Stan is currently 35 years old. He is planning for his golden years, freedom 55! He would like to retire early so that he can sail around the world with his puppy. To fund his retirement lifestyle he will need $60,000 p.a. in real before-tax dollars from age 55 to 65. After that he will settle into the typical retirement lifestyle and only need $40,000 p.a. in real before-tax real dollars until age 95.

At age 65 he will be entitled to CPP Retirement of $1,200 a month and OAS of $614 a month, before tax. He has a defined contribution plan with his employer with a current value of $63,250. He currently contributes $5,000 per annum to this account and his employer matches the contribution at 60%. The account earns 3.5%. This will not change, even with raises in his income in future years.

His after-tax income is $101,000. In 2019 his pension adjustment was $8,000; in 2020 it was $9,000. He has unused room of $100,000. The annual dollar limits are: $26,500 in 2019 and $27,530 in 2020.

He has been saving in his RRSP. At this time the RRSP account has a balance of $32,000. He plans to save 5% of his income for the first 5 years, 7% for the next 10 years and kick it up to 15% for the last 5 years. He expects raises of 3% per annum until retirement.

Rates are as follows:

Before-tax rate of 2.35% during retirement

Before-tax rate before retirement of 4.95%

Average tax rate in retirement is 20%

Average tax rate before retirement is 35%

1. Calculate his RRSP contribution room for 2020. (3 marks)
2. How much does he need for retirement at age 55 to fund his lifestyle in real before-tax dollars? (7 marks)
3. How much will he have saved in real before-tax dollars at retirement based on his current savings plan in his RRSP and pension plan? (15 marks)