You are an experienced financial planner, specializing in retirement planning. You have recently been hired by Bill and Betty Brown to prepare a comprehensive financial plan for them. This afternoon you are scheduled to meet with Bill & Betty at your office. Prior to today you have only talked to the Browns virtually on Zoom. Below are your notes from that Zoom meeting.

BACKGROUND

Bill is age 63 and Betty is age 56.

Both Bill and Betty are both working. Betty earned a gross income of $100,000 last year as a Payroll Manager for a large retail clothing company. Bill works as a studio musician (part-time) and earns approximately $24,000 per year. Bill has never worked full time and is not motivated to start working full time at this point in his life. He is happy just to play his music and help take care of his grandchild. The tax expense and payroll deduction total $24,000 for the year (for Bill and Betty together).

Both Bill and Betty indicated that they are in good health (with a life expectancy to age 90)

Bill & Betty have two children:

Bobby, age 23. Bobby is a full-time student at Ontario Tech University. Bobby currently lives with his parents. He plans on moving into his own apartment when he graduates next year. Bobby pays for his own tuition and books.

Gail, age 26. Gail works for the Ontario government as a Human Resources Supervisor and is married to Stewart Smith. Gail and Stewart rent an apartment in Markham, Ontario and have a six-year old child, named Brian.

CLIENTS GOALS & OBJECTIVES

Both Bill and Betty wish to retire in approximately 2 years, when Bill is 65 years old. (December 31, 2025).

In retirement, one of the clients goals is to ensure that their total family income is equal to their retirement expenses. Therefore, one of their key retirement goals is to ensure that they do not run out of money in retirement. However, the Browns are not very good at managing their money and have never prepared a formal budget to monitor and control their spending.

Ideally, the Browns would like to be debt-free when they retire. There are additional notes about this goal in the Retirement Planning Section of this case.

Your clients want their investment portfolios to earn an average rate of return of 6% for 2023-24.

Your clients also wish to ensure that all applicable tax planning/income splitting strategies are included in the financial plan and implemented as soon as the financial plan has been completed.

Bill and Betty want to ensure that their disabled grandson will be taken care of financially when he reaches age 60.

Bill and Betty want to ensure that they provide funding for college/university tuition for any future grandchildren.

Bill and Betty want to ensure that there is an orderly and tax-efficient transfer of their assets to their beneficiaries when they die.

CASE ASSUMPTIONS

Rate of return is 6% (before tax) on the investment accounts.

Your clients are expected to live to age 90.

When they retire in 2 years, your clients intend to sell their principal residence (currently valued at $850,000) and they will downsize to a condominium valued at $450,000.

Your clients will apply for, and begin to receive, applicable government pension payments when each of them reach age of 65.

Bill will start to collect OAS and CPP in 2 years, when he reaches age 65. Bill will receive $1,000 per month, in total, from the government, starting at age 65.

Betty is a member of her Employers Pension Plan. Betty is required to contribute $1,000 per month to her Employers Pension Plan. Betty will be eligible to start receiving monthly income from her Employer Pension Plan in 2 years. She expects to receive $5,000 per month (before deductions) from her Employer Pension Plan when she retires in 2 years.

Your calculations should ignore inflation.

Part A-CASH FLOW STATEMENT

Use the following information to complete the Cash Flow Statement below:

Income

As discussed above.

Expenses

The Browns expect their total expenses for 2022 to be $10,625 per month.

Included in their total expenses are the following:

The Browns budget for 2 trips to Europe, per year, for a total cost of $6,000 for the year for both of them.

In 2018, the Browns took up sailing as a hobby and they now rent a large sailboat each summer. Sailing has added a large cost ($7,500 in total each year) to the Browns budget, in addition to the 2 trips to Europe mentioned above.

Additional monthly costs in October 2022 for the Browns are listed below:

House-related expenses such as heat, water, Property Taxes. Etc.)	$600/month
Food & household items	$700/month
Cars Lease/gas/car insurance/car maintenance	$1,500/month
Debt Repayment (Visa ($500 per month and a Line of Credit ($1,100 per month)	$1,600/month
RRSP Contributions-Betty $600/month and Bill $200/month)	$800/month
Entertainment (Restaurants, etc.)	$700/Month
Miscellaneous Expenses	$600/month