3. You have just turned 60 and have decided to retire. You have sufficient retirement savings...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
3. You have just turned 60 and have decided to retire. You have sufficient retirement savings to get by without taking Canada Pension Plan (CPP) benefits, but you wish to decide between your different CPP options. You qualify for the maximum benefit of $1364.60 per month if you start taking CPP at age 65. If you start taking CPP benefits before age 65, your pension is reduced by 0.6% of the monthly payment for every month before age 65 that you receive pension payments. For example, if you take decide to start taking benefits 2 months before age 65, your monthly benefit is reduced by 2 x 0.6% = 1.2%. So instead of receiving $1364.60 per month, you receive $1364.60 - 1.2% x 1364.60 = $1348.22 per month, starting at age 64 and 10 months. If you delay taking your CPP benefits until after age 65, your monthly income will increase by 0.7% for each month that you delay, up until age 70. For example, if you decide to start taking benefits 2 months after age 65, your monthly benefit is increased by 2 x 0.7% = 1.4%. So you will now receive $1364.60 +1.4% x 1364.60 = $1383.70. The current life expectancy for someone of your age and other characteristics is 85. You decide to plan as if you will die at age 85. Assume the discount rate is 0.4% per month. Assume that the first payment will always occur in one month, so that the formula/calculator will always give you PV at time 0, and you will not have to add additional payments, i.e. 5 years = 60 payments. a) What is the amount of your monthly CPP payment if you take benefits immediately (at age 60)? (1 mark) b) What is the PV of your CPP payments if you take them immediately? (1 mark) c) What is the PV at age 65 of your CPP payments if you begin taking them at age 65? (1 mark) d) What is the PV at age 60 of your CPP payments if you begin taking them at age 65? (1 mark) e) What is the PV at age 70 of your CPP payments if you begin taking them at age 70? (1 mark) f) What is the PV at age 60 of your CPP payments if you begin taking them at age 70? (1 mark) g) Out of the above three scenarios, what do you conclude is the best time to start taking your CPP benefits? Why? (2 marks) 3. You have just turned 60 and have decided to retire. You have sufficient retirement savings to get by without taking Canada Pension Plan (CPP) benefits, but you wish to decide between your different CPP options. You qualify for the maximum benefit of $1364.60 per month if you start taking CPP at age 65. If you start taking CPP benefits before age 65, your pension is reduced by 0.6% of the monthly payment for every month before age 65 that you receive pension payments. For example, if you take decide to start taking benefits 2 months before age 65, your monthly benefit is reduced by 2 x 0.6% = 1.2%. So instead of receiving $1364.60 per month, you receive $1364.60 - 1.2% x 1364.60 = $1348.22 per month, starting at age 64 and 10 months. If you delay taking your CPP benefits until after age 65, your monthly income will increase by 0.7% for each month that you delay, up until age 70. For example, if you decide to start taking benefits 2 months after age 65, your monthly benefit is increased by 2 x 0.7% = 1.4%. So you will now receive $1364.60 +1.4% x 1364.60 = $1383.70. The current life expectancy for someone of your age and other characteristics is 85. You decide to plan as if you will die at age 85. Assume the discount rate is 0.4% per month. Assume that the first payment will always occur in one month, so that the formula/calculator will always give you PV at time 0, and you will not have to add additional payments, i.e. 5 years = 60 payments. a) What is the amount of your monthly CPP payment if you take benefits immediately (at age 60)? (1 mark) b) What is the PV of your CPP payments if you take them immediately? (1 mark) c) What is the PV at age 65 of your CPP payments if you begin taking them at age 65? (1 mark) d) What is the PV at age 60 of your CPP payments if you begin taking them at age 65? (1 mark) e) What is the PV at age 70 of your CPP payments if you begin taking them at age 70? (1 mark) f) What is the PV at age 60 of your CPP payments if you begin taking them at age 70? (1 mark) g) Out of the above three scenarios, what do you conclude is the best time to start taking your CPP benefits? Why? (2 marks)
Expert Answer:
Related Book For
Posted Date:
Students also viewed these finance questions
-
You have just turned 6 0 and have decided to retire. You have sufficient retirement savings to get by without taking Canada Pension Plan ( CPP ) benefits, but you wish to decide between your...
-
This assignment requires you to complete the 2022 tax reporting for a fictional woman named Anna Smith. Question 1 T1 - step 4 - line 66 This is Anna's taxable income Answer: Question 2 T1 - step...
-
Listing 8.4 checks whether a solution is valid by checking whether every number is valid in the board. Rewrite the program by checking whether every row, every column, and every small box has the...
-
If and verify that (a) A + B = B + A (b) 3(A + B) = 3A + 3B (c) (A + B)T = AT + BT 4 3 2 -2 24
-
Find the value of the line integral If F is conservative, the integration may be easier on an alternative path.) F(x, y) = xyi + 2xyj (a) r 1 (t) = ti + 1/tj, 1 t 3 (b) r(t) = (t + 1)i - 1/3(t -...
-
The wreck of the S.S. Central America waited 130 years at the bottom of the ocean for someone to come along and claim its trove of gold. Thomas G. Thompson, funded by a multitude of investors, was...
-
Operating leverage, margin of safety, and cost behavior In the early years of the 21st century the housing market in the United States was booming. Housing prices were increasing rapidly, new houses...
-
Create a relational model for the following ERD. Please do not develop a graphical version of the relational databases. Please just list the tables, attributes, primary keys and foreign keys. Dept...
-
General Weapons, Inc. (Comprehensive time value of money) Mr. Rambo, President of General Weapons, Inc., was pleased to hear that he had three offers from major defense companies for his latest...
-
Define the employment relationship and discuss the changes that have taken place to the relationship in recent years.
-
Utilitarian Jeremy Bentham argued that if utility is good, then it is good irrespective of whose utility it is, and thus the sum of societal utility should be maximized. In what ways do you feel this...
-
What is the source of energy for the building you are in or closest to? What barriers prevent more energy from being obtained from clean sources?
-
What is an evidence- based intervention? Why is it important to adopt evidencebased interventions? What factors might you need to consider in adopting an evidence- based intervention?
-
Rawls (1999, 205) writes that if government is assumed to aim for the common good, and if "some men can be identified as having superior wisdom and judgment, others are willing to trust them and to...
-
What is strategy implementation? What questions must strategy makers consider to begin the implementation process?
-
5. Convert the following ERD to a relational model. SEATING RTABLE Seating ID Nbr of Guests Start TimeDate End TimeDate RTable Nbr RTable Nbr of Seats RTable Rating Uses EMPLOYEE Employee ID Emp...
-
Why is the analyzing step of the process crucial to the success of a MedImmune proposal? In the discussion, draw students attention to the intersection of medical, legal, and social issues. Why is...
-
How does the Clinical Trial Application guide described in the example make the composing process for a new document easier? How is it informed by the evaluation process? What metaphors or analogies...
-
Review how the ACE process led to the improved message by answering the following questions. 1. What information in the revised version addresses the need for persuasion? 2. How does the email...
Study smarter with the SolutionInn App