Retirement Plan Assignment 15%

Sally and Mitch Long, both age 50 have come to see you, their financial planner to develop a retirement plan. Sally works full time at an Accounting Firm earning $55,000 a year after taxes and deductions and Mitch works full time as a Software Engineer earning $75,000 after taxes and deductions. The Longs have one daughter, Laura (15) who has dreams of becoming a Teacher and is planning to study at a University in Toronto while living at home, for which the couple plans to provide funding of approximately $60,000.

In addition, The Longs live in a house in Mississauga that is worth $1.2 million and has $160,000 remaining on the mortgage which they would like to pay off in 10 years. The Longs also share a five-year-old Hondo SUV that is valued at $26,000 and has no existing loan balance. Regarding retirement, the couple would like to retire at age 65 and want to ensure they are on track towards a comfortable retirement which would require the couple to have 2 million, combined in savings at age 65.

Please keep in mind the following:

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

The Longs have requested you to determine if theyre on the right path towards achieving their goals for Retirement and Education funding ? What recommendations can you provide them to optimize their financial plan ? During the meeting, the couple has provided you with the following information that better captures their current financial situation.

Monthly Expenses (Joint):

Mortgage Payment: $1400

Home maintenance: $100

Utilities: $300

Property Taxes $600

Auto Insurance: $200

Gas: $400

Auto maintenance: $200

Food: $1500

Clothing: $400

Internet/Cell phone bills: $300

Dining out & Entertainment: $350

Vacations $1,000

Monthly Contributions to Registered Savings Accounts:

RRSPs combined $500

RESPs $200

Assets (Joint):

Principal Residence: $1,200,000

Honda SUV: $26,000

Chequing Account: $50,000

Savings Account: (earning 2 % per year): $425,000

RESP for Laura: $45,000 (invested in a flexible GIC earning 2 % per year) based on $30,000 of contributions and $6,000 of CESGs to date

Debt (Joint)

Mortgage: $160,000

Sally Longs Assets:

TFSA: $65,000 (earning 2 % per year)

RRSP $125,000 (earning 2 % per year)

Mitch Longs Assets:

TFSA: $75,000 (earning 2 % per year)

RRSP: $155,000 (earning 2 % per year)

Assignment Instructions

As the Longs Financial Planner, are they on the right track to reach their retirement goal? Please ensure you fill in the TVM chart below, then using a TVM calculation, determine at the current savings rate how close to the goal of 2 million at retirement the clients are projected to be ? (5 marks)

MODE	P/Y	C/Y	N	I/Y	PV	PMT	FV
END

Using relevant concepts from the course, provide 5 recommendations to the Lees and explain why these recommendations would optimize their retirement plan, and /or, help provide for their goal of funding their daughter Lauras education. Each recommendation should be between 3-4 sentences long. (10 marks)

Recommendations: