Bentley’s Retirement Review Case Bentley is a single professional who lives alone and enjoys a comfortable lifestyle, but wants to make sure he is on track for retirement. He has two children in their late 20s and he wants to be able to help them financially to get into the housing market and start families. Financial situation: 

• He earned $130,000 gross annual income (40% marginal tax bracket) in 2019.

• He is 58, just had his birthday, as was born in January, and has lived in Canada all his life. 

• He has a defined benefit pension plan which is indexed to inflation and is based on 2% times years of service and the average of his best five years salary. He has been with the company for ten years. If he retires before age 60, his pension would be reduced by .5% per month of retiring prior to age 60. 

• He has a TFSA account with $60,000 in an aggressive portfolio asset mix and maximizes annual contributions to it. 

• He has $190,000 in RRSPs in an aggressive investment mix and has $120,000 unused RRSP room and has not been contributing to it in recent years. 

• He keeps a bank balance of $25,000 and has a $50,000 line of credit at 4% interest which he has not needed to use. It is for emergencies. 

• He has a home worth $800,000 with a $320,000 remaining on the mortgage (3.5% interest) and is paying $1,890 monthly payments currently. 

He does not want to downsize his home in retirement. Bentley’s net monthly income is $7,400 allocated as follows: $1,890 mortgage; $1,000 strata fees, prop tax and maintenance; $500 Phone, cable, utilities; $600 car expenses; $400 charities and gifts; $1,700 groceries and entertainment; $500 travel; $350 life, DI and house insurance; $460 TFSA. Total $7400 Bentley has a big decision to make. He is wondering if he should take a new job which pays $150,000 (40% marginal tax bracket) per year but has no retirement benefit plan. He loves his current job and does not really want to switch careers, but is concerned that he could be jeopardizing his retirement options. He is also in a new relationship and wants to consider the pros and cons of moving in together. His potential partner has children ages 10 and 12 that she shares custody for. Goals: To retire at age 65 with $6,500 per month income after tax ($100,000 gross income) and be sure that his money will not run out before age 95 (20% probability of survival). To support his children starting out with families. 

1. Accurately input Bentley’s financial situation into the CRA retirement income estimator (online program) to analyze whether he is on track for retirement and whether he should take the new job offer on financial grounds. (Use the FPSC life expectancy tables to determine what age he should plan for his retirement funds to last, if he wishes to be 80% sure he will not run out of funds. Use the FPSC Assumption Guidelines to find the REAL RATE of RETURN on an aggressive asset mix portfolio and use that for the projected return on his investments.) 

2. Write a clear concise summary of your analysis of whether he is on track to retire, if he should take the new job, and what alternatives you suggest he consider to help him achieve his retirement lifestyle goal. Briefly comment on his other goals. His strategy cannot include: “rent a room in his home”.