Retirement Planning

Running head: RETIREMENT PLANNING
Retirement Planning
Retirement Planning
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RETIREMENT PLANNING
Table of Contents
Retirement Planning.............................................................................................................................2
Registered Retirement Savings Plan (RRSP)....................................................................................2
Tax-Free Savings Account (TFSA)..................................................................................................3
Locked-in Retirement Accounts (LIRAs).........................................................................................4
Provisions for holding LIRA................................................................................................................5
Retirement Income Conversion Options for LIRA...............................................................................5
Reverse Mortgages............................................................................................................................6
References...........................................................................................................................................10
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RETIREMENT PLANNING
Retirement Planning
Retirement planning on a financial note refers to allocating a proportion of monthly income
for retirement. It is a plan with a goal to achieve financial independence. Future is uncertain and in
today’s world no one wants to be a burden on the other. When it comes to self-dependency, even
parents doesn’t want to bother their children, even though it their child’s love to take care of them.
Thus, it is where Retirement Planning comes in.
“Retirement Planning involves identifying proposed requirement of income at the retirement
age, assessing the current expenses and chalking out how much the money to save for the future
income identified and in what frequencies (Baldwin & Shillington, 2017).” There are also various
retirement programs some of which are briefly described as follows:-
Registered Retirement Savings Plan (RRSP)
This plan is a type of Savings Account in Canada that individuals open so that they could
hold investment and savings assets. This would result in a number of tax benefits to making
investments outside tax-preferred accounts. This plan was introduced in 1957 for promoting savings
that the staffs and self-employed individuals should receive after employment.
This savings plan has two main benefits. The contributors might deduct contributions in
opposition to their income. For instance, if the tax rate of a contributor is 40%, for every $100
invested in this plan, the individual would be able to save $40 in taxes up to the limit of
contribution. In addition, the growth of investments in RRSP is sheltered by tax. Unlike the non-
RRSP investments, returns are exempted from capital gains tax, income tax or dividend tax. This
implies that investments according to RRSPs are compounded at pre-tax rate (Beshears et al., 2015).
In effects, the contributors of RRSP delay the tax payments until the retirement period, when
the marginal tax rate would be lower compared to their working periods. The Canadian government
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RETIREMENT PLANNING
has provided such tax deferral in order to boost savings for retirement, which would help the
population in concentrating less on the Canadian Pension Plan for funding retirement.
RRSP are generally of the following types, which are formed by one or two related
individuals generally spouses or individuals.
 A single RRSP is set by one individual holding accounts as well as the contributor
 Spousal RRSP offers advantages for one spouse along with tax benefit for both
spouses. A high-earner might contribute to this RRSP in the name of the spouse or
the account holder. Since there is even division of retirement income, each spouse
could seek advantage from minimized marginal tax rate.
 An employer sets the group RRSP for the staffs and the individual is financed with
deductions related to payroll like the plan of 401(k) in USA. The investment manager
administers the same and the contributors are afforded with the benefit of immediate
tax savings (Boisclair, Lusardi & Michaud, 2017).
 There has been development of pooled RRSP in 2011, which is an alternative
developed for the small business employers and staffs along with the self-employed
individuals.
Tax-Free Savings Account (TFSA)
This account is an account in Canada, which is involved in providing tax advantages in
relation to savings. Investment income takes into consideration dividends and capital gains gained in
the account, which are mainly not taxed even when withdrawn. Unlike a Registered Retirement
Savings Plan (RRSP), TFSA contributions are not eligible for deduction in relation to income tax
purposes (Cross, 2014).
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