QUESTION 5: ling Wong who is 50 years old would like to retire at age 60. He is currently earning $160,000 per year in today's $s and would like to have 60% of that income per year during retirement. He expects to live till age 90. He is eligible to receive maximum CPP and OAS starting at age 65 in today's $s. Use 2012 values from table 174. He will receive an employer pension of $50,000 per year in nominal $. after he retires at age 60. He would like CPP to start after he turns 60, and on to start after he turns 65. for each month earlier than age 65 CPP starts he will lose 0.6%. His marginal tax rate is 46%. He has $290,000 in RRSP now. He plans to deposit $6,000 per year in nominal $o into it each year until retirement. He will deposit tax refund on the RRSP contribution into a Tax Free Savings flccount (TF841). He expects to earn a real rate of return of 3% per year on his portfolio. Inflation rate is expected to be 2% per year. flssume deposits into the RRSP and TFSA are in nominal $s and are made at the beginning of the year. Savings in TFSA provide no income tax deduction, but the principal and income in TF84 are never taxed, even when withdrawn. Therefore, to make the TFS comparable with other before tax values in this problem, multiply the accumulated TFSA value by 1.25 a. Do ling's savings provide enough to maintain the standard of living he desires if he lives to age 90? If not, how much will be the value of the shortfall in retirement savings at age 60. 6. How much more he contributes to his 1781 each year to reach his goal. Remember for each year maximum contribution allowed is $10,000. TABLE 17.4 Maximum Government Pensions 2011 and 2012 Maximum Monthly Pensions Details Canada Pension Plan $460.00 [$986.67) . For persons retiring at age 65 who contributed at the maximum rate on the MPE for the majority of their career Actual amount varies according to lifetime profile of contributions, and age of retirement Lump-sum death benefit to spouse or estate Disability benefit prior to age 65 $2,500 (lump sum) $1,153.34_{$1,185.50] Old Age Security $597.97 18540121 548.98 . Every Canadian at age 65, provided they have lived in Canada for a sufficient number of years Clawback of 15%, starts at net income of $67,668 and is 100% of OAS for net income of $110,123 [2012: Clawback starts at $69,562 and is 100% at $112,772) Guaranteed Income Supplement Single: $729.44 [$732.36] Reduced by 50% of income excluding OAS, GIS, Married to a pensioner: and Spouse's Allowance $482.68 [$485.61] Maximum income limits: single - $16,320 ($16,368] couple both receiving OAS - $21,557 ($21,648] couple, only one gets OAS - $39,120 [$39,264] couple, one with OAS, one with Spouses Allow- ance - $30,192 [$30,336] OAS + GIS Minimum Income Floor Single: $1,262.41 [$1,272.48] OAS + GIS for a single person/couple with no Couple: $2,043.30 [$2,051.46] other income Retired Canadians aged 65 or over are entitled to this minimum level of income, with some qualifications Spouse's Allowance $1,021.63 ($1,025.73] Person aged 60 to 64 who is a spouse of a person eligible for OAS and GIS Maximum is equal to OAS + GIS for someone aged 65 and spouse of a pensioner Net income cutoff: 30192 [$30,336] Note: 2012 figures are in square brackets. For current rates and other information, . QUESTION 5: ling Wong who is 50 years old would like to retire at age 60. He is currently earning $160,000 per year in today's $s and would like to have 60% of that income per year during retirement. He expects to live till age 90. He is eligible to receive maximum CPP and OAS starting at age 65 in today's $s. Use 2012 values from table 174. He will receive an employer pension of $50,000 per year in nominal $. after he retires at age 60. He would like CPP to start after he turns 60, and on to start after he turns 65. for each month earlier than age 65 CPP starts he will lose 0.6%. His marginal tax rate is 46%. He has $290,000 in RRSP now. He plans to deposit $6,000 per year in nominal $o into it each year until retirement. He will deposit tax refund on the RRSP contribution into a Tax Free Savings flccount (TF841). He expects to earn a real rate of return of 3% per year on his portfolio. Inflation rate is expected to be 2% per year. flssume deposits into the RRSP and TFSA are in nominal $s and are made at the beginning of the year. Savings in TFSA provide no income tax deduction, but the principal and income in TF84 are never taxed, even when withdrawn. Therefore, to make the TFS comparable with other before tax values in this problem, multiply the accumulated TFSA value by 1.25 a. Do ling's savings provide enough to maintain the standard of living he desires if he lives to age 90? If not, how much will be the value of the shortfall in retirement savings at age 60. 6. How much more he contributes to his 1781 each year to reach his goal. Remember for each year maximum contribution allowed is $10,000. TABLE 17.4 Maximum Government Pensions 2011 and 2012 Maximum Monthly Pensions Details Canada Pension Plan $460.00 [$986.67) . For persons retiring at age 65 who contributed at the maximum rate on the MPE for the majority of their career Actual amount varies according to lifetime profile of contributions, and age of retirement Lump-sum death benefit to spouse or estate Disability benefit prior to age 65 $2,500 (lump sum) $1,153.34_{$1,185.50] Old Age Security $597.97 18540121 548.98 . Every Canadian at age 65, provided they have lived in Canada for a sufficient number of years Clawback of 15%, starts at net income of $67,668 and is 100% of OAS for net income of $110,123 [2012: Clawback starts at $69,562 and is 100% at $112,772) Guaranteed Income Supplement Single: $729.44 [$732.36] Reduced by 50% of income excluding OAS, GIS, Married to a pensioner: and Spouse's Allowance $482.68 [$485.61] Maximum income limits: single - $16,320 ($16,368] couple both receiving OAS - $21,557 ($21,648] couple, only one gets OAS - $39,120 [$39,264] couple, one with OAS, one with Spouses Allow- ance - $30,192 [$30,336] OAS + GIS Minimum Income Floor Single: $1,262.41 [$1,272.48] OAS + GIS for a single person/couple with no Couple: $2,043.30 [$2,051.46] other income Retired Canadians aged 65 or over are entitled to this minimum level of income, with some qualifications Spouse's Allowance $1,021.63 ($1,025.73] Person aged 60 to 64 who is a spouse of a person eligible for OAS and GIS Maximum is equal to OAS + GIS for someone aged 65 and spouse of a pensioner Net income cutoff: 30192 [$30,336] Note: 2012 figures are in square brackets. For current rates and other information,