The percentage of a worker's pre-retirement income that is paid out by a pension program upon retirement. In pension systems where workers get substantially different payouts due to their differing incomes, replacement rate is a common measurement which can be used to determine the effectiveness of the pension system. In some cases, workers can use replacement rates to help estimate what their retirement income might be from the plan. Replacement rates are commonly mentioned in the debate over the U.S. Social Security system. Under the current Social Security law (as of 2010), replacement rates are at about 45% for the average worker. The replacement rate can allow for individuals to plan for retirement. For example, a worker with pre-retirement income of $100,000 their can estimate their pension at around $45,000 at the current 45% replacement rate.
The person who receives the principal remaining in a trust account after all other required payments have been made, such as those to the beneficiary and expenses. The remainder man may exercise the right to hold and use the property in the trust only after the trust has been completely dissolved.
The maximum amount that the Canada Revenue Agency (CRA) allows a taxpayer to deduct from his or her personal income when calculating tax liability. The sum of contributions made to a taxpayer's personal RRSP and his or her spouse's or common-law partner's RRSP must be lower than the RRSP deduction limit or withholding taxes will be imposed on the coverage. In order to arrive at this contribution limit, the CRA calculates the taxpayer's maximum contribution earned for the year according to his or her annual income. It then deduct transfers of certain qualifying income made to the taxpayer's RRSP throughout the year. Finally, the CRA calculates for pension adjustments using past service pension adjustments and adds back pension adjustment reversals and carries forward any unused RRSP deductions that were not used in previous years. Deduction limits are shown on your personal Notice of Assessment.
The amount that a Canadian taxpayer contributes to his or her RRSP. This amount can be deducted from the taxpayer's annual income to arrive at his or her taxable income for the year. The RRSP deduction amount is found on line 208 of the annual income tax return filed with Canadian Revenue Agency. As this is a tax deduction from personal income, it is advantageous for taxpayers to maximize the value of their RRSP deduction - as they minimize the amount of money that is subject to personal income tax.
A practicing professional who helps individuals prepare a retirement plan. A retirement planner identifies sources of income, estimates expenses, implements a savings program and helps manage assets. Estimating future cash flows and assets is also a central part of a retirement planner's work. He or she may use a web-based calculator or software program that will predict future cash flows and assets based on the data entered. Although most retirement planners deal with the financial aspects of planning for retirement, some planners also deal with the non-financial aspects, including how to spend one's time in retirement, where to live and when to quit work, to name just a few. Today, retirement planners rely heavily on web-based calculators and retirement-planning software, but, like any kind of forecast, the information produced is only as good as the data used. The plan created by a retirement planner is in no way a complete predictor of retirement spending or income needs, but it is a good starting point.
A group of investment products available to anyone as a conservative means of saving for retirement. A RIF is generally a mutual fund that is well diversified in large and mid-cap stocks and bonds. A RIF balances its portfolio to allow for moderate gains using a conservative approach to attempt to retain value while providing income to investors. Retirement income funds are actively managed funds that are intended to provide conservative, moderate growth for assets tucked away for retirement purposes, such as IRAs. There is no special tax treatment for these funds despite their name; they are treated as normal mutual fund investments. As a mutual fund, they are exposed to market risk and are, therefore, not a guaranteed retirement income - although they are invested conservatively. Some types of retirement income funds pay out regular distributions, such as monthly or quarterly. This type of fund usually has a required minimum investment and will incur fees similar to other mutual fund products.
An option available within some employer-sponsored qualified plans that allows for Roth tax treatment of employee contributions. The Roth option allows employees to deposit money into their retirement plans on an after-tax basis. This feature is available for both 401(k) and 403(b) plans. The Roth option is a godsend for highly compensated employees whose incomes are too high to permit Roth IRA contributions. Annual contributions can allow them to accumulate an enormous pool of tax-free cash by the time they retire.
An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free. Similar to other retirement plan accounts, non-qualified distributions from a Roth IRA may be subject to a penalty upon withdrawl. A qualified distribution is one that is taken at least five years after the taxpayer establishes his or her first Roth IRA and when he or she is age 59.5, disabled, using the withdrawal to purchase a first home (limit $10,000), or deceased (in which case the beneficiary collects). Since qualified distributions from a Roth IRA are always tax free, some argue that a Roth IRA may be more advantageous than a Traditional IRA.
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