Although Canada has the Canada Pension Plan (CPP) and Old Age Security (OAS), the benefits received from these retirement income sources is limited. If you wish to live comfortably and enjoy retirement, you need to save up money on your own. Most people do this by using a tax savings financial instrument called a Registered Retirement Savings Plan (RRSP) to which they make monthly contributions. It is noteworthy that an RRSP is not an actual financial investment – it is an envelope into which you can place your investments and the earnings are tax-free and the contributions are tax-deductible.

In order to complete this scenario, you will need to make these choices and research the following (no marks can be earned if valid research is not provided where required):

1. pick a retirement annual income amount between $30,000 to $50,000 (use $1,000 increments).
2. incorporate an inheritance amount into the end of their RRSP plan. This amount of money would be made available to a spouse and/or children upon death. Keep this amount in perspective - $100,000 today would be approximately $325,000 60 years from now). Be sure to show any work and justify the choice. Note: $0 is not an acceptable choice

Decisions and Information You Will Be Using In Your Calculations
Age 19
Retirement income amount $30,000
Life expectancy in years 83years
Long-term Interest Rate 4% compounded annually
Long-term Annual Canadian inflation rate 3.15% per year
A. Inheritance Amount (show work) $100,000

b. For each student, take their annual retirement amount and project it forward to the age of retirement which will be 65 years old. Break this number down into monthly earnings. Show your work.

C. For each student, take their annual retirement amount and project it forward to the age of retirement which will be 65 years old. Break this number down into monthly earnings. Show your work.

D. Using your required RRSP amounts at the age of retirement, for each student calculate their approximate monthly contribution required to reach that goal. Assume no starting amount in your calculations. Show your work.

E. A lot of companies advertise something similar to “Freedom 55”, which means that you can retire at age 55 instead of age 65. For each student, determine the impact of retiring at age 55 on each of the monthly contributions. Discuss the implications of what you see. Show your work.

(show your answer with step by using BAII Plus calculator)