FP2 Case #8

Joan has done well working as an independent contractor, but her husband, Jeremy, is burned out and

disenchanted with the corporate world.

Jeremy earns about $200,000 a year. Joan takes a salary of $120,000 from her consulting corporation.

He is 51, she is 49. They have two children, one of whom is still living at home, and a $2-million,

mortgage-free home in Toronto.

Jeremy works as a full-time employee, which provides benefits for the family, however, his industry has

gone through some turmoil that has left him unemployed twice in the past few years. "The last time, it

took him almost two years to find another job!"

Can they afford for Jeremy to retire now? Do they have enough to live on for 40 years?

Their goals include paying for their children's higher education. Longer term, they plan to downsize to a

smaller home and buy a condo in Florida.

"Now that we are entering our 50s, we'd like to know if we are on track to retire comfortably in the next

five years?" They also ask about strategies to keep income taxes payable to a minimum. Their

retirement spending goal is $100,000 a year after tax.

Details:

The people: Joan, 49, Jeremy, 51, and their two children, 17 and 19

Monthly net income: $18,965

Assets: His TFSA $92,110; her TFSA $90,155; cash in bank $65,000; his RRSP $1,153,110; her RRSP

$746,560; residence $2-million; cash in her corporation $60,000; RESP $179,000. Total: $4.4-million

Monthly outlays: Property tax $875; home insurance $180; utilities, water $465; maintenance, garden

$640; groceries $1,000; car insurance $355; fuel $450; parking $250; clothing $200; phones, TV, internet

$370; entertainment, dining, drinks $250; hobbies, activities $100; life, disability insurance $330; gifts,

donations $435; travel $1,665; RRSPs $2,900; car loan $835; TFSAs $1,000. Total: $12,300. (Surplus of

$6,665 goes to saving.)

Liabilities: Car loan $34,255

Can Jeremy pack in his stressful job at year end and retire?

Questions:

1. an assessment of the client's current financial situation using financial ratios, SWOT analysis
2. an assessment of how much the client will need to meet their retirement objectives (estimate expenses in retirement if not provided)
3. sources of income available when they retire
4. determination/recommendation of whether they can financially meet their retirement goals or whether other options need to be considered to enable them to meet their retirement goals and address their concerns