No need to strive for perfection: have fun and put your knowledge to the test by answering the following trivia questions.
- Judith has been religiously saving $1,500 per year for 20 years. Mathieu has preferred to invest later: $2,000 per year for each of the past 15 years. Assuming an average annual return of 6%, who has the bigger jackpot today?
A) Mathieu, obviously.
B) They are on equal footing since they have invested the same amount!
C) Neither, because Wall Street has just crashed!
D) Judith.
Answer: D). Judith, who has $58,489, is richer than Mathieu, who only has $49,345, because the compound interest has accumulated for longer.
2. What is a segregated fund?
A) An index fund that tracks a specific global index.
B) An exchange traded fund (ETF) with an unusual theme.
C) An investment account held abroad by an investor.
D) An insurance product.
Answer: D). Segregated funds are mutual funds that have a maturity guarantee and are backed by an insurance contract. They are therefore only offered by insurers.
3. If Marie-Claude withdraws $17,500 today from her TFSA by selling shares that she had paid $13,000 for during her initial contribution, what is the amount of contribution room that will be freed up by the withdrawal in question on January 1st of next year?
A) $13,000.
B) $17,500.
C) $4,500, or the difference between the two amounts.
D) It all depends on the dividends received on the shares in question.
Answer: B). From the following January 1st, Marie-Claude will recover contribution room of $17,500. It is the value at the time of withdrawal that is counted, not the amount of the initial contribution.
4. One of these claims about spousal retirement income splitting is wrong. Which one?
A) Residents of Canada have the option of splitting their retirement income with their spouse, married or common-law, who has a lower tax rate.
B) It is when preparing their tax returns that retirees make the decision to transfer up to 50% of certain eligible pensions to the tax return of the spouse with the lower income.
C) This is not an actual transfer of money between the spouses, but rather a tax choice made each year in their respective tax returns.
D) Any type of earned income is eligible for spousal retirement income splitting.
Answer: D). This is wrong. Qualifying income generally includes life annuity payments under a Registered Pension Plan (RPP), annuity payments under a Registered Retirement Savings Plan (RRSP) or a Deferred Profit-Sharing Plan (DPSP), or payments from a Registered Retirement Income Fund (RRIF) or Life Income Fund (LIF). Some nuances remain for individuals under 65 and with respect to federal tax laws.
5. It is possible to transfer part of the amounts accumulated in a Registered Education Savings Plan (RESP) to your RRSP. What part is it?
A) All contributions made to the account.
B) Only government grants received.
C) An amount at the discretion of the account holder.
D) I should go back to school.
Answer: A). If the RESP beneficiary does not pursue post-secondary studies and if no other beneficiary is named, it is all the contributions made to the RESP that you can eventually transfer to the RRSP, provided that you have the contribution room. Be careful, though! You will thus lose the government grants received. As for the income generated by the RESP since its opening, the account holder can receive it under certain conditions
6. What does the acronym VRSP stand for?
A) Genuine retirement savings plan.
B) Reversible annuity intended for retirement savings.
C) Voluntary retirement savings plan.
D) Oh no! Not another registered plan!
Answer: C). The VRSP is one of the initiatives taken by the government to allow Quebec workers to save to ensure their financial security in retirement. This plan, offered by employers, is in a way an extension of the RRSP. As the name suggests, the Voluntary Retirement Savings Plan is not compulsory. Enrolment is automatic and you have 60 days to opt out of the plan.
7. Regarding the Quebec Pension Plan (QPP), which statement is false?
A) The plan is 50% government-funded.
B) This benefit can be paid outside the country.
C) This benefit is taxable.
D) This annuity, normally payable at age 65, can be paid in advance from age 60.
Answer: A). This plan is essentially funded equally by employees and employers. It is not a government expense, except for contributions the government makes as an employer for government employees.
8. RRSP or TFSA? All of these statements are true except one. Which one?
A) These plans can be used to build up some of the down payment needed to buy a home.
B) In both cases, your investments grow tax-free.
C) Withdrawing from an RRSP is tax-free while withdrawing from a TFSA is taxable at the source, given the tax deduction associated with any contribution.
D) Although different, contribution limits exist for each of the two plans.
Answer: C). It’s the opposite! Unlike with a TFSA, placing your money in an RRSP reduces your taxable income and reduces payable taxes. On the other hand, any withdrawal from an RRSP is taxable, which is not the case with a withdrawal from a TSFA.
9. Which of the following statements about the Tax-Free Savings Account (TFSA) is true?
A) It is possible to transfer the entire RRSP account of a deceased person to the TFSA of the surviving spouse, without tax consequences.
B) It is not possible to contribute to the TFSA after death.
C) As with the RRSP, it is possible to contribute to your spouse’s TFSA.
D) It is possible to transfer the RRSP to the TFSA at any time.
Answer: B), although one possibility does exist under certain conditions for the RRSP. For statement C), it is still possible to give or lend money to a spouse so they can contribute to their own Tax-Free Savings Account.
10. Do you dream of owning your own home? What would be the minimum down payment required to purchase a single-family home?
A) 5% of the purchase price, always.
B) 10% of the purchase price.
C) 5% of the purchase price up to a certain threshold, plus 10% of the price exceeding this threshold.
D) A down payment of more than 25% is required to avoid mortgage default insurance.
Answer: C). If the purchase price is $500,000 or less, the minimum down payment required is 5%. If the price exceeds $500,000, the minimum down payment required is 5% for the first $500,000 and 10% for the portion of the price of the home that is between $500,000 and $999,999. Also note that lenders require mortgage loan insurance for loans made to buyers who make a down payment of less than 20% of the purchase price.
11. Apple (AAPL-Q) is one of the companies that executed a share split in recent years. What is that?
A) A transaction favourable to shareholders, aimed at increasing the liquidity of the shares.
B) An increase in the number of shares in circulation and a proportional reduction in the stock’s market price.
C) A financial practice that does not create any wealth instantly.
D) All of the above.
Answer: D). All of this is true. Apple carried out such an operation in June 2014. Each shareholder ended up with seven times as many shares, each worth one seventh as much as before.
12. Regarding the Old Age Security (OAS) pension, which statement is true?
A) The benefits are not taxable.
B) The plan is contributory, meaning that Canadians must contribute.
C) Like the retirement pension from the Quebec Pension Plan, the OAS can be paid in advance from the age of 60.
D) OAS can be postponed until age 70.
Answer: D). It is possible to defer payment of this benefit until the age of 70. However, it is not possible for it to be paid in advance from the age of 60.
Acknowledgements
We would like to thank Martin Dupras, President of ConFor Financiers, and François Beauregard, Financial Planner at Assante, for their contribution to the development of this trivia quiz.
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