my money*
*
and how to make it grow
Preparing for Retirement
University of Northern
British Columbia
1
Things to consider…
Residence
Individual activities
Health
Hobbies
Financial Aspect
Social life
Activities as a couple
Psychological aspect
3
Agenda
 Your plan
 Savings Phase
 Retirement Income Phase
4
Preparing for Retirement
Your Plan
5
Your Plan at a glance
Defined Contribution Pension Plan (DCPP)
Employee
contributions
You contribute 3% of monthly earnings up to YMPE and
5% above YMPE (YMPE for 2010 $47,200)
Additional voluntary contributions are accepted
Employer
contributions
UNBC contributes 8% of earnings up to YMPE and 10% over
YMPE (up to revenue Canada limits)
Eligibility: Immediate for regular employees who work more than 18 hours/week
Participation: Compulsory
Vesting and Locking in: 2 years of continuous service
Transfers: Transfers in from other financial institutions are accepted
6
Meet Robert




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
Savings Phase
Retirement Income Phase
7
Preparing for Retirement
Savings Phase
8
Plan Like Robert
9
Robert’s assets
10
Robert’s lifestyle in retirement
11
Robert’s action plan
12
Action Plan
13
Action Plan
14
Advantages of making additional
voluntary contributions (AVCs)
Gross Rate of Return 5.75 %
Fund Management Fees: 0.75 %
Annual Revenue: $50 000
$561,775
600000
550000
500000
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
$388,387
1
6
11
16
You contribute 3.11%*
Your employer contributes 8.11%*
*based on plan formula and $50,000 income
21
26
You contribute 3.11%*
You contribute AVC of 5%
Your employer contributes 8.11%*
15
Effects of contributing to the maximum
on your net salary
Annual Salary $50,000
3.11% Employee
8.11% Employer
3.11% Employee
5% Employee AVC
8.11% Employer
$1,923
$1,923
( $60 )
( $156 )
$156
$156
Less Taxes
($409)
( $405)
Tax Savings
( $20)
( $54)
Pay after taxes
$1,424
$1,362
Cost after tax
per day
$2.85
$7.28
Gross Pay
Your
contribution
Employer
contribution
16
Your Retirement Financial Challenges
THE MARKET ROLLER COASTER
OUTLIVING YOUR SAVINGS
YOUR MONEY LOSING VALUE
17
The market roller coaster
$50,000
$40,000
$ 34,583
$30,000
$ 28,893
$ 19,632
$20,000
$ 17,120
$ 13,291
$10,000
$0
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
S&P/TSX Composite Index
Source: Morningstar.ca
DEX 91-Days T-Bill Index
S&P 500 TR (Bank of Canada) CAD
DEX Universe Bond Index
18
Outliving your savings
65
Retirement
91
50% chance
one spouse will
live to age 91
95
25% chance
one spouse will
live to age 95
Source: Canadian Institute of Actuaries – 1994 Uninsured Pensioner Mortality Table Projected to 2020.
19
Your money losing value
1980
Cost of
Groceries+
Cost of
a car
Cost of
a house
Today
$21
$50
$6,715
$18,490*
$110,292
$303,700**
+ 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
20
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
Savings Phase
Retirement Income Phase
21
Financial Challenges
 Financial Challenges in the Savings Phase and the
Retirement Income Phase
SAVINGS PHASE
RETIREMENT INCOME PHASE
 The market roller coaster
 The market roller coaster
 Outliving your savings
 Your money losing value
 Outliving your savings
 Your money losing value
22
my money for life
SAVINGS
PHASE
RETIREMENT
INCOME PHASE
Robert’s savings protected
from market volatility
He gets a stable and
predictable income for life
my money for life
23
Insuring Robert’s registered
retirement savings
REER
50 000 $
DCPP
RRCD
$100,000
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
24
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 $467REER
to DCPP per month for a total of $5604 annually
 At the end of the first year his Benefit Base is $105,604.
50 000 $
RRCD
100 000
BENEFIT
BASE$
$100,000
CONTRIBUTIONS
+
Assumptions
Does does not reflect market increases
$5604
WITHDRAWALS
–
$0
=
NEW
BENEFIT BASE
$105,604
25
Benefit Base Resets
Assumes the following annual sequence of returns:
Year 1: -15%; Year 2: 6%; Year 3: 8%; Year 4: 9%; Year 5: 11% ….repeat.
27
my statement



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
27
Investment options
 You must have 40% of your money invested in Fixed Income Investment.
*Not eligible for my
money for life
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
Investment choice and fees
 You must have 40% of your money invested in Fixed Income
Investment.
MMFL
coverage
fees
Asset Category
Fund Name
FMFs
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
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
30
Preparing for Retirement
Retirement Income
Phase
31
Government Retirement Programs
Government Programs
1.
2.
3.
4.
Canada Pension Plan
Old Age Security
Guaranteed Income Supplement
Allowance
For more information

CPP/OAS/GIS/Allowance - 800-277-9914 or
www.servicecanada.gc.ca
32
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)
33
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
34
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
35
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
36
How much might I get from the
government?
2010
CPP
Maximum
Monthly
$934.17/mth
Survivor Benefit
$560.50/mth
($11,210/yr)
OAS
$518.51/mth
$518.51/mth
($6,222/yr)
($6,222/yr)
($6,726/yr)
Average
$505.11/mth
$489.12/mth
($6,061/yr)
($5,869/yr)
37
Preparing for Retirement
Retirement Income
options
38
Retirement income options for DC
pension plans
Annuity
Life Income
Fund (LIF)
39
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
40
What’s $100K worth?
Joint life annuity – Male aged 65 with Female spouse aged 65
Guaranteed
None
5 years
10 years
15 years
60%
$553
$551
$545
$534
100%
$512
$512
$511
$508
Joint life annuity – Female aged 65 with Male spouse aged 65
Guaranteed
None
5 years
10 years
15 years
60%
$536
$535
$530
$522
100%
$512
$512
$511
$508
These rates are shown for illustration purposes. They are subject to change without notice and current as of the time of writing.
41
What’s $100K worth?
Guaranteed
None
5 years
10 years
15 years
Male, aged 65
$628
$622
$605
$578
Female, aged 65
$576
$572
$562
$546
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
42
Retirement income options for DC
pension plans
Annuity
Life Income
Fund (LIF)
43
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%
44
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
45
Retirement income options for RRSPs
Annuity
Registered
Retirement
Income
Fund
(RRIF)
46
Registered Retirement Income Fund
(RRIF)- Overview
 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!
47
Registered Retirement Income Fund
(RRIF)- Features
 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 866-2243906 to understand your options
48
Comparing retirement income products
ANNUITY
LIF/RRIF
RETIREMENT INCOME
Guaranteed
for life
Not guaranteed
for life
INVESTMENT CHOICE
None
Yes
MARKET AND INFLATION RISK
None
Yes
DEATH BENEFIT
Varies
Market value
Value
49
my money for life
SAVINGS
PHASE
RETIREMENT
INCOME PHASE
Robert’s savings protected
from market volatility
He gets a stable and
predictable income for life
my money for life
50
51
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.
DCPP, RRSP
LIF, RRIF
my
money for life
my money for
life
51
Annual income guarantee

Annual income guarantee is equal to 5% of your Benefit Base, starting at
age 65.
BENEFIT BASE
$105,604
x
5%
=
ROBERT’S ANNUAL
INCOME GUARANTEE
$5,280.20
52
Income Phase
SAVINGS PHASE
RETIREMENT INCOME PHASE
Account Value/Benefit Base
$200,000
$175,000
$150,000
Resets every three years
if current market value is higher
$125,000
$100,000
$75,000
$50,000
Retirement
$25,000
$0
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
Assumes the following annual sequence of returns:
Year 1: -15%; Year 2: 6%; Year 3: 8%; Year 4: 9%; Year 5: 11% ….repeat.
53
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 1877-808-9303
Call 1-877-805-9303
54
Thank you
Questions?
55