Terms & Definitions - R
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Rate History: The chronological history of all premium rate revisions, and date of these revisions, on a particular benefit or group of benefits.
Ratio withdrawal plan: A type of mutual fund withdrawal plan that provides investors with an income based on a percentage of the value of units held.
Real estate fund: A mutual fund that invests primarily in residential and/or commercial real estate to produce income and capital gains for its unit holders.
Real estate investment trust (REIT): A closed-end investment company that specializes in real estate or mortgage investments.
Redeemable: Preferred shares or bonds that giver the issuing corporation an option to repurchase securities at a stated price. These are also known as callable securities.
Registered Education Savings Plan (RESP): A vehicle through which parents or grandparents can save for a child's post- secondary education. Any money deposited into the plan is not tax deductible, but the earnings are sheltered from tax until drawn out for the child's education, and then taxed at the child's marginal rate.
Registered Pension Plan (RPP): The basic company private pension plan for employees, sponsored by employers or unions, usually jointly funded by workers and the company. Contributions to RPPs are tax deductible; payments received from the resulting pensions are taxable.
Registered Retirement Income Funds (RRIFs): A maturity option available for RRSP assets to provide a stream of income at retirement. A RRIF is basically a continuation of your RRSP, providing the same tax sheltering of principal and earnings, with one key difference. Instead of making contributions, you have to take out a minimum amount every year, based on age. The withdrawal rate increases annually before leveling off at 20 percent for those age 94 and older. In effect, a RRIF takes the accumulated savings of an RRSP and spreads the income over retirement years, while at the same time investing the monies not being used.
Registered Retirement Savings Plans (RRSPs): Tax-sheltered retirement savings plans for individuals, including the self-employed. RRSP contribution limits are based on earned income, and provide retirement income based on what the accumulated contributions and earnings will buy at conversion. You have up until December 31st of the year that you turn 71 to "mature" your RRSP. Upon maturity, you have 4 options to choose from:
- Do Nothing (or "forget to do something")
- Convert to a RRIF
- Purchase a Life Annuity
- Purchase a Term Certain Annuity to Age 90
Contributions to RRSPs are tax deductible, and withdrawals are taxable. RRSP contributors may also belong to an RPP, but their RRSP contribution limits are reduced by the amount of a pension adjustment, a measure of the benefits provided in the RPP. RRSPs set up to receive funds transferred from RPPs on the condition they be used solely for retirement income purposes are called locked-in RRSPs.
Retained earnings: The accumulated profits of a company. These may or may not be reinvested in the business.
Retiring allowance: A lump-sum payment made by an employer to an employee on termination, or an amount received on or after retirement in recognition of long service. This includes payment for unused sick leave as compensation for loss of employment. Such payments can be rolled over, or transferred, to an RRSP to defer tax, but only for years prior to 1996. Allowable amounts are up to $2,000 for each year of service, plus up to $1,500 for each year before 1989 in which no pension or DPSP benefits were earned - in addition to the normal limits for RRSP contributions. However, the 1995 federal budget eliminated this rollover provision for years of service after 1995, drastically reducing the amount of such a lump sum a person facing this situation will be able to shelter from taxes in the future.
Retractable: Bonds or preferred shares that allow the holder to require the issuer to redeem the security before the maturity date.
Reverse mortgage: A reverse mortgage allows people to generate income through the equity in their homes. The cash from such a mortgage can be invested or used to purchase an annuity that will pay a regular income. No payments are required on the mortgage. When the owner dies, the mortgage loan and interest are paid and the rest of the proceeds, if any, become part of the owner's estate. A reverse mortgage should usually be considered only by those in their 70s and 80s.
Rights: Options granted to shareholders to purchase additional shares directly from the company concerned. Rights are issued to shareholders in proportion to the securities they may hold in a company.
Risk: the possibility of loss; the uncertainty of future returns.
Rule of 72: This is a quick way to calculate how many years it will take for you to double your money. Simply divide 72 by the annual rate of return. For example, at 10%, an investment will double in value in 72/10, or just over seven years. At 7.2% it would take 10 years and at 6% it would take 12 years.
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