Mercedes and Alejandro San Martin

It is January 2021. Mercedes and Alejandro have lived in Toronto, Ontario for the last 25 years since immigrating to Canada from South America in 1996. Married in 1992, the couple both work outside the home and enjoy an active social life.

Mercedes is currently 52 years of age (birthday October 22, 1968) and is the Office Manager for a furniture manufacturing company.

Alejandro is currently 51 years of age (birthday August 27, 1969) and is a Pharmacist by training. However, he was recently been promoted to the position of Regional Manager.

Alejandro joined Grande Pharmacia, a chain of retail pharmacies on January 1, 1998. In his current position, he is responsible for managing the operations of 12 drug stores in downtown Toronto. For 2020, his annual salary is $88,000 (which is also equal to his total earned income for the year). On January 1, 2000, when he was first eligible, Alejandro enrolled in Grande's defined benefit pension plan. He is now fully vested in this plan. He earns an annual pension benefit of 2% up to the maximum permitted, in this non-contributory pension plan. Alejandro also understands that this plan is a "final earnings" plan, based on the employee's final three years salary. For the last four years, Alejandro's salary has remained unchanged.

Mercedes manages the head office administrative staff for Starlight Inc. a firm she joined on July 1, 2012. Her 2020 earned income is $102,000 and she participates in Starlight's defined contribution pension plan. Her pensionable earnings are $97,000 on which she and her employer each contribute 5% of pensionable earnings. Mercedes has participated in the pension plan since joining Starlight. As of January 1, 2021, Mercedes' pension assets have a market value of $75,333 and a book value of $54,000. Mercedes' 2020 pensionable earnings will be $97,000, while her total earned income will remain at $102,000.

Together, Mercedes and Alejandro earn a total of $190,000. Each owns a self-directed RRSP, of which they are the respective owners. Mercedes' RRSP account has a market value of $28,000 and a book value of $12,250. Alejandro's RRSP has a market value of $67,800 and a book value of $18,000.

On October 31, 2020, a $7,000 Canadian dollar term deposit matured in Mercedes's RRSP and she immediately re-invested this money into an investment that counts as foreign content. This investment is the only foreign content inside Mercedes's RRSP.

Mercedes and Alejandro are both in the 45% marginal tax bracket.

Mercedes and Alejandro and now thinking about their retirement and how they should begin preparing for it in a way that will ensure they have a plan in place that will provide long-term financial security for them after they stop working.

They are now looking for your help and have given you the following list of questions to answer for them. When answering these questions, assume that it is January 1, 2021 and a maximum annual pension entitlement for a defined benefit pension plan is $2,697 per year of service. Disregard any legislative changes beyond this $2,697 limit.

• What are the key financial details for this case?