In Canada, a type of registered retirement income fund that is used to hold pension funds, and eventually payout retirement income. The life income fund (LIF) cannot be withdrawn in a lump sum; rather, owners must use the fund in a manner that supports retirement income for their lifetime. Each year's Income Tax Act specifies the minimum and maximum withdrawal amounts for LIF owners, which takes into consideration the LIF fund balance and the owner's annuity factor. LIF owners are not required to purchase a life annuity, buy may choose to do so at any age. A LIF owner may also choose to transfer funds to another LIF, a locked-in retirement income fund (LRIF) or in certain cases to a locked-in retirement account (LIRA). The financial institution from which the LIF is issued must provide an annual statement to the LIF owner. based on the annual statement, the LIF owner must specify at the beginning of each fiscal year the amount of income he or she would like to withdraw. This must be within a defined range to ensure the account holds enough funds to provide lifetime income for the LIF owner.
1. The age until which a person is expected to live. 2. The remaining number of years an individual is expected to live, based on IRS issued life expectancy tables. The life expectancy, for required minimum distribution (RMD) calculation purposes, is determined by the current age of the individual. 1. Also referred to as the average life span. It is used mainly by insurance companies to determine your premium. 2. The IRS life expectancy tables are used to calculate the RMD for retirement account owners and their beneficiaries.
A method of calculating annuity payments, by dividing the balance or total value of a retirement account by the policy holder's anticipated length of life. This is the easiest method of early distribution to calculate. There are two types of life expectancy methods. One is the "certain method", and the other the "recalculation method". IRS tables help determine life expectancy of the owner or the joint life expectancies of the owner and a beneficiary. An example of how this method is calculated: If a 54-year-old single man wants distributions to begin in 2011, he must first calculate the total account value as of December 31, 2010 and his life expectancy according to IRS Publication 590 Appendix C. If the account value were $100,000 and his life expectancy is 30.5 years, the amount he can receive in distributions each year is $3,278.69. The following year, the now 55-year-old would again take the account balance on December 31 and divide the amount by 29.6 - his new life expectancy. Essentially, the older the person becomes, the shorter the life expectancy becomes, although this relationship is not linear.
A U.S. state-level legal distinction of a married individual's assets. Property acquired by either spouse during the course of a marriage is considered marital property. For example, an IRA in the name of an individual with a spouse that is accumulated during the course of the marriage would be considered marital property. Also known as "community property". This type of legal definition primarily exists to protect spousal rights. Generally, the spouse of the retirement account owner who resides in a community or marital property state must be the sole primary beneficiary of an investment account designated as marital property, unless the spouse provides written consent to have someone else designated as primary beneficiary of the retirement account.
A one-time payment for the total or partial value of an asset. A lump-sum payment is usually taken in lieu of recurring payments that would otherwise be received over a period of time. The value of a lump-sum payment is generally less than the sum of all payments that the party would otherwise receive, since the party paying the lump-sum payment is being asked to provide more funds up front than it otherwise would have been required to. Lump-sum payments are often used in structured products that typically provide payouts over a series of times, such as annuities or other retirement vehicles. This type of payment is also used in structured settlements, and in some corporate retirement packages, in which the company will incentivize employees to retire early by providing all retirement funds up front.
A variable annuity fee included in certain annuity or insurance products which serves to compensate the insurance company for various risks it assumes under the annuity contract. Any time an insurance company offers an annuity to someone, it must make assumptions about uncertain factors (such as the life expectancy of the annuitant) and the likelihood of uncertain events actually occurring; it must also provide the annuitant with peace of mind via lifetime payout options for the future and fixed insurance premiums. The insurance company prices these risks inherent to the structure of an annuity as accurately as possible and packages it into a dollar value charge for the annuitant.
A type of investment vehicle that provides a specified monthly payment to the investor. This monthly payment is intended to be a stable form of income and is therefore typically suited for retired persons or senior citizens without other substantial sources of monthly income. A monthly income plan can be thought of as a budget for a retirement income. Rather than reaching retirement and spending your nest egg by making random withdrawals of varying amounts, a monthly income plan can ensure you receive a stable amount of funds each month to spend, which limits the risk of over-spending. In this regard, an MIP is similar in many ways to an annuity.
The terms of a registered pension plan that detail the specific amounts that an employer and employee contribute to the plan. The amounts may be stated in dollars or percentages. The provisions of the pension plan states the maximum amount of the employee's contribution that can be matched by the employer. Money-purchase provisions for registered plans must fall under the governing requirements outlined by the Government of Canada Aside from the government's requirements that the money-purchase provisions must meet, the company offering the registered pension plan also adds its own terms that an employee must follow to qualify for the employer's matching contributions.
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