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FIN612 > Chap 7 Retirement Income Option > Flashcards

Chap 7 Retirement Income Option Flashcards

1
Q

2 rules to accessing funds in a Registered Plan

A

1) Except for RRSP, RRIF, and LIF in some instances, funds are locked in until the person is within 10 years of NRA
2) For all registered plans, funds must start paying when the person turns 72

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2
Q

Registered Plans in which funds can be accumulated before retirement

A

1) RPP (DBPP &DCPP)
2) Locked in RRSP (LRSP)/Locked in Retirement Account (LIRA)
3) RRSP
4) DPSP

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3
Q

Where can funds in a RPP be transferred / Before retirement / Before being vested

A

Employer contributions are lost. The rest

  • Cash refund on the contributions
  • Transfer to another RPP or RRSP
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4
Q

Where can funds in a RPP be transferred / Before retirement/After vested

A
  • leave in the old plan OR
  • Transfer comuted value to a new RPP OR
  • Transfer commuted value to Locked in RRSP (LRSP) or Locked in Retirement Account (LIRA)
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5
Q

Where can funds in a RPP be transferred/After retirement

A

Life income fund (LIF)
Locked in Retirement Income Fund (LRIF)
Life annuity

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6
Q

Characteristics of a Life Income Fund LIF

A

the person can control investments, their is both a Min and a MAX withdrawal required, and it is mandatory to purchase an annuity at 80 and possible before

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7
Q

Characteristics of a Locked in Retirement Income Fund (LRIF)

A

The person can control investments, their is both a Min and a MAX withdrawal required, can purchase a life annuity

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8
Q

2 additional possible transfer of an RPP

A

Former spouse under divorce

Spouse on the death of the annuitant

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9
Q

How to calculate the commuted value of a Defined Benefit Pension Plan (DBPP)

A

Amount transfered = the lesser of
1) Commuted value = PV of lifetime pension benefit
2)Prescribed amount= Annual pension *PV factor adjusted for the age of the employee
The rest is paid cash and subject to full tax and withholding tax

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10
Q

Funds in a Deferred Profit Sharing Plan (DPSP) must be withdrawn within 90 days of which events

A

1) Retirement or termination of employment
2) year the employee turn 71
3) Death
4) Termination of the plan

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11
Q

Where can funds in a Deferred Profit Sharing Plan (DPSP) be transferred

A
  • RPP if allowed
  • RRSP
  • Another DPSP with more than 5 beneficiaries
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12
Q

Use of funds in an unmmatured RRSP

A
  • Withdrawn with full tax and withholding tax

- Transfer tax free to RRSP, RPP, Registered Retirement Income Fund (RRIF) for the same annuitant

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13
Q

Use of funds in a matured RRSP

A

Can be transfered tax free to:

  • RRSP
  • Registered Retirement Income Fund (RRIF)
  • A carrier to buy an annuity
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14
Q

Characteristics of a Locked In Retirement Account (LIRA) or Locked in RRSP (LRSP)

A 
Allow indiv to make investment decisions 
Funds must be transferred by 71 to 
- Life annuity 
- Life Income Fund 
-Locked In retirement Income Fund (LRIF)
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15
Q

What are the Min Withdrawal on Registered Retirement Income Fund (RRIF) Life Income Fund (LIF) and Life Retirement Income Fund (LRIF) based on

A
  • Weather RRIF is qualifying (entered into before 1993) or non qualifying
  • Age of the individual (or spouse) at the beg of the year
  • Fair market value of the fund at BOY
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16
Q

What is Max withdrawal in a Locked in Retirement Income Fund (LRIF)

A

MAX withdrawal is the greatest of:

  • Min requirement withdrawal
  • 6% balance @BOY (for the first 2y)
  • Fair Market Value at BOY - net value of transferes without withdrawals
  • Investment Income
17
Q

Unlocking plan for 55 and older

A

can transfer up to 100% of a LIF, Locked in RRSP and some pension benefit into a Restrected Life Income Income Fund

18
Q

Restricted Life Income Fund (RLIF)

A

Locked in fund that allow to transfer up to 50% of balance into RRSP or RRIF or another RLIF or life annuity or a Restricted Locked in Saving Plan (RLSP)

19
Q

Death of an RRSP annuitant

A
  • Market value of RRSP included in final tax return OR
  • If the beneficiary is a spouse, financially dependent child or grandchild&raquo_space; RRSP rollover with no consequence on contribution room or taken as cash and taxed in the hands of the beneficiary
20
Q

What retirement fund options are available

A
  • Life annuity
  • Term annuity
  • Life Income Fund (LIF)
  • Locked In Retirement Income Fund (LRIF)
  • Registered Retirement Income Fund (RRIF)
21
Q

Characteristics of a Registered Retierment Income Fund (RRIF)

A

Funds have to be transferred from another registered plan, they cannot be deposited directly directly into a RRIF. There is a min but no max withdrawal. Can be converted into an annuity. Allows the annuitant to control investments on the fund

22
Q

Spousal RRIF

A

Spousal RRSP rolled over into a RRIF. Income attribution and withholding tax remain in effect for any axcess amount withdrawn

23
Q

Cashable annuity

A

Can be cashed to buy another annuity if interest rates have increased a lot

24
Q

Contingent annuity

A

Pays until the second spouse dies

25
Q

Income reducing annuity

A

Decrease the amount of payment when the original annuitant dies

26
Q

Prescribed annuity

A

Allows the annuitant to spread interest evenly over the life of the annuity for up to 15y so that the same amount of interest is taxable every year

27
Q

3 Non registered investment for retirement

A

1) Annuity
2) Systematic Withdrawal Plan (SWP)
3) Reverse mortgage

28
Q

Systematic (Automatic) Withdrawal Plan (SWP)

A

For retirees who want to keep control over their retirement income. Allows investor to liquidate small portions of their units from non registered mutual fund portfolio on a regular basis

29
Q

Reverse Mortgage

A

Loan against the accumulated home equity

30
Q

Demutualization

A

Mutual insurers raise capital through profitable operations and surplus noted which are similar to corporate bonds. Recently many mutual insurers have been demutualizing&raquo_space; Changing their structure so that they can sell shares and issue bonds

FIN612 (9 decks)

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