Sault ste , marie ON may 15,16 & 17, 2012

1. Sault ste, marie ONmay 15,16 & 17, 2012 Dedicated to culturally Appropriate training Pension Planning ONWAA 2012 Spring Assembly Prepared by Micheal Nadeau, MBA

2. Pension Planning The following material provides a basic understanding of pension terms, tools and benefits available. The list is not exhaustive and there is much more detail available in each topic area. Participants are encouraged to read more on their own and/or speak to a financial planner/consultant.

3. What is a Pension Plan? A type of retirement plan where an employer makes contributions toward a pool of funds set aside for an employee's future benefit. The pool of funds is then invested on the employee's behalf, allowing the employee to receive benefits upon retirement. There are two main types of pension plans: 1. defined-benefit plans 2. defined-contribution plans

4. Pension Planning In a defined-benefit plan, the employer guarantees that the employee will receive a definite amount of benefit upon retirement, regardless of the performance of the underlying investment pool. ie, The employee is guaranteed to receive $30,000.00 in pension benefit each year.

5. Pension Planning In a defined-contribution plan the employer makes contributions for the employee, but the final amount of benefit received by the employee depends on the investment's performance. ie. The employer contributes 8% of the employee gross wages towards to a retirement investment plan. Upon retirement the total retirement fund is varied and depends upon the investment’s rate of return(not guaranteed).

6. Canada Pension Plan The Canada Pension Plan was established in 1966 to provide a basic benefit package for retirees. If the recipient dies, survivors receive the plan's provided benefits.  On reserve, status employees may or may not be contributing to CPP. Each employer is different. If offered, CPP is co-funded funded between an employee and the employer.

7. Pension Planning Taking your retirement pension before age 65 If you take your CPP retirement pension before you are 65, it is reduced by 0.5% for each month that you are under 65 years old. For example, if you want your pension to begin the month after your 60th birthday, your retirement pension would be reduced by 30% (0.5% x 60 months).

8. Pension Planning Taking your retirement pension after age 65 Your CPP retirement pension is increased by 0.5% for each month after your 65th birthday that you delay taking the pension. The maximum increase is 30%. For example, if you want your pension to begin the month after your 67th birthday, your retirement pension would be increased by 12% (0.5% x 24 months).

9. Pension Planning Canada Pension Plan Payment Amounts

10. Pension Planning Other Retirement Benefits.

11. Stock Market A stock market or equity market is a public entity for the trading of company stock (shares) at an agreed price. Stocks are listed and traded on stock exchanges which specialize in bringing buyers and sellers together. ieNewYork Stock Exchange (NYSE) Toronto Stock Exchange (TSX) • .

12. RRSP A legal trust registered with the Canada Revenue Agency and used to save for retirement. RRSP contributions are tax deductible and taxes are deferred until the money is withdrawn. An RRSP can contain stocks, bonds, mutual funds, GICs, etc.

13. RRSP RRSPs have two main tax advantages: • Contributors deduct contributions against their income. For example, if a contributor's tax rate is 40%, every $100 he or she invests in an RRSP will save that person $40 in taxes, up to his or her contribution limit. This only is applicable to non status people and status members working off reserve.

14. RRSP Advantages (cont’) 2. The growth of RRSP investments is also tax sheltered. Unlike non-RRSP investments returns are exempt from any capital-gains tax, dividend tax or income tax. This means that investments under RRSPs compound at a pretax rate. Note: Money earned through an RRSP investment is subject to income tax when withdrawn from the investment upon retirement, as the money was invested and earned off reserve.

15. RRSP Most RRSP’s are invested in mutual funds. Income earned through an RRSP is taxable, as the money was invested in the stock market, which operates off reserve. WHAT is a mutual fund?

16. Mutual Funds A mutual fund is a type of professionally-managed investment fund that pools money from many investors to purchase securities (stocks, bonds, etc.) How do mutual funds work?

17. Mutual Funds When you put your money in a mutual fund along with many other people, it creates a large pool of money that can be invested. The company that runs the mutual fund puts a professional in charge of investing the money. This person is the fund manager. The fund manager decides where to invest the money and manages it for all of the investors, so you don't have to decide what to do. The manager also decides when to buy and sell investments for the mutual fund.

18. Tax Free Savings A Tax-Free Savings Account (TFSA) is a registered general-purpose savings instrument that allows Canadians to earn tax-free investment income.

19. TFSA How a Tax-Free Savings Account Works • Canadian residents age 18 or older can contribute up to $5,000 annually to a TFSA. • Investment income earned in a TFSA is tax-free. • Withdrawals from a TFSA are tax-free. • Unused TFSA contribution room is carried forward and accumulates in future years.

20. TFSA (cont’) • Choose from a wide range of investment options such as mutual funds, stocks, Guaranteed Investment Certificates (GICs) and bonds. • Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit. • TFSA assets can generally be transferred to a spouse or common-law partner upon death.

21. Credit Rating One of the most important gifts you can give yourself is a solid credit rating. A good credit rating allows you to borrow money – credit cards, trucks, boats, homes, etc. The better your credit score the lower your interest rate (cost of borrowing) will be. Thus, a good credit rating provides options and opportunities and will save you money.

22. Credit Rating

23. Credit rating (cont’)

24. Pension Planning Financial planning is very important. Without a solid plan, retirement will be uncertain and could be difficult.