FIP 502: PLANNING FOR RETIREMENT, EDUCATION & INDIVIDUALS WITH A DISABILITY Group Assignment: 30 marks worth 20% of grades Due on Aug 3rd 11:59 pm Case 1 (15 marks) Anand & Priya both aged 55 are in exceptionally good health and have a lot of time as their children are away at university. Anand owns a caf in Toronto and Priya was self-employed as a software engineer. Anand earns a gross income of $45000 and $31500 net income after taxes. Priya has a gross income of $135000 and a net income of $97200 after taxes. Looking back, they realise how hard they worked to come thus far. They thoroughly loved raising their two children and have always made financially sound decisions. Now they look forward to their retirement years and hope to retire at 65. They have been saving regularly and investing wisely over the years. They keep a close eye on their investments and adjust their strategies whenever necessary. They have no credit card balances and bought their car with the cash they had. They use credit cards for convenience only. Both their children have work-study programs at the university and so have their education covered. The couple wishes to purchase a smaller home in Niagara Falls area. Current financial Situation Monthly expenses Chequing account $8500 Mortgage $1542.77 Savings account $53000 Property taxes $400 Emergency fund savings account $55000 Homeowners insurance $200 House (Mortgage value $63000) $875000 TFSA contribution $300 TFSA $90000 RRSP contributions $1000 RRSP $400000 Utilities $350 Non registered investments Food $600 (stocks & bonds) $300000 Gas /Maintenance $485 Life insurance cash value $125000 Entertainment $400 Car : Anand $12500 Life insurance $475 Car : Priya $16000 Note: Assume the portfolio of assets in the various investments earns an average of 5% APR compounded monthly for investment accounts and 1% APR compounded monthly for the savings/emergency accounts. Ignore taxes & inflation a. Looking over Anand's & Priya's assets, which ones could be valuable to them for income as retirement approaches? (2 mark) b. What government pensions will they be entitled to at retirement? What is the earliest they can collect these government pensions and how would taking it early impact the pension? (3 marks) c. Assuming they continue to contribute the above amounts to the RRSP's and TFSA's, how much will they have in assets to use for retirement at age 65 (include the non-registered investments as well in your calculations)? (5 marks) d. How much can Anand & Priya withdraw each month and still leave their nest egg intact? (1 mark) e. How much can they withdraw each month that will reduce their nest egg to zero assuming they live until they are 90 years old? (2 marks) f. What are some issues that could come in the way of their retirement plans? (2 mark) 1 FIP 502: PLANNING FOR RETIREMENT, EDUCATION & INDIVIDUALS WITH A DISABILITY Group Assignment: 30 marks worth 20% of grades Due on Aug 3rd 11:59 pm Case 1 (15 marks) Anand & Priya both aged 55 are in exceptionally good health and have a lot of time as their children are away at university. Anand owns a caf in Toronto and Priya was self-employed as a software engineer. Anand earns a gross income of $45000 and $31500 net income after taxes. Priya has a gross income of $135000 and a net income of $97200 after taxes. Looking back, they realise how hard they worked to come thus far. They thoroughly loved raising their two children and have always made financially sound decisions. Now they look forward to their retirement years and hope to retire at 65. They have been saving regularly and investing wisely over the years. They keep a close eye on their investments and adjust their strategies whenever necessary. They have no credit card balances and bought their car with the cash they had. They use credit cards for convenience only. Both their children have work-study programs at the university and so have their education covered. The couple wishes to purchase a smaller home in Niagara Falls area. Current financial Situation Monthly expenses Chequing account $8500 Mortgage $1542.77 Savings account $53000 Property taxes $400 Emergency fund savings account $55000 Homeowners insurance $200 House (Mortgage value $63000) $875000 TFSA contribution $300 TFSA $90000 RRSP contributions $1000 RRSP $400000 Utilities $350 Non registered investments Food $600 (stocks & bonds) $300000 Gas /Maintenance $485 Life insurance cash value $125000 Entertainment $400 Car : Anand $12500 Life insurance $475 Car : Priya $16000 Note: Assume the portfolio of assets in the various investments earns an average of 5% APR compounded monthly for investment accounts and 1% APR compounded monthly for the savings/emergency accounts. Ignore taxes & inflation a. Looking over Anand's & Priya's assets, which ones could be valuable to them for income as retirement approaches? (2 mark) b. What government pensions will they be entitled to at retirement? What is the earliest they can collect these government pensions and how would taking it early impact the pension? (3 marks) c. Assuming they continue to contribute the above amounts to the RRSP's and TFSA's, how much will they have in assets to use for retirement at age 65 (include the non-registered investments as well in your calculations)? (5 marks) d. How much can Anand & Priya withdraw each month and still leave their nest egg intact? (1 mark) e. How much can they withdraw each month that will reduce their nest egg to zero assuming they live until they are 90 years old? (2 marks) f. What are some issues that could come in the way of their retirement plans? (2 mark) 1