Retirement Goal Plan Assignment – 15%
Vanessa and Joe Samson both age 49 have come to see you, their financial planner to develop a retirement plan. Vanessa works full time at an Accounting Firm earning $70,000 a year after taxes and deductions and Joe works full time as a Software Engineer earning $105,000 after taxes and deductions. The Samson’s have one child, Rebecca (24) who just finished University and is living on her own.
In addition, The Samson’s live in a townhouse in Scarborough that is worth $1 million and has $180,000 remaining on the mortgage which is on track to be paid off in 10 years. The Samson’s also share a five year old Mercedes SUV that is valued at $36,000 and has no existing loan balance.
Regarding retirement, the couple would like to retire at 65 and want to ensure they are on track towards a comfortable retirement which would require the couple to have 1.6 million, combined in savings at age 65. The Samson’s were both born in Toronto and have always resided in Canada. In addition, both Vanessa and Joe have been employed full time since graduating from College at age 22 with the exception of Vanessa taking a year off of work during her maternity leave.
Please keep in mind the following:
The chequing Account balance is seen by the couple as an emergency fund, and therefore they don’t want it included in calculations for Retirement Income.
The Samson’s have an abundance of questions for you and have requested you to determine if they’re on the right path towards achieving their retirement goal. During the meeting, the couple has provided you with the following information that better captures their current financial situation.
Monthly Expenses (Joint):
Mortgage Payment: $1200
Home maintenance: $300
Property Taxes $400
Auto Insurance: $160
Internet/Cell phone bills: $260
Dining out & Entertainment: $480
Monthly Contributions to Registered Savings Accounts:
The Samson’s each contribute $240 per month their RRSP accounts.
Principal Residence: $1,000,000
Chequing Account: $20,000
Savings Account: (earning 2% per year): $380,000
TFSA: $78,000 (earning 2% per year)
RRSP $100,000 (earning 2% per year)
TFSA: $86,000 (earning 2% per year)
RRSP: $160,000 (earning 2% per year)
Assignment Instructions – Answer the following questions:
1. As the Samson’s Financial Planner, are they on the right track to reach their retirement goal? Using TVM Calculations, determine at the current savings rate how close to the goal of 1.6 million at retirement the clients are projected to achieve. (3 marks)
2. The Samson’s are not very familiar with Old Age Security (OAS) as well as what the eligibility criteria is to receive OAS is. Provide a brief explanation of what OAS is and whether or not they would be eligible to receive the maximum benefit. (Your response should be between 2-3 sentences long). (2 marks)
3. In addition to questions about OAS, The Samson’s have questions about the Canada Pension Plan (CPP). Provide a brief explanation on what CPP is and how one can be eligible for the maximum CPP benefit. (Your response should be between 2-3 sentences long). (2 marks)
4. The Samson’s are wondering whether it would make more sense to take CPP early or to defer it. How would you respond to their question using relevant concepts from the course? (Your response should be between 3-5 sentences long). (4 marks)
5. After reviewing the Samson’s financial situation, provide a recommendation to the couple that would optimize their retirement goal plan. Be sure to elaborate on how your recommendation would help them with achieving their retirement goals. (Your response should be between 4-6 sentences long). (4 marks)
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