Elaine and Bruce are nearing retirement from their government jobs and are meeting with Janice, a CFP
Question:
Elaine and Bruce are nearing retirement from their government jobs and are meeting with Janice, a CFP professional. Elaine is 57 years old; Bruce is 58. Both have defined benefit pension plans which will provide them with more than enough income to meet their income objectives in retirement.
They had acquired a rental property about twenty years ago, and are now considering disposing of it, as they wish to have the freedom to travel in retirement without any concerns about managing the rental property. The original cost of the property was $90,000; they have recently had it appraised at $310,000. The property is jointly owned, and they both contributed equally to the purchase of the property.
In addition to the rental property, they own the following assets:
- Elaine's RRSP: $35,000, all invested in Canadian Balanced Funds.
- Bruce's RRSP: $42,000, all invested in Canadian Equity Funds.
- Joint Savings Account: $18,000.
- Joint Chequing Account: $6,800.
- Condominium, Jointly Owned: $520,000. There is no mortgage on the condo.
Their initial concern is what to do with the proceeds of disposition when they sell the rental property. The couple has heard of the principle residence exemption and thought they could apply it to their rental property. They have little investment experience, and only accumulated any value in their RRSPs because they signed up for a pre-authorized contribution plan decades ago, when their nephew was briefly working as an investment representative at their local credit union.
Question:
They are considering using the proceeds from selling the rental property to use their outstanding RRSP deduction room and are comparing the following options. Describe one positive and one negative characteristic - applicable to their situation - unique to each of the following investments.
Response Template:
Investment | Positive | Negative |
ABC Canadian Index Exchange Traded Fund | ||
DEF Canadian Growth Mutual Fund | ||
GHI Canadian Growth Segregated Fund | ||
JKL Bank 5 Year Guaranteed. Investment Certificate |
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen