Ava and Samuel are meeting with their Financial Planner, Finn Wong, today regarding their retirement. They are both 43 years of age and hoping to retire in 20 years. They have two children, age 10 and 12. They are unsure of how much money they will need to retire. They ask Finn to help them to make sure that they are on the right track to retirement.

Ava is a teacher in Toronto and earns a salary of $93,000 annually. She is a member of the Ontario Teachers Pension Plan, which is a defined benefit pension plan. She started teaching when she was 26 years old and her pension will be based on her best five average salary and a 1.5% factor. She is currently at the top of the pay grid and expects that her salary will keep up with inflation. Ava asks Finn if she is eligible to retire with her full pension in 20 years if the factor on her pension is 85. Once she starts to receive her pension it will be indexed for inflation.

Samuel works for a candy company as a marketing manager. His income is $81,000 annually. He has a group RRSP through his employer where he puts in 5% of his salary and they match 50% of his contributions. He has chosen to invest this money in a balance portfolio earning 5.5% per year, compounded annually.

Samuel and Ava would like to spend their retirement travelling twice a year and golfing. They estimate that a golf membership will cost them $13,000 annually and their trips would cost them $10,000 annually. Ava is also concerned with making sure that they are not a burden to their children in the event that they become ill. They believe it will cost them $6,000 per year in additional health care expenses in retirement.

Net Worth Statement for Ava & Samuel Belman

As of December of Last Year

Assets
House Group RRSP RESP DBPP TFSA (Emergency fund in cash) Total Assets	$1,000,000 $188,000 $52,000 $308,000* $21,000 $1,569,000
Liabilities
Mortgage Line of Credit Credit Card Total Liabilities	$676,893 $11,300 $0 $688,193
Net Worth	$880,807

Cash Flow Statement for Ava & Samuel Belman

As of December of Last Year

Income	Annually
Samuels Employment Income $81,000 Less: Taxes, EI & CPP $19,200 Less: Group RRSP Contribution $ 4,050 Avas Employment Income $93,000 Less: Taxes, EI & CPP $25,050 Less: DBPP Contribution $ 9,900	$57,750 $58,050
Total Take Home Income	$115,800
Expenses
Housing Mortgage Payments House Maintenance Home Insurance Utilities Heat, water, electricity Property Taxes Automobiles Lease Payments (Honda & Audi) Gas, Operating Expense & Repairs Other Expenses Phone, cable, internet Food Clothing Entertainment & Vacation Miscellaneous Savings RESP TFSA	$46,925 $6,000 $3,400 $6,500 $4,200 $13,200 7,200 $3,840 $6,200 $3,600 $10,000 $6,000 $5,000 $2,200
Total Expenses	$124,265
Surplus or (Deficit)	($8,465)

Assumptions:

• Inflation 2.25%
• CPP Maximum (2020) - $14,000
• OAS Maximum (2020) - $7,000
• Avas Best Five Years average - $125,500
• ATR in retirement 21%
• MTR in retirement 31%
• Nominal Return in Retirement 5%
• Life Expectancy Age 90

QUESTION 1

1. Based on their retirement spending, what do you estimate that they will need in the first year of retirement to cover expenses.

   Total Expenses Today:	$139,025
   Less: Expenses that will stop in retirement	Total Dollar Amount of Expenses
   (List of Expenses)	$ (Sum of Expenses)
   Plus: New Expenses in retirement
   (List of Expenses)	$ (Sum of Expenses)
   Total Retirement Expenses	$

QUESTION 2

QUESTION 2

1. Based on your total retirement expenses projected in question one, what amount will they need in their first year of retirement to cover expenses, inflation and taxes?

   Variable	Input
   Mode
   P/Y
   C/Y
   N
   I/Y
   PV
   PMT
   FV

   Tax Rate	Amount Required to Cover Expenses, Inflation & Taxes (Rounded to the Nearest Dollar)

   QUESTION 3

2. Calculate the amount of money that they will need on the date of their retirement?

   Variable	Input
   Mode
   P/Y
   C/Y
   N
   I/Y	(Round to two decimal places)
   PV	(Round to the nearest dollar)
   PMT
   FV

QUESTION 4

1. At what age can Ava retire with her full pension?