Estate Objectives Gary wants to leave a before-tax amount of $25,000, in current dollars, in his RRIF as a charitable bequest to his church. A major assumption in Gary and Nancy's retirement plan is that real estate values will continue to rise. They are counting on their principal residence having a market value of $2.5 million at the time of their deaths. The property was purchased by Gary during his first marriage so, ultimately, he would like to see the house passed on to Charlene and his grandchild. Assumptions Gary and Nancy will live for another 26 years inclusive of this year. . Unless otherwise stated, Gary and Nancy are each assumed to be in a 36% combined marginal tax bracket for the remainder of their lives Inflation is expected to be an annual rate of 2.5%. Investment returns for all investments are assumed to be 7%. . The OAS clawback threshold for this year is $72,809. . The maximum monthly OAS benefit from this year forward will remain fixed at $563.74. . The maximum monthly CPP benefit from this year forward will remain fixed at $1,065.00. . The maximum monthly CPP benefit 18 months ago was $1,012.50. YMPE: 3 years ago: $50,100; 2 years ago: $51,100; last year: $52,500 The net income threshold for enhanced Registered Education Savings Plan CESG payments will remain fixed at $89,401 from this year forward. 21 go back to Questions 21 - 32 are based on the Gary and Nancy Weinrib Case Study Personal Situation Gary Weinrib was born on January 1st; he celebrated his 65th birthday this year. He was born in Israel but he immigrated to Canada with his family when he was 12 years old. After ten full years of residency in this country, he moved back to Israel when he was 22 years of age only to return to Canada and settle here permanently at the age of 37. Upon his return to Canada, Gary began working for Cygnus Corporation as a service technician where he worked for 12 years. After leaving Cygnus Corporation, he was hired by Dreamline Enterprises where he was employed for nine years. Gary retired at the age of 58 and has been enjoying his time at home for the past seven years. Nancy was also born on January 1st; she is 60 years old. She has lived in Canada her entire life. Due to working on her PhD, Nancy entered the workforce at a relatively late age-she began working for the federal government at the age of 34. She completed 26 years of service before officially retiring effective today's date. Gary and Nancy have been married for 13 years. This is Gary's second marriage following the death of his first wife. He has a 32-year old daughter named Charlene from his first marriage. Charlene is a single mother-her daughter Wendy will be celebrating her first birthday on May 7th of this year. Assets Asset Ownership Registered Assets: RRSP Gary LIF RRSP Spousal RRSP Gary Nancy Nancy (annuitant); Gary Market Value $443,000 $ 79,000 $ 88,000 $91,000 Spousal RRSP Non-registered Assets: $50,000 5-year, 4.85% non-redeemable compound GIC maturing in 2 years $75,000 5-year, 4.85% non-redeemable compound GIC maturing in 2 years Canadian and global equity mutual funds Canadian bond fund Gary Nancy Nancy (annuitant); Gary (contributor) $ 91,000 $ 57,634 $ 86,450 Gary and Nancy as joint tenants $ 68,250 Nancy $ 96,135 5,000 common shares of Earthshine. Corporation Real Estate: Rental property Gary $ 32,112 Principal residence . Registered Assets Gary and Nancy as joint tenants Gary and Nancy as joint tenants $675,000 $268,000 In addition to contributions to his own RRSP, Gary has made annual contributions of $5,000 to Nancy's spousal RRSP for the past several years. Gary intends to continue making these spousal contributions until and including the year Nancy has to deregister her RRSP. Nancy will not make any further contributions to her individual RRSP. Gary and Nancy intend to wait until the latest possible year before transferring their respective RRSPs into RRIFS. Pension Assets The source of Gary's LIF assets is from his membership in a registered pension plan during his employment with Cygnus Corporation. Gary lives in a province that requires conversion of his LIF to a life annuity at age 80. His subsequent employer, Dreamline Enterprises, did not offer a pension plan. Being a government employee, Nancy was a member of a contributory, defined benefit pension plan with a normal retirement age of 60. She joined the plan immediately upon being hired. The plan provides a retirement pension based on 2% per year of service of for the last five any further contributions to her individual RRSP. Nancy has to deregister her RRSP. Nancy will not make Gary and Nancy intend to wait until the latest possible year before transferring their respective RRSPs into RRIFS. Pension Assets The source of Gary's LIF assets is from his membership in a registered pension plan during his employment with Cygnus Corporation. Gary lives in a province that requires conversion of his LIF to a life annuity at age 80. His subsequent employer, Dreamline Enterprises, did not offer a pension plan. Being a government employee, Nancy was a member of a contributory, defined benefit pension plan with a normal retirement age of 60. She joined the plan immediately upon being hired. The plan provides a retirement pension based on 2% per year of service of her average pensionable earnings for the last five years of service. Benefits are reduced by a CPP offset of 0.7% of the average YMPE for the last three years of service. Nancy's pensionable earnings for the past five years and the YMPES for the past three years are as follows: Nancy's Average Pensionable Earnings Year's Maximum Pensionable Earnings (YMPE) 5 years ago $47,850 4 years ago $50,242 3 years ago $52,755 $50,100 2 years ago $55,392 $51,100 last year $58,162 $52,500 Based on this information, Nancy's average pensionable earnings for her last five years of service with the federal government was $52,880.20 and her basic monthly pension at age 60 is $2,291.47. Canada Pension Plan (CPP) and Old Age Security (OAS) Based on this information, Nancy's average pensionable earnings for her last five years of service with the federal government was $52,880.20 and her basic monthly pension at age 60 is $2,291.47. Canada Pension Plan (CPP) and Old Age Security (OAS) Gary's contributions to the CPP started upon his return to Canada from Israel at age 37. Nancy made her first contribution to the CPP once she was hired by the federal government at age 34. Neither Gary nor Nancy has had any interruptions during their CPP contributory period. Gary started receiving his CPP retirement pension when he was 63 years and 6 months old. Gary will receive his first OAS benefit payment effective this month. Nancy will wait until age 65 before collecting her CPP retirement benefits. At that time, she will be eligible for the maximum pension payable. Also, when her CPP payments commence, based on an assignment ratio of 69.23%, the portion of her CPP benefits that will be assignable will be $737.30; the portion of her CPP benefits that will not be assignable will also be $327.70. . Retirement Objectives Gary and Nancy intend to lead a modest lifestyle during their retirement years. That being said, within the next five years, they will have one significant expense: they want to take a round-the- world trip. They estimate they will have to withdraw $50,000 from their savings to fund this trip. Estate Objectives Gary wants to leave a before-tax amount of $25,000, in current dollars, in his RRIF as a charitable bequest to his church. A major assumption in Gary and Nancy's retirement plan is that real estate values will continue to rise. They are counting on their principal residence having a market value of $2.5 million at the time of their deaths. The property was purchased by Gary during his first marriage so, ultimately, he would like to see the house passed on to Charlene and his grandchild. . Assumptions Gary and Nancy will live for another 26 years inclusive of this year. Unless otherwise stated, Gary and Nancy are each assumed to be in a 36% combined marginal tax bracket for the remainder of their lives Jest to hisS A major assumption in Gary and Nancy's retirement plan is that real estate values will continue to rise. They are counting on their principal residence having a market value of $2.5 million at the time of their deaths. The property was purchased by Gary during his first marriage so, ultimately, he would like to see the house passed on to Charlene and his grandchild. Assumptions Gary and Nancy will live for another 26 years inclusive of this year. Unless otherwise stated, Gary and Nancy are each assumed to be in a 36% combined marginal tax bracket for the remainder of their lives Inflation is expected to be an annual rate of 2.5%. Investment returns for all investments are assumed to be 7%. The OAS clawback threshold for this year is $72,809. The maximum monthly OAS benefit from this year forward will remain fixed at $563.74. The maximum monthly CPP benefit from this year forward will remain fixed at $1,065.00. The maximum monthly CPP benefit 18 months ago was $1,012.50. YMPE: 3 years ago: $50,100; 2 years ago: $51,100; last year: $52,500 The net income threshold for enhanced Registered Education Savings Plan CESG payments will remain fixed at $89,401 from this year forward. How much of a monthly retirement pension benefit can Nancy expect to receive at age 65 based strictly on her membership in her employer's registered pension plan? $1,098.18 b) $1,514.43 c) $2,036.97 d) $2,291.47 Minutes remaining: 231 Previous Question Next Question View Summary and Submit