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.   Plus, there may be information contained in this case that you must address. So please read the entire case carefully. Personal Information –

Retirement Planning Case Study

W2022

 

  Due Date Graded out of :
Part 1 Sunday February 13th, 2022 5
Part 2 Sunday March 27th, 2022 8
Part 3 Wednesday April 13th, 2022 12
  TOTAL 25

 

Please submit each part of the assignment electronically to the appropriate drop-box on FOL by 11:59 pm on the due date.  Late penalty is 20% per day. Part 1 and Part 2 of the assignment MUST BE submitted in excel.  No word or PDF files will be accepted.

Part 3 of the assignment is a report to the clients and needs to be submitted in a word file.  Any tables needed for the report should also be included in the word file.  You will also need to submit your Excel files to support your work, so I can follow your logic.

Statement on Academic Offences:

This case study assignment is worth 25% of your grade in the course. It is an individual assignment and you cannot work with others on it. Your work must be original and cheating will not be tolerated.

Fanshawe College is committed to Academic Integrity. Academic offences are taken seriously and students are directed to read the appropriate policy, specifically, the definition of what constitutes an offence, at the following Web site: http://www.fanshawec.ca/about-fanshawe/corporate-information/policies/academic-policies

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.  

Plus, there may be information contained in this case that you must address. So please read the entire case carefully.

Personal Information As at 31 December 2021

Name Jamie Barker Janine Barker
Date of Birth January 1st, 1977 January 1st, 1977
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 2022 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 1999.  Janine is a member of their defined contribution pension.  Her current salary is $65,000 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 3 years of employment and will pay Jamie a 1.4% 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 3% of her salary to the pension plan and her employer matches.  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 65 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
Entertainment $325 Monthly
Jamie RRSP $275 Monthly
Janine RRSP $275 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 – $19,000

Janine RRSP – $26,000

Jamie LIRA – $9,200

Janine DC Pension – $41,000

Cars – $23,000

RRSP Carry Forward Room 2021 (amount to be carried forward to 2022)

Jamie – $139,000

Janine – $98,000

Appendix 3 – Historical Incomes

 

Year Jamie’s Age Janine’s Age Jamie’s Income Janine’s Income
1995 18 18 $10,000

 

$7,000
1996 19 19 $13,000 $9,000
1997 20 20 $15,000 $9,000
1998 21 21 $28,000 $9,000
1999 22 22 $33,000 $9,000
2000 23 23 $33,000 $9,000
2001 24 24 $38,000 $10,000
2002 25 25 $40,000 $15,000
2003 26 26 $44,000 $17,000
2004 27 27 $46,000 $20,000
2005 28 28 $48,000 $24,000
2006 29 29 $48,000 $28,000
2007 30 30 $49,500 $31,000
2008 31 31 $51,000 $32,000
2009 32 32 $51,000 $37,000
2010 33 33 $52,000 $40,000
2011 34 34 $54,000 $41,000
2012 35 35 $56,000 $45,000
2013 36 36 $56,000 $46,000
2014 37 37 $56,000 $47,000
2015 38 38 $57,000 $50,000
2016 39 39 $58,000 $52,000
2017 40 40 $59,000 $53,000
2018 41 41 $61,000 $54,000
2019 42 42 $63,000 $54,000
2020 43 43 $69,000 $57,000
2021 44 44 $71,000 $58,000

 

 

Appendix 4 –Monthly Retirement Expenditures (in today’s dollars)

Housing Maintenance – $400

Groceries – $975

Dining Out – $625

Hydro – $275

Heating – $100

Internet/Cable – $175

Gas – $200

Automobile Insurance – $255

Entertainment – $200

Vacation – $600

Memberships – $200

Gifts – $200

Home Insurance – $75

Property Tax – $400

Cell Phones – $100

Vehicle Maintenance – $200

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.

You will use Excel to complete parts 1, 2 & 3. But part 3 also includes a word doc file that must be submitted.

Complete this assignment in parts per the requirements listed below.

DO NOT START THE NEXT PART UNTIL YOU HAVE CORRECTED ALL THE ERRORS FROM THE PREVIOUS PART.

 

Part 1 (5 marks out of 25)

 

  1. Estimatethe CPP benefits that Jamie and Janine will receive when they are 65, (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 assumptions on future salary increases. You will also need to use the historical YMPE/YBE figures to complete.

 

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

 

  1. Estimate the value of Janine’s DCP plan when she  Be sure to state your assumptions and be sure they are reasonable.

 

 

Section Out of:
OAS estimate 10
CPP estimate 16
DB pension estimate 10
DC pension estimate 14
   
TOTAL 50

Part 2 (8 marks out of 25)

  1. Project until life expectancy the CPP and OAS income for Jamie and Janine.  At this point, don’t worry about the OAS claw back.
  2. Project until life expectancy the DB pension income for Jamie.
  3. Assume that Janine converts her DC pension at retirement to a LIF and project the income from it until life expectancy.  At this point, assume that she takes the minimum withdrawal amount.
  4. Calculate, and show, the RRSP contribution room for each of your clients from now until they retire. You must show the contribution limit (including the cap on the limit) pension adjustment and carry-forward for each year.  Their starting RRSP values are listed in the case.
  5. Calculate the total value in their individual RRSPs when they retire.  State what investments you will choose (asset category, not the specific investment) and what rate of return you will assume. It is important that you validate the rate of return used.
  6. Convert the RRSPs to RRIFs at retirement and show the minimum withdrawal amount each year.
  7. Develop a table that shows the expected total before-tax income for both Jamie and Janine from retirement to their expected deaths.

 

Evaluation Marks
CPP and OAS projection (before claw back) throughout retirement 4
DB pension income projection 4
LIF income projection 12
Annual RRSP Contribution Room 8
Pension Adjustment 8
Total RRSP Contribution Room 8
Future Value of RRSP Contributions 12
RRIF Minimum Withdrawal Amount Projection 12
Before-tax income Projection 8
Total 76

Part 3 (12 marks out of 25)

  1. Show the OAS claw back threshold for each year in future dollars.  Determine whether the OAS claw back will apply.
  2. Estimate income taxes using current federal and provincial tax brackets applied to taxable income. (Be sure to increase the income ranges for inflation).  Ignore surtaxes, credits and deductions but include the basic non-refundable tax credit.
  3. Develop a table that shows the expected total after-tax income, considering all sources, for your clients from retirement until their expected death. Compare this to their goal established in part 1 and show any shortfalls or surpluses.
  4. Prepare a list of recommendations for Jamie and Janine to assist in their retirement planning.  If they have a shortfall, describe what, if anything, can be done to eliminate it.  If they have a resulting surplus, advise them on appropriate strategies incorporating this expectation.  Be cognizant of taxes.  Please note the quality of your recommendations will be assessed.  Generic strategies will not receive full marks.  Recommendations should be supported with analysis and numbers.
  5. Assemble the 3 parts of this case study into 1 professional consolidated word document, using the following main sections:
    1. Executive Summary
    2. Retirement Goals and Objectives
    3. Summary of Expected Retirement Expenditures
    4. Summary of Expected Retirement Income Sources
      1. Government sources
      2. Employer sources
  • Private savings sources
  1. Summary of Expected Retirement Surplus or Shortfall
  2. Recommendations
  3. Appendix
  1. Remember to write your report to Jamie and Janine.  Your document should be extremely professional in nature and easy to understand.  Make use of the appendix to highlight detailed calculations and assumptions refer to these in your report so as not to confuse your clients. All necessary tables should be included in report or appendix.
Evaluation Marks
Executive Summary 4
Retirement Goals and Objectives 4
Summary of Expected Retirement Expenses 4
Summary of Expected Retirement Income Sources

– Government Sources

– Employer Sources

– Private Savings

 

8

4

12

Summary of Expected Retirement Surplus or Shortfall 8
Recommendations 24
Current and Recommended After Tax Retirement Income Table 16
Appendix 6
Professionalism 10
Total 100

 

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.   Plus, there may be information contained in this case that you must address. So please read the entire case carefully. Personal Information –
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