Shelly, the superintendent of a local school board, will retire at the end of this school year when she turns 55. Her husband Tom plans to continue working for the next five years until he turns 65. The couple does not expect to draw income from their assets while Tom is still working. Once Tom retires, the couple estimates they will need $10,000 per month (before taxes, in todays dollars) in addition to their full Canada Pension Plan (CPP) retirement and Old Age Security (OAS) pensions for the remainder of Toms projected lifetime of 100 years. Shelly and Tom own their home, estimated to be worth $800,000 by the end of the year. They are selling their home upon Shellys retirement and investing the proceeds in a joint non registered investment account. Their monthly living expenses include their rental costs after selling their home. Tom has a federally regulated Locked-In Retirement Account (LIRA) valued at $98,000 and a Registered Retirement Savings Plan (RRSP) worth $600,000. He plans to continue contributing $20,000 to his RRSP annually at the beginning of the year until he retires. The couple has 70 percent of their investments in fixed income and 30 percent in equities, in preparation for retirement. Their average annual rate of return is 3.5%. Starting next year, Shellys defined benefit pension plan will provide a monthly benefit of $4,000, indexed to inflation. The couple is debt-free and has $15,000 set aside for emergencies. Based on a previous cash flow analysis, they expect to have $500 in surplus cash flow going forward until Tom retires. Tom expects to remain in the same tax bracket once he retires, while Shelly expects to be in a lower tax bracket once she begins receiving her pension. The couple would like some assurance that they are on track to meeting their retirement income goals. Assume CPP and OAS do not inflate.

a) If Tom begins drawing from a RRIF account at age 65, what would be his RRIF minimum withdrawal in his first year? How much will Shelly have in after-tax income when she retires? Assume she will have a 25% marginal tax bracket.

b) What additional step can Tom take to ensure more financial flexibility from his LIRA at retirement? What can Tom do with his RRSP funds at retirement if he wants to remove sequencing risk from his income plans? What income tax reduction opportunity(ies) are available to Shelly and Tom once they are both retired?

c) Will Shelly be subject to OAS clawback at retirement? Assume no income splitting. Show all your work.