- the emotion - ability to withstand the emotion of a loss - based on psychological factors

- the financial - Ability to overcome the financial loss - based on financial factors

- longevity: cant conrrol how long we live - leveraging: borrowing to invest

- reduces taxable income in year of contribution - contribution limit: 18% - trfs dont impact contribution limit - unused room can carey fwd - growth is tax deferred (tax on withdrawals ) Max age: dec 31st of 71st year

- can put some income is spouse RRSP to lessen tax birden in retirement - RRSP belongs to spouse - contributor gets tax deduction

PPTS Flashcards by LaToya Grant

Time horizon

When does client need the money

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Risk tolerance

the emotion
ability to withstand the emotion of a loss
based on psychological factors

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Risk capacity

the financial
Ability to overcome the financial loss
based on financial factors

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Personal risks

longevity: cant conrrol how long we live
leveraging: borrowing to invest

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RRSP facts

reduces taxable income in year of contribution
contribution limit: 18%
trfs dont impact contribution limit
unused room can carey fwd
growth is tax deferred (tax on withdrawals )
Max age: dec 31st of 71st year

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RRSP contribution room formula:

Step 1: personal contribution limit cirrent yr : prev yr income X 18%

Step 2: deduct pension adjustment if any from prev yr (group RRSP/pension)

Step 3: unused room + current year contribution limit

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Spousal RRSP

can put some income is spouse RRSP to lessen tax birden in retirement
RRSP belongs to spouse
contributor gets tax deduction

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RRSP @ maturity (R.A.W)

@ 71 must use an option to trf RRSP to R.A.W:
- RRIF
- Annuity
- Withdrawal (full withdrawal)

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Registered Retirement Income Fund (RRIF)

min amt must ne withdrawn every year (4%)
withdrawals based on u and spouse age and increases w age
if withdrawn above min = withholding tax
all withdrawals = taxable income

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Group retirement plans: Pension plans

DBPP: Defined benefit pension plan
DCPP: Defined Contribution pension plan
PRPP: Pooled Registered pension plan

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Group retirement Plans: retirement plans– need to update w more details

Transfer:
- LIRA
- locked in RRSP
- deferred life annuity

At retirement:
LIF
LRIF
RLIF
PRRIF

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Group retirement plans: savings plans

DPSP: Deferred profit sharing plans

GRRSP Group Registered Retirement Savings Plans

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Defined benefit pension plan

Missed notes

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Defined contribution Pension Plan (DCPP)

employer and employee contribution known as
end benefit: not known

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Pooled registered pension plan (PRPP)

employer not required to pay
not a specific employer –> 3rd party
enrollment automatic
deduction from pay

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Deferred Profit sharing plans (DPSP)

only employer can add
comes feom company profits
contributions reduce RESP (pension adj)

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Group Registered Retirement savibgs plans (GRRSP)

Similar to RRSP but for group

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Investment options in order of least risk

savings account
GICs
bonds
stocks
real estste

Then:
Mutual funds
Seg funds and annuities

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How does money grow?: time calue of money

FV= PV X (1 + interest rate) n

Calculator:
PV X %
Then press = for the amount of n
ORRR
PV + % + %+% etc… to the number of n

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Segregated Funds
Card not finished

death benefit guarantee 75%
maturity guarantee 75%
reset option

MER: management expense ratio
Card not finished

used to pay the cost of operating the investment
deducted from assets of fund
covers operating expenses, management fees, etc…

Seg fund reset formula

New contract guarantee amount =
New market value X 75%

And can withdraw in #? Years?

Sales charge: commision (3 types)

no load
front load
deferred sales charge/back end

Sales charge: commission: no load

???

Sales charge: commission: front end load

Charge commission up front

Sales charge: commission: deferred sales charge/ back end

Only charged if client withdraws money within 1st 7 yrs

Segregated funds real return:

Return % + MER%

What is an annuity

- Type of investment - 2 types: *accumulation(IN)* or *Payout(out)* - guaranteed income (i.e for retirement) , spousal/child support pmts - duration: Term or Life or impaired

Impaired annuity

Ppl w shortened life expectancy due to health.

Annuities: factors affecting payments NOT DONE!!!

Annuity income

- level - variable -indexed

Annuity income: leveled

Payment stays same

Annuity income: variable

Annuity paymets linked to the performance of the investment

Annuity income: indexed

Tied to inflation Increases w inflation up to a max (determined by CPI)

Annuity limitations

- penalties to surrender/withdraw - withdraw: taking a portik - surrender: cancelling policy all together

Seg funds and annuities : creditor protection

1. Protected class (parent, spouse, child/grandchild 2. Irrevocable beneficiaries

Recommendign an investment: seg fund vs Ann.

Seg fund: wants investment w benefits of insurance contract , *NOT seeking income* Annuity: *seeking income*

Seg funds and ann: associates risks

Seg funds: types of investments im the gund Annuity risks: interest rate risk + inflation risk

Seg fund right of recission (to change mind)

2 biz days to get full refund

Seg fund and ann taxation

Sev fund withdrawals:

RRIF VS LRIF

RRIF- Registered Retirement Income Fund - has min wothdrawal amt LRIF- Locked-in Registered Retirement Income Fund - has min and max withdrawal amt - max is to ensure $$ lasts

Insured life annuity

1. Buy permanent life insurance ins 2. Buy immediate life annuity where income pmt equal/more rhan premium on insurance policy

How to bypass probate

Any product/account that allows investor to name a beneficiary can potentially avoid probate fees I.e: life insurance, seg funds, RRSP

What valuation date used to deteemine seg fund redemtiom value?

Seg funds always based on NAVPU at NEXT VALUATION DATE

Insured Life Annuity (2 steps)

1. buy PERMANENT lofe insurance 1ST 2. Buy immediate annuity where the income payments equal/more than premium on life insurance policy

CPP entitlement formula (2 formulas)?

**CPP % increase formula:** (%0.70 inc ) X # months of delay= ?? **MAX 8.4%/yr, 42% over 5 yrs** **CPP benefit $ entitlement increase:** (Monthly entitlement @65) X (100% + % Inc calculated above)

CPP entitlement INCREASE - if delay till 70

- CPP permanently INCREASED by 0.70% ea month DELAYED (after age 65) - max increase 8.4%/yr , 42% over 5 years

CPP entitlement reductions- take early (before 70)

- permanently reduced by 0.60% ea month taken early (before age 70) - Max reduction = 7.2%/ yr , 36% max over 5 yrs