The foreign plan is a Canadian retirement savings plan that is created for individuals who are not Canadian residents. It is intended specifically for individuals who plan to retire beyond the borders of Canada. The plan can be funded by establishing a registered retirement savings plan and making contributions on a regular or periodic basis. Those funds are then rolled into a registered retirement income fund and disbursed according to the stipulations of the plan.
The citizens of any country can participate in the foreign plan. It can be funded with income earned both inside and outside of Canada. If, however, the beneficiary does not reside in Canada another entity must be selected to manage the fund.
It isn’t uncommon for someone to establish a foreign plan to provide support for a beneficiary who doesn’t live in Canada. A child or other relative may receive the assets from the fund. It can even be established in the name of a charity. Even Canadian citizens who work in Canada but intend to retire elsewhere can establish such a fund in order to save money from income earned in country.
Setting up a foreign plan is acknowledged as a viable way to save for retirement that won’t take place in Canada. However, it is quite complicated. It affects the filing of Canadian tax returns and should involve the help of a tax professional who is intimately familiar with the complexities that result. A foreign plan is not suitable for all individuals who plan on retiring outside of Canada, so make sure to consult with an expert before setting one up.
There are number of ways that a person might be subject to forced retirement. Also known as involuntary retirement, the result is the same. An employee has their employment terminated due to a layoff, for health reasons or a disability. There are some circumstances under which an employee may have grounds for legal retaliation, but to investigate those you would need to speak with an attorney specializing in employment law.
One of the most significant problems faced by someone who is the victim of forced retirement is how it affects their retirement plans. In addition to the potential loss of numerous benefits, they can no longer contribute to their employer based pension plan. With no income the household may have to make major adjustments to the budget.
In some cases the employer may offer a severance package to the employee. If the individual is close to retirement age then the offer may be sufficient to make up for the anticipated loss in income and savings. It is worth noting that older employees are more likely to be targeted for forced retirement because they earn more than younger workers.
Even if you have been subjected to an involuntary termination this doesn’t mean you can’t search for, and find, work at another firm. The advantage of an older worker is that they have many skills that can be well used by another firm. A new retirement account may be opened and the funds from older plans rolled over. This will allow you to continue to save for your planned retirement, even if it is at a lower level than anticipated.
There are three types of defined benefit plans: flat, unit and variable benefit. The Flat Benefit formula is a way of calculating an employer’s contribution to an employee’s plan. The benefit is determined by multiplying an employee’s months of service by a flat monthly rate that is predetermined. Another alternative involves a specific payment as long as a minimum term of service is reached.
In the first case the employer may have to contribute a specific percentage to the employee’s retirement plan for each month they have worked with the company. In the second instance the employer may have an agreement in place to pay a specific percentage of the average earnings of the last five years of employment. In both cases the plan could require that the employee work for the company for a minimum number of years.
Regardless of the formulation the defined benefit plan is a type of employer-sponsored retirement plan. A traditional style of pension plan, such plans leave the employer fully responsible for making all contributions. In some cases the employee may make contributions as well. These plans are generally found only at larger companies that can afford the expense.
Since these plans don’t require employee contributions they don’t get to make any investment decisions either. The employer is fully in charge of how the monies are invested and they assume all the risk. Furthermore, the employer is responsible for funding the plan regardless of how their investments turned out. In some circumstances the benefits may be extended to beneficiaries if the employee dies prematurely.
The term fixed income can have several definitions. It can describe a state where an individual must live on a specific, unchanging income. It can also define a type of investing or budgeting through which a predictable income arrives at regular intervals.
In the case of an investment the tool usually offers a low interest rate along with a guaranteed and unchanging rate of return. Any investment that offers a guaranteed rate of return may be called a fixed income investment. Federal bonds, bonds issued by local municipalities or those sold by major corporations are typical fixed income securities.
When used to refer to the financial state of a person the term describes a situation in which an individual receives only their pension payments and/or social security income. If the retiree doesn’t make additional investments that will increase their income, or return to work, their income remains static.
As many retirees are finding out, if one’s fixed income is small, getting by can be a struggle. Fixed income doesn’t adjust to inflationary changes. Prices rise continuously and those who don’t have a substantial fixed income can end up unable to pay their bills. This may mean having to make choices between things like food or medicine.
It is the anticipation of such circumstances that leads financial advisors to constantly encourage individuals to save way beyond what they expect they will need upon retirement. It is foolish to believe that it is possible to live on social security payments alone in the future. With constant questions about the viability of the Social Security system wise workers are stashing away as much as possible during their working years.
There are three ways that an early retiree can access their retirement funds: the fixed annuitization method is one of the ways of doing so without penalty before the age of 50.5. By dividing the balance of the individual’s retirement account by a specific annuity factor found in IRS tables, a payment can be determined. The annuity factor takes into account IRS mortality tables and an interest rate that must be less than 120% of the federal mid-term rate.
Once the payment has been determined by using the fixed annuitization method it can not be changed, except under special circumstances. Generally speaking the retiree can make one change in the subsequent year, and then the payments are made based upon the new determination.
Because each calculation method results in different payments it is critical that the individual go through the process of actually doing all the math. While the fixed annuitization method is considered the most complicated, it sometimes results in the highest payments. Higher payments mean a more comfortable retirement. Distributions are made monthly, quarterly or annually.
Under normal conditions people cannot withdraw funds from their retirement accounts until they hit the age of 59 ½. Any funds withdrawn prior to that point are assessed a 10% early withdrawal penalty. There are some special occasions that bypass the penalty. If someone is using the fixed annuitization method to access their retirement funds before the stipulated age and stops withdrawals, funds that have already been disbursed are then subject to the aforementioned penalties.