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FINA 2 4 8 Case Study Assume the Year is 2 0 1 9 Mary and Susan are a married same sex couple. They have

FINA 248 Case Study
Assume the Year is 2019
Mary and Susan are a married same sex couple. They have been married for 25 years and own their own home. Their home is valued at $850,000 and they have a $200,000 mortgage. Mary will be 50 this year and Susan will be 48 this year. Mary works for Bell Canada and earns $100,000 per year. She is a member of a DBPP. The pension entitlement represents 2% of her salary over the best 5 years of employment.
Susan works as an office administrator for ABC Company and does not have any form of pension plan. Susan earns $55,000 per year.
Their number one goal is retirement planning. Mary loves her job and plans on working until she is 65. Susan wants to retire when Mary does so that they can enjoy retirement and travel extensively.
There assets and liabilities are as follows.
Mary RRSP $25000
Susan RRSP $13,000
Susan Spousal RRSP $275,000
Mary Income $100,000
Susan Income $55,000
Home Value $800,000
Mortgage $200,000
Mary TFSA $55,000
Susan TFSA $10,000
Assume you are Mary and Susans financial planner and that Mary and Susan have hired you to complete a retirement plan for them.
1. As an advisor you recommend that Mary maximize her RRSP into a spousal RRSP, with Susan as the annuitant on an annual basis because Mary is in a higher marginal tax rate than Susan. Is this the best strategy? If so, why? If not, please offer an alternative strategy and explain why it is a more appropriate strategy.
2. How much is Marys benefit entitlement for pension adjustment (PA) calculation purposes? (Please show your calculation)
3. How much RRSP eligibility would Susan accumulate in 2020?(Please show your calculation)(Assume no (carry forward).
4. What ages should you use for the retirement projections you prepare for Mary and Susan?
a) Marys age for both
b) Susans age for both
c) Marys retirement age and Susans life expectancy
d) Susans retirement age and Marys life expectancy
Explain why you chose the answer you chose.
5. How much would Mary contribute to CPP in 2019? Assume the YMPE is $57,500(Please show your calculation)
6. How much would Susan contribute to CPP in 2019? Assume the YMPE is $57,500(Please show your calculation)
7. As Mary and Susans financial planner which of the following strategies would you recommend to them?
a) Maximize both of their RRSPs before doing other savings.
b) Maximize both of their TFSAs before doing other savings.
c) Maximize Marys RRSP and use the tax refund to fund her TFSA.
d) Maximize Susans RRSP and use the tax refund to fund her TFSA.
e) None of the above
Explain why you chose this strategy.
8. At what age will Mary and Susan be forced to convert their RRSPs into a RRIF or annuity?
9. Assume Susan decides to RRIF her RRSP at the age of 65. If the value of her RRIF at the beginning of that year is $57,500 how much is the minimum she has to take from the RRIF in that year? (Please show your calculation)
10. At age 67 Susan withdraws $27,500 from a RRIF created by the spousal RRSP. Assuming Mary had contributed to the spousal RRSP up until Susan had turned 60 how much of the withdrawal would be attributed back to Susan as taxable income?
11. Assuming you are Susan and Marys financial planner, what advice would you provide them in terms of the use of TFSAs
a. Are TFSAs appropriate strategy for Susan and Mary? Why?
b. What is the yearly TFSA limit?(Assume 2019)
c. What are the benefits of using a TFSA?
d. What savings goals are TFSAs used for?
e. What happens as it relates to TFSA limits if a withdrawal is made from a TFSA?

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