Alan is $50,$ Joanne is $51.$ They have a large house worth $$800,000$ in Toronto and a cottage worth $$200,000$ in Muskoka. Mortgage payments on these properties are $$42,000$ p$.$a$.$ and they will be paid off in $10$ years. They have no other debts, although they just finished paying off a car loan. They each own a recent model car, and they replace their cars every three or four years because they do not want to be seen driving older models. Alan's net income or take$-$home income was $$100,000$ last year, after taxes, CPP$,$ EI premiums, medical insurance, etc. Joanne takes home $$40,000$ p$.$a$.$ after the same set of deductions and contributions to her employer pension plan. They have two children whom they are currently helping through school, at a cost of $$25,000$ p$.$a$.$ This cost will continue for another five years, after which the children are on their own. They are both carrying substantial life insurance and disability insurance, all of the cost of which is deducted from their gross pay in arriving at the net income reported above.

They have $$10,000$ in a chequing account and a substantial line of credit at the bank if they need it$.$ Alan has $$30,000$ in an oil and gas mutual fund. He has no pension plan. Joanne has $$20,000$ invested in GIC's in an RRSP$.$ She expects an indexed pension plan of $$25,000($in today's dollars$)$ if she retires at age $61.$ They would each qualify for only $80\%$ of maximum Canada Pension, and that would be further reduced if they start receiving it before age $65.$

Alan has been earning gross income over $$100,000$ p$.$a$.$ for five years, and he expects the $$100,000$ net income of last year to be substantial until he retires. He started saving money only in the last $2$ years. Last year he deposited $$15,000$ in the mutual fund $($this amount is included in the $$30,000$ balance$).$ Joanne has been contributing $$1,000-$$$2,000$ p$.$a$.$ to her RRSP for $10$ years. They would like to retire in $10$ years. Advise them in their retirement planning.

Questions:

Retirement Goals: How much money do they need?

A$)$ Calculate required income $($Starting point not given, estimate it from present income and expenditures$)$

B$)$ What level of retirement income is appropriate? INFLATION $2\%.$ KEEP IN MIND THAT THE MORTGAGE AND SCHOOL PAYMENTS WILL BE OVER ONCE THEY RETIRE IN $10$ YEARS. THEY CHANGE CARS EVERY $3-4$ YEARS.