Retirement Planning Case Study

Retirement Planning Case Study

Part 1 of the assignment MUST BE submitted in excel only! NO WORD OR PDF FILES WILL BE ACCEPTED!

Please be advised that plagiarism will result in zero grading as well as failing in this course

The Case: Jamie and Janine Barker
Note: paper cases have significant limitations as they are simply black ink on white paper and not based on actual people. This case will attempt to give you a sense of who these people are, but you will still need to make some assumptions as you work toward an overall retirement solution for this family.
Personal Information – As at 31 December 2020
Name Jamie Barker Janine Barker
Date of Birth January 1st, 1976 January 1st, 1976
Smoking Status Non – Smoker Non- Smoker
Health In good health In good health
Pension Defined Benefit Defined Contribution

Employment
Jamie is a nurse at Victoria Hospital in London. Jamie started his current job on January 1st 2021 and expects to continue in this role until his retirement. His current salary is $86,000 per year. Jamie is a member of the HOOP pension plan and joined the pension when he started at Victoria Hospital.
Janine works for London Life in an office administration role. Janine has been employed by London Life ever since she graduated from the University of Waterloo in 1998. Janine is a member of their defined contribution pension. Her current salary is $62,000 per year.
Health
Jamie and Janine have always been quite healthy. However, last month Jamie had his annual physical and it was discovered that he has moderately high blood pressure. His doctor was quite concerned as Jamie’s family has a history of high blood pressure. His doctor has suggested that medication is not required right now; instead he has advised Jamie to begin an exercise program, at 3 times per week and to pay close attention to his eating and sleeping habits to reduce stress from his life. He is currently 6 feet tall and weighs 190 pounds. Jamie and Janine consider themselves non-smokers as Janine only occasionally smokes a cigarette during a girls-weekend away in Las Vegas twice a year.
Major Assets
Jamie and Janine jointly own a home in London, Ontario that was purchased for $450,000. The house is currently valued at $775,000. They have no intentions of moving and have a mortgage remaining of $310,000, that they expect to pay off over the next 15 years.
Jamie and Janine saved very little in retirement, as they believe the pensions they have through work will be enough to meet their retirement needs. See Appendix for asset values.

Pension Plans
Jamie is a member of his employer’s mandatory defined benefit pension plan. The plan is based on the average of the best 5 years of employment and will pay Jamie a 1.325% credit per year of service up to the YMPE and a 2% credit on the amount above the YMPE. The pension is indexed to inflation. The pension has a maximum of 35 years of service. The pension plan provides survivor benefits to Janine in the event of Jamie’s death. Janine will be entitled to a spousal pension worth 60% of Jamie’s pension at the time of his death.
Janine is a member of a Defined Contribution Pension Plan. She contributes 2% of her salary to the pension plan and her employer matches. Janine also makes optional contributions of 2%, that the employer matches at a rate of 50%. The plan is invested with a balanced mandate. Jamie and Janine both have a moderate risk tolerance.
Expenditures
Please see appendix for a list of expenditures that Jamie and Janine have provided.
Future
Jamie and Janine have had some discussions with family members who have told them they need to complete a retirement plan. They have decided they want to retire at age 62 and have provided you with a retirement budget in today’s dollars.

See the following pages for appendices. 
Appendix 1 – Jamie and Janine’s expenses
Jamie and Janine have not historically tracked their expenses well. They have provided details on specific items below but are looking for your assistance on what living expenses amount to for their rest of their current lifestyle. They have provided you with their gross salaries above.

Item Amount Frequency
Mortgage $1,500 Monthly
Property Tax $400 Monthly
RESP contributions $325 Monthly
Jamie RRSP $225 Monthly
Janine RRSP $225 Monthly
Groceries $1,100 Monthly
Heat/Hydro $300 Monthly
Insurance $400 Monthly
Cable/Internet $180 Monthly

Appendix 2 – Jamie and Janine’s Assets
House $775,000
Jamie RRSP – $14,000
Janine RRSP – $24,000
Jamie LIRA – $6,200
Janine DC Pension – $48,000
Savings – $1,400
Cars – $23,000
RRSP Carry Forward Room 2020
Jamie – $139,000
Janine – $98,000 
Appendix 3 – Historical Incomes

Year Jamie’s Age Janine’s Age Jamie’s Income Janine’s Income
1994 18 18 $10,000
$7,000
1995 19 19 $13,000 $9,000
1996 20 20 $15,000 $9,000
1997 21 21 $28,000 $9,000
1998 22 22 $33,000 $9,000
1999 23 23 $33,000 $9,000
2000 24 24 $38,000 $10,000
2001 25 25 $40,000 $15,000
2002 26 26 $44,000 $17,000
2003 27 27 $46,000 $20,000
2004 28 28 $48,000 $24,000
2005 29 29 $48,000 $28,000
2006 30 30 $49,500 $31,000
2007 31 31 $51,000 $32,000
2008 32 32 $51,000 $37,000
2009 33 33 $52,000 $40,000
2010 34 34 $54,000 $41,000
2011 35 35 $56,000 $45,000
2012 36 36 $56,000 $46,000
2013 37 37 $56,000 $47,000
2014 38 38 $57,000 $50,000
2015 39 39 $58,000 $52,000
2016 40 40 $59,000 $53,000
2017 41 41 $61,000 $54,000
2018 42 42 $63,000 $54,000
2019 43 43 $67,000 $55,000
2020 44 44 $69,000 $57,000

 

Appendix 4 –Monthly Retirement Expenditures (in today’s dollars)
Housing Maintenance – $300
Groceries – $975
Dining Out – $525
Hydro – $275
Heating – $100
Internet/Cable – $225
Gas – $250
Automobile Insurance – $255
Entertainment – $200
Vacation – $600
Memberships – $200
Gifts – $200
Home Insurance – $75
Property Tax – $400
Cell Phones – $120
Vehicle Maintenance – $275
Personal Care – 200
Medical – $300
Miscellaneous – $200 
ASSIGNMENT INSTRUCTIONS

Your role is as that of a retirement planner. Your objective is to help your clients organize themselves in order to do some financial planning. In the real world, you would do so with clear step by step communication. Details on their income, expenses, assets and liabilities are provided in appendices. Clearly state what assumptions you need to make to complete your assignment.

Complete this assignment in parts per the requirements listed below.

Part 1

a) Estimate the CPP benefits that Jamie and Janine will receive when they are 62, (calculate the ratio of earnings to YMPE) and the OAS benefits they will receive at age 65, in future dollars. Show your calculations and list any assumptions you are making. Hint: you will need to make an assumption on future salary increases. You will also need to use the historical YMPE/YBE figures to complete.

b) Determine the RPP annual pension income that Jamie will receive from his pension when he retires at age 62. Hint: remember to base the benefits on the future salary.

c) Estimate the value of Janine’s DCP plan when she retires. Be sure to state your assumptions.

Section Out of:
OAS estimate 10
CPP estimate 16
DB pension estimate 10
DC pension estimate 14

TOTAL 50