Reference no: EM133305745
Joe's mom, Betty, is 43 years old and is an operations manager. dreams of them retiring at 65. Joe's dad, John is 45 and is self-employed. They dream of retiring at 65 and living in Florida 6 months of the year but they are unsure of having enough income to cover their expenses. They both have a combined income of $125,000 and they want to start planning for retirement which is 20 years away.
Betty contributes $3,500 to her RRSP at the end of each year though she would want to contribute more. Her before-tax income based on her last pay raise was $52,000. John contributes on and off, whenever he can. He earns about $73,000 per year. His earnings has increased about 7% each year since opening the company 10 years ago. He expects this to continue increasing at the same rate until retirement. Betty has had a steady job and plans on staying at the same job until retirement. She expects a $5,000 pay increase per year until retirement.
When retired, the couple would like to cover their current annual expenses of $80,000. They anticipate that their expenses will go down to $70,000. John's father recently passed away and left John a beach house in Florida. The beach house will cost $2,000/month to maintain. John has to include this to his annual expenses.
They know they will receive OAS and CPP and that it will increase by about 2% each year. Betty and Johan have RRSP accounts currently valued at $20,000 and $47,800, respectively. Their RRSP will grow at an annual rate of 6% compounded annually from now until the end of their retirement.
They want to plan for retirement that lasts until Betty reaches 90.
They currently have a house which is $750,000 and a cottage in the Laurentians worth $350,000. Their dream is to move into their cottage on retirement for the warmer 6 months of the year. They both own cars currently worth about $10,000 each. Betty is considering whether she needs to have a car as her job is transitioning to being remote. She is wondering whether she should sell her car and put it towards investments. Betty also has a barbie collection that she has been valued at $15,000. Joe is a huge hockey fan and has been collecting hockey cards since his teenage years. His cards are worth $12,000. Also John & Betty want to make sure they leave Joe $500,000 in the event of them passing away.
1. Help Joe's parents by determining how much money they will have when retired to reach their retirement goals with detailed calculations.