Project Scope

You are a financial advisor bringing on a new client who is 24 years old and just starting her first career out of college. Her entry-level salary is $46,000/year and she expects her cap income to run about $87,000/year. She wants to retire at age 60 with $1.2M in her account. What kind of plan would you suggest to help her reach her goals?

Current situation

The new client rents an apartment and has no debt but no savings. She owns a 10-year-old car. Her monthly non-discretionary expenses are $1,600 (not including income tax). She is currently spending the balance of her after-tax income on discretionary items. She does not want to rent forever and wants to know if she can save a 20% down payment on a $300,000 home within 10 years and still reach her retirement financial goal. She has lived in Canada all of her life and has never made a contribution to either a TFSA or an RRSP. She does not have a company pension plan.

Tax Assumptions

The marginal tax rate on income of $46000 - 28.8%

The marginal tax rate on income of $87000 - 37.2%

The average Tax rate on income of $46000 - 16.8%

The average Tax rate on income of $87000 - 25.7%

Capital gains and dividend income are taxed more favorably than interest and employment income. If you require other tax information, you can assume that federal and PE tax rates and brackets will remain at the 2021 levels. See https://www.taxtips.ca/taxrates/pe.htm

After completing a discussion and questionnaire with the client, you have been able to determine the following "know-your-client" information.

low to medium investment knowledge

medium risk tolerance

does not want to select individual investments

prefers to work with a financial advisor.