Retirement Goal Plan Assignment

Madison and John Jones, both age $40$ have come to see you, their financial planner to develop a retirement plan. Madison works full time at an Accounting Firm earning $$96,000$ a year after taxes and deductions and John works full time as a Software Engineer earning $$128,000$ after taxes and deductions. The Jones$$ have one child, Rebecca, who is $10$ years old. The Jones$$ have not yet put any savings aside for Rebecca$$s post secondary education but would like to start.

In addition, The Jones$$ live in a townhouse in Oshawa that is worth $$1$ million and has $$260,000$ remaining on the mortgage which is on track to be paid off in $12$ years. The Jones$$ also share a four year old Toyota SUV that is valued at $$28,000$ and has no existing loan balance.

Regarding retirement, the couple would like to retire at $65$ and want to ensure they are on track towards a comfortable retirement which would require the couple to have $1\mathrm{.}4$ million, combined in savings at age $65.$ Madison and John were both born in Toronto and have always resided in Canada. In addition, both Madison and John have been employed full time since graduating from College at age $22$ with the exception of Madison taking a year off of work during her maternity leave.

Please keep in mind the following:

The chequing Account balance is seen by the couple as an emergency fund, and therefore they don$$t want it included in calculations for Retirement Income.

The Jones$$ have an abundance of questions for you and have requested you to determine if they$$re on the right path towards achieving their retirement goal. During the meeting, the couple has provided you with the following information that better captures their current financial situation.

Monthly Expenses $($Joint$)$:

Mortgage Payment: $$1600$

Home maintenance: $$300$

Utilities: $$280$

Property Taxes $$480$

Auto Insurance: $$160$

Gas: $$360$

Food: $$1400$

Clothing: $$380$

Internet$/$Cell phone bills: $$260$

Dining out & Entertainment: $$560$

Vacations $$1,600$

Monthly Contributions to Registered Savings Accounts:

Madison and John each contribute $$300$ per month their RRSP accounts.

Assets $($Joint$)$

Principal Residence: $$1,000,000$

SUV: $$28,000$

Chequing Account: $$18,000$

Savings Account: $($earning $2\%$ per year compounded annually$)$: $$240,000$

Debt $($Joint$)$

Mortgage: $$260,000$

Madison$$s Assets

TFSA: $$40,000($earning $2\%$ per year compounded annually$)$

RRSP $$120,000($earning $2\%$ per year compounded annually$)$

John$$s Assets:

TFSA: $$70,000($earning $2\%$ per year compounded annually$)$

RRSP: $$140,000($earning $2\%$ per year, compounded annually$)$

Assignment Instructions $$ Answer the following questions:

$1.$ As the Jones$$ Financial Planner, are they on the right track to reach their retirement goal? Using TVM Calculations, determine at the current savings rate how close to the goal of $1\mathrm{.}4$ million at retirement the clients are projected to achieve. $(3$ marks$)$

MODE:

p$/$Y:

c$/$Y:

N:

I$/$Y:

PV:

PMT:

FV:

$2.$ The Jones$$ are wondering what RRSP maturity option would provide them with flexibility and the ability to maintain control over how their funds are invested at retirement. Provide the Jones$$ with an overview on which RRSP maturity option would best fit their needs and why. $($Your response should be between $3-4$ sentences long$).(3$ marks$)$

$3.$ The Jones$$ have questions about CPP$.$ Provide a brief explanation on what CPP is and how one can be eligible for the maximum CPP benefit. $($Your response should be between $2-3$ sentences long$).(2$ marks$)$

$4.$ After reviewing the Jones$$ financial situation, provide a recommendation to the couple that would optimize their retirement goal plan. Be sure to elaborate on how your recommendation would help them with achieving their retirement goals. $($Your response should be between $4-6$ sentences long$).(4$ marks$)$

$5.$ In regards to saving for Rebecca$$s post secondary education, the Jones$$ mention that they would like to have $$38,000$ for Rebecca in $8$ years and are unsure what the best course of action would be$.$ Using relevant concepts from this course, provide the Jones$$ with a recommendation and explain how this could help them achieve this goal. $($Your response should be between $3-4$ sentences long$).(3$ marks$)$