Group Assignment $$ Jim and Jane Smith

Jim Smith and Jane Smith have come to you to talk about going through some planning together. They have been thinking about it for some time and have heard about you through a friend who is also a client of yours. They feel that they need some guidance from a professional planner. They want to know if they are on track and can achieve their short$-$term, medium term, and long$-$term goals.

Jim $($born Jan$/25/1977)$ works as a Heavy$-$duty mechanic earning $$105$K $($employment income$)$ a year with a defined contribution plan at work. It is currently valued at $$300$K$.$ He does not know much about investing, often relying on tips from his co$-$workers, and has been told by a colleague that $$you cannot beat GIC rates these days$$ where he then elected a GIC ladder in his pension plan after many years where he did well in a target date investment.

Jane $($born March$/27/1977)$ works for the city of Vancouver as a city planner and makes around $$100$k income $($employment income$).$ She knows that she has a defined benefit plan $($DB$)$ from work. This DB plan will guarantee a monthly income of $$3,000($in today$$s dollar terms$)$ for her from the age of $65$ and indexed for $1\%$ inflation. She feels lucky that she does not have to risk her capital.

Together they have $2$ children $($Harry and Nelson$).$ Harry was born in $2011,$ and he is currently in grade $8.$ He likes mathematics. Nelson was born in $2010,$ and he is currently in grade $9.$ He is fascinated by AI and would like to become a computer programmer. They have good grades at school. Jim and Jane feel grateful that their children are smart. However, they want to know how they can fund their post$-$secondary education.

They would like to leave some inheritances for their children. They own a townhouse in Vancouver currently appraised at $$1\mathrm{.}65$M$.$ Their mortgage is partially paid off since Jim got inheritance from his father last year. They are left over with a mortgage of $$650$K$.$ In addition, they bought a vacation home in Sunshine Coast $5$ years ago for $$300$K$.$ It is valued around $$450$K with a small mortgage of $$100$K outstanding.

Health is something they both take seriously. Jane$$s mother passed away $20$ years ago due to cancer and her father has been suffering from diabetes and lives in a long$-$term care facility. Both of Jim$$s parents passed away in their $80$s and were relatively healthy when they were alive.

You held an initial discovery meeting with them in your office. You have uncovered some insights into their financial situation. Jim has a life insurance policy through work covered $$100$K while Jane has an insurance coverage of $$150$K through work. Jim$$s employer provides him with a disability insurance plan for $50\%$ after tax income. Jane$$s employer also provides her with a disability insurance for $65\%$ after tax income.

In addition, Jim has $$35$K in her TSFA account with RBC$,$ and it is sitting in a high$-$interest$-$saving account. Jane has a TFSA with $$50$K all in stocks that were suggested through her $$colleague investment council$.$ They both value their work extended medical and dental plan a lot. They want to have some coverage after retirement. They have not been tracking their daily expenses as they have not incurred any debts, except for their mortgages.

When you dig into their risk tolerance you have uncovered the following concerns from Jane and Jim.

Jim thinks that given the wars, inflation, and ongoing COVID, it is safe for him to hide in GIC. He still remembers what happened to his portfolio during the $2008/2009$ financial crisis, and he does not want the same experience to repeat. In addition, he told you that he only wants to invest in large Canadian companies if he ever gets back to the stock market again. A retired co$-$worker told him that he invested all his savings in Telus and RBC bank and has been collecting great dividends. However, Jane is open to other investment recommendations if required. She owns a stock portfolio in her TSFA account, consisted of recommendations by her co$-$workers. She told you that the portfolio is not doing too well. Despite good news from the companies, her portfolio has been doing poorly even the S&P$500$ Index is having a great year. She does not want to sell her stocks since she does not want to crystalize her losses. She would like to know why her portfolio is not doing well.

You also noted the following information from the meeting.

Jane mentioned to you that her work pension takes up a lot of her RRSP contribution room and her last year$$s tax return indicates that her RRSP contribution limit is $$8,000$ after pension adjustment.

They both shared with you, if necessary, they can cut some of their current discretionary expenses to fund their future needs.

Retirement Goals

They want to retire in the year when both turn to $65.$ They hope they can collect around $70\%$ of their pre$-$retirement after tax income during retirement. They love travelling abroad. They told you a recent trip to China and Japan. They would like to d