For most parts of this great country summer 2011 was filled with long, warm and sunny days. Now we are experiencing the leaves changing colours, offering us a spectacular view of Mother Nature at work. Soon the skiers will be on the snow-packed hills enjoying the best of winter. And finally, spring will melt the snow, bringing a feeling of rebirth as the days lengthen and warm weather returns.

Like our four very distinct seasons, people also experience changes as they go through their human life cycle. Life insurance agents can help their clients deal with these life cycle changes by providing well thought out financial plans that focus on helping clients reach their financial objectives.

Regardless of the type of plan, financial planning involves:

• Gathering financial/personal information to identify needs and problems
• Establishing specific and realistic financial objectives
• Developing appropriate strategies, implementing and continually monitoring the plan to achieve these objectives

Life Cycle Demographics

Since the end of World War II, society has been shaped by the baby boom generation. This tidal wave of population growth is now approaching retirement age and their focus has shifted from wealth accumulation to wealth management and preservation. Below are some questions dealing with retirement issues and insurance products to help your “boomer” clients achieve their financial goals.

See how well you do in answering these questions:

1. Monique belongs to a 2% career average formula registered pension plan at work. She has worked for her company for 35 years and has been a member of the pension plan for 33 years. When she started with her company, her salary was $12,000 yearly. Today she earns $90,000 yearly. Her career average earning is $51,000. What would be Monique’s annual pension income if she went on pension today?

1. $33,660
2. $35,700
3. $59,400
4. $63,000

2. Mary (age 61) and Jim (age 64) have been married for 40 years. They want to split Mary’s eligible pension income with Jim. Their monthly income sources are as follows:

	Mary	Jim
RPP	$1,800	$1,200
RRSP	$2,200	$1,000
DPSP	$4,000	$ 0

How much taxable income could Mary transfer to Jim’s income tax return under the tax fairness rules?

1. Nil - Income splitting only kicks in once Mary reaches age 65
2. $900
3. $1,500
4. $4,000

3. The Canada Pension Plan in the year 2011 has a monthly maximum payout of $960 at age 65. If Sonia retires in 2011 on her 62nd birthday, what is her monthly CPP pension amount? (Assume that she would have been entitled to the maximum CPP monthly benefit had she waited until age 65.)

1. $ 787.20
2. $ 780.28
3. $ 844.80
4. $ 960

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Answers

1. – a. $33,600

Rationale:
Career Average earnings ($51,000 x 2%) = $1,020.
$1,020 x 33 years = $33,660.

Reference: LLQP Study Guide, Module 10, Volume 2

2. – b. $900

Rationale:
Only RPP income is splittable before age 65. However at age 65, RRSP, DPSP, Taxable non registered annuity and LIF income may be split up to 50% with a lower income earning spouse.

Reference: LLQP Study Guide, Module 10, Volume 2

3. – a. $787.29

Rationale:
CPP at age 65 = $960.00.
For each month a person retires before age 65, the CPP pension is reduced by one half of 1%.
(0.5 x 36 months = 18% discount)
100% minus 18% = 82% of $960 CPP pension = $787.20.

Reference: LLQP Study Guide, Module 10, Volume 2

I want to wish you all the best for exam writing success.

Yours truly,