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RETIREMENT

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RETIREMENT PLANS (RRSP, RRIF, IPP, ANNUITY)

 

RETIREMENT

 

Choose to start  your Registered Retirement Savings Plan (RRSP) now if you have not yet done so already, because the sooner you start the sooner you can stop and enjoy it. Anyone can start a plain savings plan, but don't  you deserve a Tax-Break, adding the tax refund to your RRSP plan will give a little boost to help your plan grow that much more.

 

Think about, some of the things you want to do when you have accumulated enough money to retire, like travelling, spending more time on or starting a hobby. These  happy thoughts will help you determine and set some goals, give you the motivation to stick with your plan and before you know it you will be there ready for that next stage.

 

Retirement for some may seem a long time away. Could this be because we have been conditioned to think retirement means at Age 65 you stop working. We know that you can retire at any time or at any age, the key is to accumulate enough capital to provide the income you need to live in the way you have become accustomed or in a manner that you choose.

 

As individuals approach or enter retirement, their focus shifts from wealth accumulation to income distribution, wealth preservation and leaving a legacy for their heirs (family), a foundation or charitable institution. To support this shift their non-registered financial portfolio typically includes more guaranteed investment instruments, such as GICs / GIAs and Bonds.

 

The interest generated with these types of investments can be used to supplement their retirement income while leaving the principal in tact. However, while the stability of these investments may satisfy the need for security, they are missing opportunities for efficiently managing taxes because 100% of interest income is taxable.

 

There are solutions available to create a more favourable tax situation while preserving capital. Now, we all know solutions should always be based on an individual's need, so I am going to resist presenting detailed solutions and avoid the risk of sounding like there is a "one fits all" solution.

 

 

RRSP - REGISTERED RETIREMENT SAVINGS PLAN

 

Registered Retirement Savings Plan with the capability to defer Income Taxes is one way to create a little nest egg. It is very likely that your income from earnings during your working years will be higher than your income during your retiement years. The higher your income the higher the income taxes you are required to pay, so from these perspectives, you can understand the strategy of sheltering some of your high income dollars thereby defering taxes on those dollars.

 

In addition the taxes on the growth on those sheltered dollars are also deferred. During your retirement your base income will likely be lower and you can control the income amount from withdrawals of  your RRSP thereby paying less taxes than you would have otherwise. Many people make the mistake of thinking of an RRSP as the investment instrument. Your RRSP is a plan within which you are allowed hold a variety of eligible investment instuments such as a Term Deposit, Mutual Funds and Segregated Funds. 

 

An Individual Pension Plan is another way of creating a nest egg which provides some of the same benefits as an RRSP but  work with higher dollar limits.

 

 

Individual Pension Plan can generate healthy tax savings and Peace of Mind throughout retirement.

 

Are you over 40 and earning a six figure income? Why not consider looking beyond a Registered Retirement Savings Plan (RRSP) to build your nest egg. For the right person, Individual Pension Plans (IPP's) can generate significat tax advantages beyond those provided by an RRSP. Additionally, an IPP can also produce higher pension benefits.

 

  • Do you qualify for an IPP?
  • What are the advantages of an IPP?

 

Go to my Library  where you can download the full article -Individual Pension Plan Advantages.

 

 

RRIF - REGISTERED RETIREMENT INCOME FUND

 

Registered Retirement Income Fund a plan you convert your RRSP to when you are ready to start drawing an income from  your RRSP. There is a minimum and maximum schedule amount that income payments must follow as set out by Canada Revenue Agency (CRA). All your RRSPs have to be converted to a RRIF by the end of the calendar year in which the RRSP holder turns Age 71. With a younger spouse you can elect to use their age to determine the start date of your income stream, thereby achieving a longer income paying period.  

 

Your Principal, the initial deposit amount to your RRIF like an RRSP continues to grow tax sheltered and can be invested in Guaranteed Interest Accounts (GIAs the Insurance companies equivalent of Bank GICs) or Segregated Funds (Seg. Funds). The Income withdrawn is taxable and subject to witholding tax. Any RRIF balance remaining at the time of annuitant's death can be rolled over tax free to a spouse's RRSP, RRIF or to a dependent child or grandchild under age 18.

 

It is important to note, in all other instances the RRIF balance is subject to income taxes. The RRIF balance at time of an annuitant's death has to be included as income in the annuitant's final income tax return. Can you see how this will bump up income and income tax paying bracket in an individual's final year. Ask me about  use of life insurance as an effective Estate Planning strategy in preservation of Estate values. Consider and estimate how much of your hard earned money will go to the tax-man instead of your family or favourite charity. Asset depletion, highest income, tax bracket and income tax payment, Is this how you want the final chapter to end?. I will to provide you with additional information and possible solutions if you contact me.  

 

 

INCOME PLUS

 

Income Plus is a whole new way of planning for your retirement income. A concept and strategy ideally suited for individuals age 55 and up with unique guaranteed benefits backed by a Manulife financial. Competitive offering from Other Supplier companies recently introduced. For more details and an in depth look at this solution contact me.

 

 

ANNUITIES

 

Annuities come in a few different forms and in principle is purchased with a lump sum of money,  structured to payout a scheduled stream of dollars, partly a return of your Principal plus a gain on your investment. This is a contract with guaranteed amounts and terms thereby eliminating the risks and volatility of other types of investments, great reasons for their appeal to consumers. Annuity payments are usually for life with or without a guaranteed period but can also be for a specific term, like five or ten years. The tax treament differs based on the type of annuity and you can find those details on my tax page by clicking on Taxes.

 

 

Performance Annuity

 

Standard Life introduces Performance Annuity, a market-based annuity developed to meet today's retirement income needs. Like a conventional annuity, Performance Annuity provides income for your entire life. Like a RRIF, it offers the opportunity to grow your income by linking your investments to leading indexes such as the S&P/TSX, S&P 500 and MSCI World.

 

Performance Annuity – our new market-based annuity – may be right for you if you are accustomed to taking an active role in your retirement strategy and maximizing opportunities over time. Performance Annuity provides an income for life, but the amount of income will increase or decrease in line with the investments you choose.

 

  • Single Life annuity
  • Provides annuity payments for your lifetime
  • Guaranteed period available
  • Joint Life annuity
  • Provides annuity payments for your lifetime and that of your spouse
  • Income continues in full or at a reduced amount to the surviving spouse
  • Guaranteed period available
  • Investment Options


When purchasing a Performance Annuity, choose from 5 leading indexes. And, change your investment mix to respond to market conditions or evolving personal needs.

 

Anticipated Investment Return

 

The Anticipated Investment Return is the investment return you "anticipate" when establishing a Performance Annuity contract. We offer a choice of four AIRs: 0%, 3%, 5% or 6% and this rate is used in determining your initial Performance Annuity payment. The higher the AIR, the higher the starting income. However, a higher AIR reduces future growth potential. Future payments depend on the returns of the investment options you have chosen and the selected AIR. For a more detailed discussion of AIR in this relatively new approach, contact a financial advisor.

 

Payment frequency

 

You can choose monthly, quarterly, semi-annual or annual payments - deposited directly to your bank account.

 

Snowbird Feature

 

"Snowbirds" can receive their payments in their bank account in Canada, in Canadian dollars, or in the U.S. in American dollars.

 

Convert to a conventional Annuity at any time

 

As your needs change during your retirement, you may decide to opt for the guaranteed and stable income of a conventional annuity.

 

Added protection

 

While Performance Annuity guarantees an income for life, you may want the added comfort of having a guaranteed base income. If so, you can combine Performance Annuity with any one of Standard Life's conventional annuities. This way:The conventional annuity provides a minimum basic income for life; While Performance Annuity offers the potential for increased income.

 

Performance Annuity… the performance potential of a RRIF, with the comfort of an annuity.

Our full range of conventional annuities, available on a registered and non-registered basis, offer competitive rates coupled with flexible income stream options

 

  • Life annuity
  • Single Life annuity
  • Provides level or increasing annuity payments for your lifetime
  • Options available
  • Guaranteed Period
  • Life Cash Refund
  • Installment Refund
  • Joint Life annuity
  • Provides level or increasing annuity payments for your lifetime and that of your spouse
  • Income continues in full or at a reduced amount to the surviving spouse
  • Income can be reduced by a fixed amount or by a percentage; on prime or first death

 

 Available Options

 

  • Guaranteed Period
  • Installment Refund
  • Term Certain annuity
  • Provides guaranteed income payments for a specified period
  • Temporary annuity (non-registered contracts only)
  • Provides level or increasing payments for a specified period as long as you are alive Options available
  • Single or Joint Life
  • Lump Sum annuity

 

You customize your annuity as a series of lump sum payments

 

Deferred Annuity (Prepaid RRIF)

 

You purchase a deferred annuity contract (term certain to age 90) with the option of converting it to a RRIF at the earlier of age 69 and within 7 years of the annuity purchase date; an interest rate and term are selected for the RRIF. The single premium accumulates at the annuity contract's interest rate. If you convert to a RRIF, the accumulated value of the contract is transferred to the RRIF while maintaining the RRIF interest rate for the balance of the term selected. If you choose not to convert to a RRIF, annuity payments automatically start at the annuity contract's commencement date.

 

  • Level Income annuity: Income payments are the same for the duration of the annuity
  • Indexed Income annuity:  Income payments increase each year according to the level of the Consumer Price Index (CPI)
  • Payments can be fully or partially indexed to the CPI
  • Payments will never decrease or be subject to clawbacks
  • Payments can be indexed during the deferral period (from the date of the single premium payment to the annuity commencement date) to a maximum of 10 years



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