SEGREGATED FUNDS ANNUITIES STUDY EXAMS
GUIDE ANSWERS AND QUESTIONS SET A+
✔✔What are the 2 main government retirement plans?
LLQP - SFA VL 26 - ✔✔1. Canada Pension Plan (CPP) (QPP in Quebec)
- A compulsory pension plan, if you have
income over a certain level. If you earn over
that level, you must contribute to CPP.
- Your employer must also match your
contributions.
- If you are self-employed, you have to make
both your contributions and the employer
contribution (because you are the employer.
- Generally, CPP is received at age 65.
- Benefits can be received up to 5 years earlier,
at a reduced amount.
- Or, benefits can be delayed up to 5 years,
resulting in an increased payment amount.
2. Old Age Security (OAS)
- A form of social assistance. i.e. you do not
"contribute" to OAS like CPP
- You can receive it even if you have never
worked your entire life.
- generally received at age 65 and is based on
residency. i.e. As long as you've lived in
Canada for the appropriate amount of time, at
age 65, you are entitled to OAS.
✔✔Couple A:
- Wife earns $150,000/year
- Husband has no taxable income
- Total household income is $150,000/year
, Couple B:
- Wife earns 75,000/year
- Husband earns $75,000/year
- Total household income is $150,000/year
Who couplde pays more tax on a combined basis?
LLQP - SFA VL 27 - ✔✔Couple A
✔✔Joel has $10,000 in annual RRSP contribution too,.
His wife, Mary, does not work and does not have any earned income. Neither Joel nor
Mary are part of a pension plan.
How should Joel structure his RRSP contributions?
LLQP - SFA VL 27 - ✔✔Joel should contribute $5,000 into his own RRSP. He also
contribute $5,000 to his wife's spousal RRSP.
Their RRSP balances are equal. If their RRSP perform and increase at the same rate,
they would have equal RRSPs in retirement and they can each pull out half of they need
combined and therefore pay less tax.
✔✔Spousal RRSPs rules
LLQP - SFA VL 27 - ✔✔To avoid contributing $5,000 into his wife's spousal RRSP and
saving 21% or more in taxes only to have it immediate;y withdraw and pay no tax
because her income would be below the threshold.
1. If you contribut to a spousal RRSP, the fund must remain in the fund for the rest of
calender year and the next 2 2 calendar years.
2. Last in, First out (LIFO).
If you she was to withdraw today, snhe can't argue this money was contributed 5 years
ago. So, you have to stop contributing for the time period before the spouse can
withdraw the money and not have the income attributed back to Joel.
✔✔What is Annuity?
LLQP - SFA VL 28 - ✔✔1. An annuity can be described as 4 words:
A series of payments
2. The key difference between the following types of
annuities is:
GUIDE ANSWERS AND QUESTIONS SET A+
✔✔What are the 2 main government retirement plans?
LLQP - SFA VL 26 - ✔✔1. Canada Pension Plan (CPP) (QPP in Quebec)
- A compulsory pension plan, if you have
income over a certain level. If you earn over
that level, you must contribute to CPP.
- Your employer must also match your
contributions.
- If you are self-employed, you have to make
both your contributions and the employer
contribution (because you are the employer.
- Generally, CPP is received at age 65.
- Benefits can be received up to 5 years earlier,
at a reduced amount.
- Or, benefits can be delayed up to 5 years,
resulting in an increased payment amount.
2. Old Age Security (OAS)
- A form of social assistance. i.e. you do not
"contribute" to OAS like CPP
- You can receive it even if you have never
worked your entire life.
- generally received at age 65 and is based on
residency. i.e. As long as you've lived in
Canada for the appropriate amount of time, at
age 65, you are entitled to OAS.
✔✔Couple A:
- Wife earns $150,000/year
- Husband has no taxable income
- Total household income is $150,000/year
, Couple B:
- Wife earns 75,000/year
- Husband earns $75,000/year
- Total household income is $150,000/year
Who couplde pays more tax on a combined basis?
LLQP - SFA VL 27 - ✔✔Couple A
✔✔Joel has $10,000 in annual RRSP contribution too,.
His wife, Mary, does not work and does not have any earned income. Neither Joel nor
Mary are part of a pension plan.
How should Joel structure his RRSP contributions?
LLQP - SFA VL 27 - ✔✔Joel should contribute $5,000 into his own RRSP. He also
contribute $5,000 to his wife's spousal RRSP.
Their RRSP balances are equal. If their RRSP perform and increase at the same rate,
they would have equal RRSPs in retirement and they can each pull out half of they need
combined and therefore pay less tax.
✔✔Spousal RRSPs rules
LLQP - SFA VL 27 - ✔✔To avoid contributing $5,000 into his wife's spousal RRSP and
saving 21% or more in taxes only to have it immediate;y withdraw and pay no tax
because her income would be below the threshold.
1. If you contribut to a spousal RRSP, the fund must remain in the fund for the rest of
calender year and the next 2 2 calendar years.
2. Last in, First out (LIFO).
If you she was to withdraw today, snhe can't argue this money was contributed 5 years
ago. So, you have to stop contributing for the time period before the spouse can
withdraw the money and not have the income attributed back to Joel.
✔✔What is Annuity?
LLQP - SFA VL 28 - ✔✔1. An annuity can be described as 4 words:
A series of payments
2. The key difference between the following types of
annuities is:
