Sebastian and Samantha are 52 and 53 respectively. They have two children that have graduated from York University with a degree in Business Administration, specializing in finance. The children have now found jobs and will be moving out of their parents’ home in the near future. They would like to save $20,000 after-tax for each of their 2 kids to provide as a gift in 5 years to help them start their independent lives. They plan on saving a monthly amount from now, at the beginning of each period.

Now thinking about their empty nest, they are looking forward to retiring when Sebastian turns 60. They would like to be able to spend $65,000 before-tax total per annum for both of them during retirement. Sebastian will get government pensions of $20,000 before-tax and Samantha is entitled to a small pension of $10,000 before-tax in addition to her government pensions of $15,000 before-tax. They would like to set aside funds for this at the end of each year.

Sebastian has his own business and earns $200,000 per annum and paid tax and had other deductions of $95,000. Samantha temporarily left the work force and took care of the children. She has worked part-time here and there as a consultant in order to maintain her sanity. She earns on average $30,000 per annum from her part-time work and paid tax and other deductions of $9,000. Sebastian and Samantha are debt free.

They plan on saving for retirement in an RRSP earning a before-tax rate of 6% p.a. They currently have $170,000 set aside in their RRSP. They will save for their children in a non-registered account earning 5% after-tax p.a. Sebastian’s tax rate is 40% and Samantha’s is 20%. Assume they will live until Sebastian’s age 90.

1. Identify the family’s current stage of the life cycle based on the text reading and specify areas of high importance for them at this time. Explain why these areas are of high importance. Most marks will be allocated for the explanation.
2. Identify 2 financial goals stated in the case.
3. Calculate how much Sebastian and Samantha need to save for each goal based on their current plan.
4. Assume they can only save $400 monthly for the kids and $4,000 annually for retirement, suggest 4 alternative options they have to achieve their goals and show calculations for each option.  
5. Out of the four options you suggested, which would you recommend for each goal and why?