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my money* * and how to make it grow
Preparing for Retirement
University of Northern British Columbia
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Things to consider…
Social lifeSocial life Activities as a coupleActivities as a couple
ResidenceResidence
Psychological aspectPsychological aspect
Individual activitiesIndividual activities
HobbiesHobbiesHealthHealth
Financial AspectFinancial Aspect
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Agenda
Your plan Savings Phase Retirement Income Phase
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Preparing for Retirement
Your Plan
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Your Plan at a glance
Employee contributions
Defined Contribution Pension Plan (DCPP)
Eligibility: Immediate for regular employees who work more than 18 hours/weekParticipation: CompulsoryVesting and Locking in: 2 years of continuous serviceTransfers: Transfers in from other financial institutions are accepted
Employer contributions
You contribute 3% of monthly earnings up to YMPE and 5% above YMPE (YMPE for 2010 $47,200)Additional voluntary contributions are accepted
UNBC contributes 8% of earnings up to YMPE and 10% over YMPE (up to revenue Canada limits)
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Meet Robert
Retirement Income PhaseSavings Phase
10 years from retirement 14 years of service with UNBC Annual salary $50,000 Contributes required amount to
the DCPP He is a conservative investor He wants to ensure he is saving
enough for retirement Wants to grow his money and
manage risk
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Savings Phase
Preparing for Retirement
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Plan Like Robert
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Robert’s assets
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Robert’s lifestyle in retirement
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Robert’s action plan
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Action Plan
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Action Plan
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Advantages of making additional voluntary contributions (AVCs)
Gross Rate of Return 5.75 %Fund Management Fees: 0.75 %Annual Revenue: $50 000
$561,775
$388,387
15
You contribute 3.11%*
Your employer contributes 8.11%* You contribute 3.11%*You contribute AVC of 5%Your employer contributes 8.11%**based on plan formula and $50,000 income
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Effects of contributing to the maximum on your net salary
Annual Salary $50,000
Pay after taxes
Less Taxes
Your contribution
Gross Pay
Cost after tax per day
Tax Savings
Employer contribution
$1,362
( $405)
( $156 )
$1,923
3.11% Employee
5% Employee AVC
8.11% Employer
$7.28
( $54)
$156
$1,424
($409)
( $60 )
$1,923
$2.85
( $20)
3.11% Employee
8.11% Employer
$156
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Your Retirement Financial Challenges
OUTLIVING YOUR SAVINGS
YOUR MONEY LOSING VALUE
THE MARKET ROLLER COASTER
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The market roller coaster
$0
$10,000
$20,000
$30,000
$40,000
$50,000
Jun 95 Jun 96 Jun 97 Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Jun 10
Consumer Price Index DEX 91-Days T-Bill Index DEX Universe Bond Index
S&P/TSX Composite Index S&P 500 TR (Bank of Canada) CAD
$ 13,291
$ 17,120
$ 19,632
$ 28,893
$ 34,583
Source: Morningstar.ca18
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Outliving your savings
9525% chance
one spouse willlive to age 95
9150% chance
one spouse willlive to age 91
Source: Canadian Institute of Actuaries – 1994 Uninsured Pensioner Mortality Table Projected to 2020.
Retirement
65
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Your money losing value
$18,490*$6,715Cost of a car
$303,700**$110,292Cost of a house
$50$21Cost of Groceries+
1980 Today
+ Inflation impact of the cost of groceries is measured by the CPI sub-index for food purchased from stores; inflation impact on the cost of a car and house is based on the aggregate CPI. Data source: Statistics Canada* Canadian MSRP for a 2010 Honda Civic Sedan DX with air conditioning** Average price for a detached bungalow in Canada, as at September 30, 2009
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Meet Robert
10 years from retirement 14 years of services with UNBC Annual salary $50,000 Contributes the required amount
to the DCPP He is a conservative investor He wants to ensure he is saving
enough for retirement Wants to grow his money and
manage risk Adds my money for life coverage
Retirement Income PhaseSavings Phase
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Financial Challenges
The market roller coaster Outliving your savings Your money losing value
RETIREMENT INCOME PHASE
Financial Challenges in the Savings Phase and the Retirement Income Phase
The market roller coaster Outliving your savings Your money losing value
SAVINGS PHASE
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my money for life
my money for life
He gets a stable andpredictable income for life
RETIREMENT INCOME PHASE
Robert’s savings protected from market volatility
SAVINGS PHASE
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RRCD
100 000 $
REER
50 000 $
Insuring Robert’s registered retirement savings
DCPP
$100 000
DCPP without coverage DCPP with my money for life Robert decides to add my
money for life on his entire DCPP balance
DCPP$100,000
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RRCD
100 000 $
REER
50 000 $
Benefit Base
The Benefit Base is the starting point used to calculate Robert’s annual income guarantee
Robert allocates $100,000 of his retirement savings to my money for life He contributes $467 to DCPP per month for a total of $5604 annually At the end of the first year his Benefit Base is $105,604.
BENEFIT BASE
$100,000CONTRIBUTIONS
$5604+
WITHDRAWALS
$0–
NEW BENEFIT BASE
$105,604=
Assumptions
Does does not reflect market increases 25
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Assumes the following annual sequence of returns:Year 1: -15%; Year 2: 6%; Year 3: 8%; Year 4: 9%; Year 5: 11% ….repeat.
Benefit Base Resets
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my money for life is reported separately from your uninsured savings on your statements
Semi-annual statement can be viewed online
Annual statement mailed directly to your home
my statement
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Investment options
You must have 40% of your money invested in Fixed Income Investment.
Asset Category Fund Name
Fixed Income BlackRock Universe Bond Index Fund
PH&N Bond Fund
Money Market SLF Money Market Fund
Balanced Beutel Goodman Balanced Fund
McLean Budden Balanced Growth Fund
McLean Budden Select Balanced Fund
Bonavista Balanced Fund*
Canadian Equity Beutel Goodman Canadian Equity Fund
BlackRock S&P/TSX Composite Index Fund
McLean Budden Canadian Equity Fund
McLean Budden Canadian Equity Growth Fund
U.S. Equity BlackRock US Equity Index Fund
McLean Budden US Equity Fund
CI American Value Fund*
Global Equity McLean Budden Global Equity Fund
Minimum 40%
Up to 60%
28*Not eligible for my money for life
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Investment choice and fees
You must have 40% of your money invested in Fixed Income Investment.
Asset Category Fund Name FMFsMMFL coverage fees
Total fees
Fixed Income BlackRock Universe Bond Index Fund
PH&N Bond Fund
0.44%
0.66%
0.65%
0.65%
1.09%
1.31%
Money Market SLF Money Market Fund 0.39% 0.60% 0.99%
Balanced Beutel Goodman Balanced Fund
McLean Budden Balanced Growth Fund
McLean Budden Select Balanced Fund
0.73%
0.64%
0.71%
0.85%
0.85%
0.85%
1.58%
1.49%
1.56%
Canadian Equity Beutel Goodman Canadian Equity Fund
BlackRock S&P/TSX Composite Index Fund
McLean Budden Canadian Equity Fund
McLean Budden Canadian Equity Growth Fund
0.73%
0.45%
0.65%
0.64%
0.95%
0.95%
0.95%
0.95%
1.68%
1.40%
1.60%
1.59%
U.S. Equity BlackRock US Equity Index Fund
McLean Budden US Equity Fund
0.45%
0.71%
0.95%
0.95%
1.40%
1.66%
Global Equity McLean Budden Global Equity Fund 0.67% 0.95% 1.62% 29
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Action Plan
Review page 2 and 3 of your annual expense worksheet to help you determine your needs.
Complete the Retirement Planner online or consult a financial advisor
Review periodically your investment strategy
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Retirement Income Phase
Preparing for Retirement
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Government Retirement Programs
Government Programs1. Canada Pension Plan2. Old Age Security3. Guaranteed Income Supplement4. Allowance
For more information CPP/OAS/GIS/Allowance - 800-277-9914 or
www.servicecanada.gc.ca
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Canada Pension Plan (CPP) - Overview
Designed to replace 25% of the earnings on which you contributed over your working life
Retirement pension paid to people who are at least 60 years of age Conditions apply in order to draw an early pension Pension is reduced if taken before age 65 and
increased if taken after age 65
Need to apply (6 months in advance)
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CPP - Eligibility to apply from ages 60 to 64
Stop working Not working by the end of the month before the
pension begins and during the month that it begins
OR
Have low earnings Earn less than the current maximum retirement
pension amount in the month prior to starting to collect and during the month that it begins
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Old Age Security (OAS) - Overview
Payable to anyone who has lived in Canada for a minimum of 10 years between the age of 18 and 65
Maximum pension paid if you lived in Canada for more than 40 years between the age of 18 and 65
Eligible at age 65 (must apply) Clawback provisions exist based on your other
income
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OAS – Clawback income threshold
If your net income is above $66,733 there is an OAS clawback (repayment) to part or all of your OAS payments
Full OAS is eliminated when your net income is $108,090 or above
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How much might I get from the government?
$518.51/mth($6,222/yr)
$505.11/mth($6,061/yr)
$489.12/mth($5,869/yr)
2010 CPP OAS
Maximum Monthly
Survivor Benefit
Average
$934.17/mth($11,210/yr) $518.51/mth
($6,222/yr)
$560.50/mth($6,726/yr)
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Retirement Income options
Preparing for Retirement
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Retirement income options for DC pension plans
AnnuityLife Income Fund (LIF)
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Annuities - Overview
Series of future payments in exchange for a lump sum today
Irrevocable once purchased Sensitive to interest rates at time of purchase Once your beneficiary passes on, payments
will cease under most circumstances Does not require active management Is not affected by financial markets
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What’s $100K worth?
These rates are shown for illustration purposes. They are subject to change without notice and current as of the time of writing.
None 5 years 10 years 15 years
$536 $535 $530 $522
$512 $512 $511 $508
Joint life annuity – Male aged 65 with Female spouse aged 65Guaranteed
Joint life annuity – Female aged 65 with Male spouse aged 65Guaranteed
60%
60%
100%
100%
None 5 years 10 years 15 years
$553 $551 $545 $534
$512 $512 $511 $508
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What’s $100K worth?
These rates are shown for illustration purposes. They are subject to change without notice and current as of the time of writing.
Payments are coded in gross dollars. taxes still apply. Annuity calculations are proprietary and this Information will not be divulged
None 5 years 10 years 15 years
$628 $622 $605 $578
$576 $572 $562 $546
Guaranteed
Male, aged 65
Female, aged 65
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Retirement income options for DC pension plans
AnnuityLife Income Fund (LIF)
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Life Income Fund (LIF) - Overview
Money in a LIF continues to grow tax deferred as long as there is money in the plan
Money can be invested in various options (e.g. mutual funds, stocks, bonds, GICs)
Begin to draw a retirement income from the account (page 4) Annual minimum amount applies (from Income Tax Act) Annual maximum amount applies (from Pension Acts)
Minimum withdrawal required – at age 65 it is 4% of the market value on January 1st
Maximum withdrawal restriction is the greater of:
÷ The previous year’s investment earnings; or
÷ The maximum established by a government formula – at age 65 – 7.20%
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Life Income Fund (LIF) - Features
A beneficiary can be designated Upon death, the balance of your account
is transferred to your beneficiary on a locked in basis
An annuity can be purchased at any time
Call the Customer Solutions Centre at 1- 866-224-3906 to understand your options
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Retirement income options for RRSPs
Annuity
Registered Retirement Income Fund (RRIF)
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Registered Retirement Income Fund (RRIF)- Overview
47
Money in a RRIF continues to grow tax deferred as long as there is money in the plan
Money can be invested in various options (eg. mutual funds, stocks, bonds, GICs)
Begin to draw a retirement income from the account Annual minimum amount applies (from Income Tax
Act) Annual maximum does not apply!
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Registered Retirement Income Fund (RRIF)- Features
48
Can close anytime and take cash (less tax)
A beneficiary can be designated An annuity can be purchased at any time
Call the Customer Solutions Centre at 866-224-3906 to understand your options
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MARKET AND INFLATION RISK None
RETIREMENT INCOME
ANNUITY
Guaranteed for life
INVESTMENT CHOICE None
DEATH BENEFIT Varies
LIF/RRIF
Not guaranteed for life
Yes
Yes
Market Value
None
Guaranteed for life
Yes
Market value
Comparing retirement income products
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my money for life
my money for life
He gets a stable andpredictable income for life
RETIREMENT INCOME PHASE
Robert’s savings protected from market volatility
SAVINGS PHASE
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my money for life
LIF, RRIFDCPP, RRSP
my money for life
Retirement income phase
Convert your savings to retirement income through Sun Life Financial’s group retirement income products at age 65 and maintain
your my money for life.
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BENEFIT BASE
$105,604 5%x
ROBERT’S ANNUAL INCOME GUARANTEE
$5,280.20=
Annual income guarantee
Annual income guarantee is equal to 5% of your Benefit Base, starting at age 65.
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Assumes the following annual sequence of returns:Year 1: -15%; Year 2: 6%; Year 3: 8%; Year 4: 9%; Year 5: 11% ….repeat.
$0
$25,000
$50,000
$75,000
$100,000
$125,000
$150,000
$175,000
$200,000
55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95
Robert's Age
Ac
co
un
t V
alu
e/B
en
efi
t B
as
e
Retirement
Resets every three years if current market value is higher
SAVINGS PHASE RETIREMENT INCOME PHASE
Income Phase
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More information
I can help you enrol in my money for life today or you can book a one on one session with me tomorrow to discuss your options further.
For more information on my money for life go to www.mysunlife.ca/mymoneyforlife
For more information on other retirement products got to www.mysunlife.ca, access your account and select retiring soon
For questions regarding retirement options including LIFs, annuities and my money for life, call a Financial Services Consultant at 1-877-808-9303
Call 1-877-805-9303
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Thank you
Questions?
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