Beatrix Mayumi Case Study

Ms. Beatrix Mayumi (born April 20, 1966) is a widowed 55-year old woman that lives at 9 Oldfield Street in Maple, Ontario L6A 3Y3. Beatrix and her husband, Yoshi, immigrated to Canada from Japan on January 1, 1990. Yoshi died earlier this year from cancer. Beatrix has decided to retire from work on December 31, 2021. Her gross income this year was $125,000, which she received semi-monthly.

When Yoshi died, he had a $1,000,000 life insurance policy that named Beatrix as the beneficiary. Beatrix has completed the paper work related to that insurance policy and expects to receive the funds from it by December 31, 2021. Beatrix would like to maintain the proceeds from this policy in cash, if possible, and only wants to invest it if absolutely necessary.

Based on Beatrixs and Yoshis contribution history with CPP, Beatrix expects to receive a full CPP retirement pension. She also expects to receive a full OAS pension. With her choosing to leave work now, Beatrix also has to make the decision whether she would like to remain a member of the pension plan or commute her pension.

If Beatrix commutes her pension, she will be entitled to receive a maximum transfer value of $892,973 and a taxable cash payment of $112,589. If she chooses to maintain her membership in the pension plan, she will receive an indexed monthly pension of $3,562 starting on her 65^th birthday, and be eligible for full health and dental benefits.

Beatrix owns her own home worth $900,000. She just leased a car worth $35,000 and pays $350 per month for the car. She will continue to lease cars like this every five years as she appreciates that the car is always under warranty. Beatrixs RRSP contribution limit is $74,290. At the time of his death, Yoshis RRSP contribution limit was $528,986. Neither Beatrix, nor Yoshi, ever contributed to a TFSA.

Beatrix has no surviving family. Both her and Yoshis parents pre-deceased Yoshi, as did Beatrixs sister, who never married. Her goal is to leave any monies remaining in her estate at the time of her death to her favourite charity. Her will is currently set up with Yoshi as the sole beneficiary of her estate.

Beatrixs current monthly expenses are:

• Housing costs, including utilities of $1,500.
• Food and housing supplies of $500.
• Transportation expenses of $200.
• Cable TV, internet, and cell phones of $400.
• Social and Entertainment expenses of $400.

Her annual property taxes cost $7,000. She expects that she will need about $10,000 per year to facilitate her travel desires.

Beatrix expects that she will continue to have all of her current expenses in retirement.

Beatrixs answers to the investment questionnaire are shown on the next pages. She expects to pay a 1% tax deductible annual fee for money management.

Complete a pension commutation analysis on Naviplan.

Based on your analysis, answer the following questions:

1. What is Beatrixs life expectancy?
2. What is Beatrixs current net worth as of today?
3. What is Beatrixs cash flow surplus expected to be for 2021?
4. Should Beatrice remain a member of her company's pension plan or commute her pension? Support your answer with three clear and specific reasons.
5. Identify three specific recommendations you would provide to Beatrix (outside of whether to commute her pension or not).
6. How much money will Beatrix's favourite charity receive upon her death if she lives until her most conservative life expectancy?