Flash Retirement

Vocabulary

OAS Pension Indexation

The benefit amount is adjusted 4 times a year according to the 3-month "moving average method". There is more details on this method at: http://www.servicecanada.gc.ca/eng/services/pensions/oas/payments/index.shtml.

Alternative minimum tax

A special tax charged to certain high-income individuals with considerable tax shelters. The alternative minimum tax (AMT) adds to their tax bill. This measure was put into place to improve the fairness of the tax system at various income cutoffs. AMT tax rules do not apply in the year the taxpayer dies.

Attribution rules

The provisions that determine which taxpayer declares a given investment income.

Autorité des marchés financiers

Set up on February 1, 2004, Autorité is a regulating agency that oversees Québec's financial sector. It has taken on the duties and personnel of the following five organizations: Bureau des services financiers; Commission des valeurs mobilières du Québec; Fonds d'indemnisation des services financiers; Inspector General of Financial Institutions (financial institutions sector only); Régie de l'assurance-dépôts du Québec (www.lautorite.qc.ca This link will open in a new window.)
 
Its mission includes...

  • Promoting efficiency in Québec's financial markets
  • Protecting investors and regulating the information that share issuers must provide their shareholders
  • Overseeing the work of securities professionals and market organizations

Beneficiary

Person designated to receive an inheritance.

Bond

A certificate of indebtedness for which the issuer promises to pay the holder a certain amount of interest over a specific period and redeem the total value at maturity (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Bond fund

An investment fund containing first-class bonds from multiple issuers (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Common stock

A certificate representing participation or a share of ownership in a company and granting the right to vote (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Consumer Price Index (CPI)

The CPI is a measure of the rate variation of the price of goods and services bought by Canadian consumers. The CPI is the most widely used indicator for price changes in Canada.

CSI

The Canadian Securities Institute is a training organization with the following goals:

  • Enhancing knowledge of the financial industry and securities among finance professionals
  • Promoting knowledge and understanding of investment among Canadians

Debenture

Bonds not secured by any specific property but issued against the general credit of the issuer (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Deferred pension

A pension payable at the normal age of retirement set out in the plan, when you have not yet reached this age.

Defined Benefit Pension Plan

The pension payable is determined in advance according to a very specific formula.

Defined Contribution Pension Plan

The employer's and, as the case may be, the employee's contributions are set in advance.

Early pension

A pension payable before the normal age of retirement set out in the plan.

Equity fund

An investment fund containing stocks from small, medium, or large companies (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Exemption from seizure

A rule of law preventing creditors from seizing any part of their debtor's estate.

Fixed-term annuity (annuity certain)

An annuity contract that guarantees a specified number of payments.

Guaranteed income certificate/Term deposit

A certificate with a predetermined interest rate over a specific period that cannot be redeemed prior to maturity; issued by most financial institutions (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

HBP

Home Buyer's Plan

Hedge fund

A means of protection against losses due to rate fluctuation (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Heir

Person who has accepted an inheritance.

Income splitting

A strategy by which a high-income taxpayer can transfer a portion of their earnings to someone with a lower income to reduce the tax bite.

Income trust

An entity in a specific business sector that generally redistributes practically all profits to its shareholders (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Income-generating asset

An asset that generates a taxable income (e.g., an investment)

Indexed term savings

A certificate of indebtedness providing a guarantee on the capital and a rate of return that is generally only known at maturity (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Level premium

A level premium is higher than a term policy premium in early years, but less in later years.

LIF

Life Income Fund.

Life annuity

An annuity that is payable for the life of the purchaser.

Liquidity

The ease with which an investment can be converted to cash.

Major Shareholder

A person who holds at least 10% of shares of the employer's company. Synonym: connected person.

Maximum deduction

The maximum RRSP contribution you can deduct on your tax return.

Maximum Eligible Earnings (MEE)

The MEE for a given year is equal to the MEE from the previous year, multiplied by the ratio of the averages for the last two 12-month periods' average weekly earnings in Canada, ending on June 30th. For 2014 it is $52,500 and for 2018 it was $55 900.

Money market fund

A type of mutual fund invested solely in short term, low risk debt securities such as treasury bills, bankers' acceptance notes, and other commercial debt instruments (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Mortgage fund

An investment fund containing first-class mortgages (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Non-income-generating asset

An asset that does not generate any income (e.g., a home).

Normal pension

A pension payable at the normal age of retirement set out in the plan, when you have reached that age.

Participate

Own shares.

Postponed pension

A pension payable after the normal age of retirement set out in the plan.

Preferred stock

A company certificate entitling the bearer to receive dividends ahead of common shareholders and conferring a priority right to the company's residual assets if it is liquidated (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

QPP benefits index

This index is used to calculate the Québec Pension Plan's indexation. For a given year, it is equal to the average CPI for the 12-month period ending on the previous 31st of October.

QPP Indexation

Benefit payments are increased on January 1st of each year. The rate of increase is equal to the rate of increase of the QPP benefits index.

Registered Plan

In Canada, a plan is considered registered if it meets the requirements of the Income Tax Act and is registered with the CRA.

Risk

The level of uncertainty regarding return on investment, including the possibility that some or all of the capital may be lost.

Risk concentration

Concentrating your investments in one or few products

RRSP

Registered Retirement Savings Plan.

Segregated funds

An insurance company product that guarantees coverage of at least 75% of the capital invest

Support payments

Payments to cover an individual's basic living expenses (housing, food, clothing, medical care).

Tax damming

A planning option for self-employed workers who have loans with nondeductible interest. They can take out a loan to cover their business expenses, gradually making interest deductible, and the income generated is used to pay off nondeductible debts (e.g., home mortgage). Eventually, personal debts are paid off and interest on the new business loan is deductible.

Term

Period from purchase to maturity.

Treasury bill

A short term certificate of indebtedness issued by the government (source: Lexique des termes employés dans le commerce des valeurs mobilières, published by the Canadian Securities Institute).

Unused contributions

Contributions you have made but never deducted on your tax return.

Unused deductions

The difference between your annual maximum RRSP deduction and the amount you actually deducted. If you do not max out your RRSP each year, your unused deductions accumulate.

Wrap account

An account that charges a set annual fee based on the account balance, rather than brokerage fees for each transaction. Each account is managed separately.

Yield

Total profit from an investment, either in the form of interest income, dividends, or capital gains (or losses) from fluctuations in the market value

This text is intended exclusively to provide general information on financial security at retirement. This information may not be appropriate to the reader who wishes to obtain particular information on one of the treated subjects and cannot be a guarantee for results. It is up to the reader to make pertinent expert advice requests. This information capsule does not bind partner providers of these information.

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