP.
B)Once you are vested in a pension plan,you can transfer the assets to your RRSP if you leave.
C)Defined-benefit pension plans are always advantageous,but not defined-contribution plans.
D)You should take advantage of them because the employer must contribute at least half the funding.

Question 59

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)group RRSPs to pension plans.
D)registered retirement income funds to defined-contribution pension plans.

Question 60

Most defined-contribution plans allow some investment flexibility including the option to choose

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

Question 61

You are retiring and the balance of your RRSP is $203 126.What amount of monthly income could this provide you for 20 years if you can get a four percent annual return?

A)$1223
B)$846
C)$880
D)$1782

Question 62

Tax-free withdrawals from an RRSP for the HBP or LLP

A)represent lost contribution room in the future.
B)must be paid back on schedule or added to your taxable income.
C)do not affect the compounding of your investments inside the RRSP.
D)can be paid back to a spousal account instead of the account they were withdrawn from.

Question 63

You want to save $400 000 to supplement your pension income to retire early at age 60.You have 26 years to accomplish this and already have $90000 saved.Assuming an eight percent annual return,how much should you set aside each month to reach this goal?

A)$311
B)$267
C)$1072
D)$994

Question 64

RRSP contribution room

A)can be carried forward until age 71.
B)is eliminated each year if it is not used.
C)can be carried forward until age 65.
D)can be used until age 75 as long as you have earned income.

Question 65

Which of the following is true regarding LIRA and locked-in RRSP accounts at age 71?

A)LRIFs and LIFs can be cashed in but will be fully taxed.
B)Some provinces have LIFs and some have LRIFs.
C)At age 80,LRIF funds must be used to purchase a life annuity.
D)LRIFs and LIFs have the same withdrawal schedule throughout the retirement years.

Question 66

What does Shelley need to save monthly to make sure she is on track to reach her retirement goal of having $440000 saved by the time she reaches age 65? She is 48 years old,has been contributing $400 per month and has $180000 in her RRSP.Assume she will make an annual return of seven percent.

A)$1275
B)$336
C)$1133
D)$681

Question 67

Phil has a defined-benefit plan that pays him a pension of two percent of his average best three years' earnings.His earnings are as follows: 2008,$58000 ; 2009,$62000 ; 2010,$65000 ; 2011,$66000 ; 2012,$62000 ; 2013,$72000 ; 2014,$75 000.What will be his annual pension benefit if he was with Plastis Co.for 22 years?

A)$16 224
B)$28 789
C)$31 240
D)$30 360

Question 68

Income from which of the following sources would have no impact on OAS clawback?

A)Tax free savings account (TFSA)
B)Locked-in retirement account (LIRA)
C)Canada Pension Plan
D)Spousal RRSP

Question 69

Which is a key difference between RRSPs and TFSAs?

A)TFSA withdrawals are taxed.
B)RRSPs' contribution limit accumulates.
C)TFSAs give tax deductions on contributions.
D)RRSP withdrawals are taxed.

Question 70

Pension splitting for couples over age 65

A)is only possible by equalizing RRSP plans.
B)requires the couple to do a CPP pension assignment first.
C)is only possible with employer pension and CPP income.
D)can be applied to pension,CPP and RRIF income.

Question 71

Before the end of the year in which you have your 71st birthday

A)you must transfer your RRSP assets to a RRIF.
B)the assets inside your RRSP must be converted to cash and placed in a RRIF.
C)you must pay tax on the profits sheltered in your RRSP.
D)you must start annual withdrawals of 18 percent of the value of your RRIF.

Question 72

If you invested $10 000 in an RRSP 30 years ago and it has a value today of $100000 ,what amount will you pay tax on when you withdraw it during your retirement years?

A)Only on the initial $10 000
B)Only on the $90 000 growth
C)On all $100 000 as it is withdrawn
D)There is no tax to be paid in retirement.

Question 73

If you want to save $1 000 000 for retirement with $200 monthly deposits at eight percent interest compounded monthly,how long will it take?

A)50 years,1 month
B)43 years,3 months
C)44 years,4 months
D)44 years,1 month

Question 74

Arnie is 21 years old and earning $35 000 annually.If inflation averages three percent annually over his career,what will he have to earn at age 60 to equal his current pay?

A)$105 500
B)$114 171
C)$128 500
D)$110 846

Question 75

Danielle is 40 years old and has saved $150 000 in her RRSP.Her goal was to reach $1000000 by the time she turns 60.How much more will she have to save each year if she maintains a nine percent annual return on her investments?

A)$3115
B)$31 150
C)$15 280
D)$6230

Question 76

If you qualify,the maximum withdrawal allowed under the Home Buyers' Plan (HBP)is

A)$20 000 per person.
B)$25 000 per person.
C)$25 000 per couple.
D)$40 000 per couple.

Question 77

Tax-free withdrawals can be made from an RRSP under which of the following circumstances?

A)Each spouse can withdraw $40 000 tax-free for the purchase of a house.
B)You can withdraw $10 000 under the Lifelong Learning Plan to educate your children.
C)You can withdraw any amount necessary to pay off your mortgage if over 55 years of age.
D)You can withdraw $10 000 for two years for your spouse to be a full time student.

Question 78

The Guaranteed Income Supplement (GIS)benefit will be subject to clawback if

A)the pensioner has liquid savings of at least $10,000.
B)the pensioner has total investments of at least $10,000.
C)the pensioner receives any income other than OAS.
D)the pensioner is under the age of 65.

Question 79

What rate of return (compounded monthly)will you need,to reach a lump-sum total of $500000 in 20 years if you contribute $500 per month?

A)12.1 percent
B)8)9 percent
C)13.2 percent
D)7)31 percent

Question 80

According to Statistics Canada,for many Canadians,the most important source of retirement income will be

A)the OAS benefits.
B)the investments in their RRSPs.
C)the equity they have in their homes.
D)their pension plans.