Individual Final Project - Retirement Planning

This assignment will allow students to demonstrate their knowledge and application of personal finance planning. Personal finance planning includes finance management, risk management, investment, and

retirement planning

In the assignment, we continue working with Hung and May and help them plan their retirement. Hung and May just turned 55 this year. Both have been active and do daily exercise. Hung and May are both non-smokers and rarely drink. Hung's parents are healthy, and they are in their 80s. There are not lots of mental stress for him now. Hung started his own consulting business and had many challenges ten years

ago.The companv is now stable. and he has emplovees managing the client accounts most of the time

He only shows up in important meetings. May has worked for the same organization and is not planning to change until her retirement

When Hung's father died, his mother received his father's life insurance payout. His mother, Ann, paid off the mortgage balance and has a significant amount left to cover her retirement. Ann wanted to keep the house in memorv of her husband. but it was too much for her to take care of the propertv phvsically

and mentally as her husband had just passed away. She hesitated between selling or keeping the property Hung consulted with Mav and decided to purchase the property from his mother. They had Ann live with them and help them care for the kid, Long. Also, Ann would share the housing and living expenses as well.

It was the perfect solution for everyone. They were able to keep Hong's mother close and help her cope with the loss of her husband. Ann could help them with the kid and share living expenses. Now, Long is

26 and about to get married

Ann is in her late 80s, and she needs additional care. After consulting with Hung and May, Ann moved to

a retirement home in riorida to enjoy the warm weather. more importanti, she knows it wIll be too much

for Hung and May to take care of her once she is in her no-go years. Now, Hung has no one else to worr about their retirement. A few days ago, Hung called and left a message, and they wanted to check their financial stabilitv. Todav. they came to the meeting and informed vou that they would like to eniov their earlier retirement to travel. Even though they know that their house is too much space for them, they

want to keep it as Lone grew up there. Hung and Mav have so manv good memories. and he is considering

passing on the house to his grandchild as a heritage.

Hung wants to know whether Mav and himself can afford to keep the house financially without compromising their retirement funds. They are considering early retirement at age 60 but are unsure about their financial situation after retirement. For the last 40 years, both have lived in Canada and made the maximum CP contribution even after Hung Eric started his own business. When Hung left his firm and started his business, he had to give up his employer's pension plan. He received a lump sum payout of $50,000 after the income-taxed payout. Eric invested payout in his TSA accounts. May has been working for the same company for the last 25 years, and her company provides a defined-benefit pension plan. If May continues working for the company until her retirement, she will be eligible for a fixed monthly payment of S2,000 until her death. The pension income is fully taxable, fixed, and without inflation adjustment. Besides their CP contribution, They have invested with your firm using registered and non-registered tax-saving accounts. Last year, Hung paid off their 30-year mortgage, the last loan they owed. They are debt free and have $150,000 in savings in GIC, $250,000 in RRSP, and $250,000 in TFSA

They plan to leave the house as an estate to their grandchild. There are only five vears away for their retirement, and they want to know whether they can retire at age 60. They want to have the same lifestyle and have a budget of $9,000 per year for travel and leisure during the first five years of retirement. To plan their retirement, they have been thinking about purchasing a sunlite annuity, which needs a lump sum investment of $150,000 and receives $10,000 per year for the rest of their life. Please help Hung and

Mav analvze their retirement plan and find how much they need to retire at bU. Also. Hung has expressed

his early retirement to his management team and discussed the management buyout option, allowing his current management team to purchase his business for $250.000. The management team agrees to make five consecutive annual payments. Doing so will ease the company's cash flow and minimize Hung's income tax, as the $250,000 is fully taxable as a capital gain. Hung generates $100,000 in after-tax earnings. and Mav's atter-tax income is $55.000 annuallv. Please see the attached Exce tile tor additiona

financial information and assumptions

Required:

Calculate their life expectancy (5%)

Prepare their current net worth statement (10%

Prepare their retirement incomes budget (20%)

Prepare their retirement expenses budget 20%)

Prepare their retirement cash budget (20%)

Calculate the amount of retirement fund they need to retire 10%)

Calculate the financial gap between their current net worth and retirement fund (5%)