Certified Financial Planner (CFP) Practice Exam · Question
Comparing an Individual Pension Plan (IPP) to a Registered Retirement Savings Plan (RRSP), which of the following is generally considered a primary advantage of an IPP for a high-income business owner?
IPPs can offer significantly higher contribution room than RRSPs, especially for older, higher-income individuals, as they can fund past service actuarially, al
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Question: Comparing an Individual Pension Plan (IPP) to a Registered Retirement Savings Plan (RRSP), which of the following is generally considered a primary advantage of an IPP for a high-income business owner?
Answer options:
- Unlimited contribution room, irrespective of salary.
- Lower administrative costs than a typical RRSP. ✅ Greater contribution room for older, higher-income individuals due to past service funding opportunities.
- Investment flexibility to include personal-use assets like cottages.
Correct answer: Greater contribution room for older, higher-income individuals due to past service funding opportunities.
Explanation: IPPs can offer significantly higher contribution room than RRSPs, especially for older, higher-income individuals, as they can fund past service actuarially, allowing for larger deductible contributions and faster accumulation of retirement savings.
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