Retirement planning Assignment:

Case Joseph and Grace Magee

Joseph and Grace Magee are 38 years of age.

Both Joseph and Grace have been born and raised in Toronto, and have lived in Toronto their entire lives. The Magees met while attending the University of Toronto, in their fourth year. They were married three years later.

The Magees do not have any children.

Joseph and Grace have been married for 13 years.

Joseph and Grace are very concerned about saving for retirement. Both their parents are currently struggling to retire. Josephs parents are 63 and 65 and Graces parents are 60 and 65. Neither of their parents are in a financial position to retire yet. Thus, their concern with their own financial plan.

Josephs grandparents are still living and are well into their 90s; while Graces grandparents are deceased and they passed away between the ages of 70 to 80.

Their main concerns are:

1. They want to retire with enough income to live comfortably.

2. They want to ensure that should either of one of them passes away, the surviving spouse will have sufficient income to continue living a comfortable lifestyle; unlike their parents who are struggling to make ends meet.

Joseph is currently working for KPMG as an accountant earning $70,000 annually. He has been with KPMG for the past 13 years, and believes is job is fairly stable.

Grace is a teacher and works for the public school board earning $65,000 annually. Grace has been working as a fully time teacher for the past 7 years.

The Magees are excellent savers and they have been contributing to their RRSPs every year; $3,000 for Joseph and $2,000 for Grace.

Joseph has accumulated $18,000 in his RRSP account. This total was $25,000; however, there was a drop in the market, last quarter which caused the drop in his RRSPs.

Grace has accumulated $10,000 in her RRSP account. She has her RRSP savings in short term GICs. The Magees also have $8,000 each saved in their TFSA accounts

Magees	Joseph	Grace
Age	38	38
Salary	$70,000	$65,000
Type of Pension Plan	DBPP	DBPP
Annual Increases in salary	1.5%	2.5%
% of Pensionable Earnings per year of Service	2%	2%
Best 5 years at age 65	$85,700.	$80,300.
Years of Service	13	7
Indexing/CPI	3%	3%
Survivor Benefit	60%	65%
Returns before retirement	9.5%	8%
Returns after retirement	7%	7%

The Magees other assets consist of:

1. Savings $8,000

2. Home is worth $750,000, and they have a mortgage of $500,000 at a current rate of 5.75% which they just renewed for an additional 5 years.

Questions:

1. Retirement Assets Required? (Provide 3 scenarios (50% lowest amount, 75% middle amount, and 100% best case scenario amount). Calculate all three scenarios on an excel spreadsheet.

2. Based on your responses to question 1, How much savings will the Magees require if Inflations is considered? Calculate all three scenarios on an excel spreadsheet.

3. How much savings will the Magees require if they retire at age 60, 65, 70? (Based on your responses in questions #2)

i) Calculate all three scenarios on an excel spreadsheet.

ii) Which of the three scenarios is most realistic for the Magees to achieve and why? Give full details

4. What are some points that should be made to the Magees when presenting the above figures? 1.

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5. Calculate the following for both Joseph and Grace: (use excel spread sheet) i. Company Pension benefits for both Joseph and Grace, for the current year?

ii. Calculate the Pension Adjustment for both Joseph and Grace, for the current year.

iii. Calculate the Future Value of their Company Pension Plans at retirement.

iv. Calculate their RRSP contribution room, for the current year.

v. Calculate the future value of their RRSP at retirement.

vi. Calculate the future RRSP of their non-registered savings at retirement.

6. Based on the value of their Pensions, RRSP savings and non-registered savings, at what age will the Magees be able to retire? Give full detail, outlining the numbers, only using your calculator. Provide answers on excel spreadsheet.

7. What additional savings if any will the Magees require, to retire comfortably? Show calculations using excel spreadsheet.

8. What other sources of income may be available to the Magees at retirement? Explain each, including the tax implications

9. What steps can you take to help ensure that the Magees reach their retirement goals?

10. What actions could you take to standout to the Magees?