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Retirement Planning Case Assignment – Professional Essay Writing Service


Retirement Planning Case Assignment

We have completed the review of the elements in the retirement planning process. We will conclude Part I with a case assignment, which requires you to apply what they have learned so far.

Chapter 1 shows how the savings needs of Margot and Craig were identified, and how Francesca, their

financial planner, estimated their retirement savings needs and how much they would need to save each year. To do so, Francesca has done a number of calculations:

1. How much they need after tax.

2. How much this is before tax assuming they are able to perfectly split their retirement income. This also

provides their average tax rate in retirement.

3. The present value at retirement of their annual retirement income.

4. The present value at retirement of government and employer-sponsored pension plans.

5. The future value at retirement of their present RRSP balances.

6. The future value at retirement of the amount they plan to save each year.

Having completed Chapters 2 to 7, students are now ready to prepare their own financial plan.



You have recently been awarded the CFP designation. This is the first retirement plan that you will work on independently (or as a group of up to five individuals). You have met with the clients, Rose and Leonard and have come away with the following information. As is the case with real clients, the information may be incomplete or unclear. Your clients will respond to the best of their ability. Like real clients, they may not know the answers to all of your questions so you will need to make assumptions. You must clearly state assumptions in your final report in your final report to the clients.  Use generic rates throughout your analysis and refer to the OMERS defined benefit information (Ch. 4) for details on the defined benefit pension plans.

Background Information

Leonard and Rose Domino
, both
age 52
, have been married for 15 years. They live in London, Ontario.

Leonard and Rose have one child, Charlotte age 13.  The Dominos came to see you in early January 2014 and provided you with the following information.

Employment Information

works as a chartered accountant with a large insurance company in London. His income was $172,000 (including his $24,000 performance bonus) for 2013 and has been that for several years. He expects his income will remain about the same in real terms until retirement, although there is a possibility that his salary will fall by $24,000 if he does not receive his annual bonus. There is a defined benefit pension plan at the firm. Leonard has been in the plan for 7 years. In aIDition, Leonard contributes the maximum possible to his RRSP every year, although he is confused because he has only had about $600 of contribution room for the last few years. The firm has a group insurance plan ???????? a benefits package that provides him with life insurance coverage for twice his annual income after expenses, short-term disability coverage, as well as an extended health care for his family. He pays the premium of $155 a month for family coverage. This amount is not tax deductible for him. In aIDition, Leonard pays, at work, $960 p.a. in long-term disability insurance premiums which would provide him with 2/3 of his base salary should he become totally disabled. Because Leonard pays the premiums which are not tax deductible, the 2/3 would be received as non-taxable income.

works as a manager for the City of Cambridge. She has worked for the city for 23 years. Her gross annual salary for 2013 was $91,000. She has been getting regular raises that reflect the increase in the cost of living, but in $ real, her salary has been this for a few years and she expects it to remain unchanged in real terms until retirement. Rose also has group insurance which pays extended health care, disability benefits and life insurance equal to her gross salary. Her employer pays the premiums and the taxable benefit portion of the amount paid by her employer is $1,750 a year. She is also a member of a defined benefit pension plan.

Assets and Liabilities

Liquid Assets

The Dominos pay their household bills and everyday expenses from their joint chequing account, which has a current balance of $14,200. They view the large balance in the chequing account as an ???????emergency fund??????? should anything happen that requires quick access to cash. The chequing account pays 0.25% interest annually.

They both opened Tax Free Savings Accounts in January 2013 and are making monthly deposits of $400 each. They both have the TFSA funds invested in equity mutual funds that they hope will generate 6% annually
. (This is before inflation- you will need to determine an appropriate inflation rate, if you feel you need one.) Leonard has $30,000 in GICs that mature equally over the next 5 years (i.e $6,000 yearly). Leonard does not plan to use these until retirement, so he will continue to invest in a new 5-year GIC each time a GIC matures. He earns 2.5% on his GICs.


Non-Registered Investment Assets

They have a joint balanced mutual fund account that has $250,000 in it. They are putting $4,000 into this account each month, and plan to do so until they retire. These funds are currently earning 6% nominal. Rose and Leonard plan on purchasing a new truck in June 2014 for $40,000 and will use some of the funds for that purpose.

Leonard has $60,000 in non registered mutual funds that he earns 6% on. They are in an aggressive growth mutual fund sold by the bank. He does not intend to aID to this fund or use it, unless there is an emergency.

Leonard????????s RRSP Investment Assets

Leonard currently has $80,000 in his personal RRSP, which is invested in a Canadian equity fund. He has contributed the maximum possible each year in his personal RRSP, but lately, his contribution room has been $600. These contributions are made from the bank account at tax time. He is fairly knowledgeable about investing and the score from his investor profile questionnaire categorizes him as an ???????aggressive growth??????? investor. He has no unused contribution room.

Leonard has $30,000 in a locked in RSP from a previous employer. He has never really thought about this money, since it is locked-in. It is sitting in a cash account at his brokerage.

For simplicity, you can assume that Leonard????????s DB pension follows the OMERS pension plan outlined in the text in Chapter 4.

Rose????????s RRSP Investment Assets

Rose considers herself a relatively conservative investor and the score from her investor profile questionnaire categorizes her as an ???????income and moderate growth??????? investor. She has been with the City for 23 years and has been a member of OMERS for the entire time. She took some time off when Charlotte was born, but she bought back all of her pension credits. She has been able to contribute the maximum possible each February and currently has $63,000 in her RRSP invested in a Canadian dividend fund earning 5% a year.

For simplicity, you can assume that Leonard????????s DB pension follows the OMERS pension plan outlined in the text in Chapter 4.

Personal Use Assets

principal residence
is valued at $265,000 and the house is held in joint tenancy by Leonard and Rose.

Household contents
are valued at $75,000 while their clothes are estimated to be worth $35,000. Rose has a 2-year-old
, which is worth approximately $24,000. Leonard has a 4-year old car that is valued at $11,000. Both cars are paid off. They are considering the purchase of a third automobile, a $40,000 truck that Rose and Leonard will use to pull their trailer when they go camping.

Short-term Liabilities

Leonard and Rose each have a
with an interest rate of 18.25% p.a.

They currently have a balance of $4,205 and always pay off the outstanding balance each month. (So, they will pay $4,205 this month).

Long-term Liabilities

Rose and Leonard bought have no long-term liabilities.


Leonard and Rose Domino are not good about tracking their expenses, but in response to your questions, they have provided the following estimates,  in aIDition to those mentioned above.

expenses in 2013 were: $2,799 for property taxes, $2,302 for heat, hydro and water, $612 in home insurance premiums and $1,100 for home maintenance.

expenses were $1,790 for automobile maintenance and licence, $2,980 for gas and oil, and $2,724 p.a. for insurance premiums.


, personal care, beer and wine are currently about $18,000. Leonard and Rose go out often, to

the movies and dinners.  

They spent about $4,800 on the family recreational activities and allowances to Charlotte, $1,500

for gifts, $500 for charitable donations, while clothing was $1,275 in 2013. Other costs were $700 a year on the garden, $370 on the Globe and Mail, $400 for miscellaneous computer expenses and $1,867 for all their cell phones, land lines, Internet service and cable.

Child-care expenses
were $5,000 in 2013. (costs for sports and music lessons, clothing, etc )

While they expect Charlotte will get a part-time job when the time is appropriate, Leonard and Rose are expecting that this cost will remain pretty constant until they retire.

The family spent $5,500 on a
this year. Rose and Leonard feel that it is important to travel with Carlotte and want to budget for a $5,000-$7,000 vacation every other year. (But not this year because they plan to buy a truck)

In 2013, they spent $800 on furniture and small appliances and expect to do so in the future.

In response to your question about priorities, they say their current level of spending reflects their

family????????s priorities and life-style choices. They are not, for instance, willing to get rid of their vacations or decrease their donations in order to save more for their retirement.

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