Introduction & Background It is early 2022, when Jerome and Natasha, ages 48 and 45 respectively, come to you for some help with their financial planning. Even though they have always been cognizant of their financial position, they have found that, in the past few years, life has become so busy that they have sort of lost control. They know that they make good money but somehow, they find it hard to "stay afloat" in the last few years. Part of the reason for the loss of control of their finances, is that Natasha took a leave of absence to care for her terminally ill mother. During this 6-month period she was not earning any income and they had to use their line of credit to pay for some of their expenses. Natasha's mother has now passed away and she is ready to return to work. They look forward to "getting things back under control" this year as she returns to work and starts earning her regular income. Jerome and Natasha have been blessed with two children, Max, age 15 and Malcom, age 13. They are both rep hockey players, which represents a huge commitment, both from a time and financial perspective. IT is very important to Jerome and Natasha that the boys continue with their passion as long as they want to......it keeps them fit and provides them with self-esteem and confidence. Both boys are happy and healthy and play house league soccer in the summer to help keep them fit in the off season. Other than that, they both do well in school and love spending time with their friends. Looking ahead in the short term, Jerome and Natasha want to maximize their time with their children. They hope that they can spend more time as a family and make memories before the boys go off to university. Jerome and Natasha would like to pay for most of their kids post secondary education and they expect that they will go away for school. They would like to provide each of them with the equivalent of $15,000 (today) per year for each year of a four-year program. Max will leave in 3 years and Malcom will leave in 5 years. Other key goals include "enjoying life" now. Although they look ahead to the future, they want to make sure that they do not sacrifice everything today for a tomorrow that may never come. They are unsure how much they will need in retirement but would like to have an idea to make sure they are on track. Current Financial Position: Jerome is an engineer who is employed by a large utility firm for the last 20 years. He earns a salary of $155,000 per year. There is potential for a bonus based upon performance. He has just been advised that his bonus, for the 2021 year will be $10, 000, resulting in a net payment of $5,775 after taxes and all applicable deductions. This payment will be received in February 2022. He has full family health and dental coverage with his employer. Also, Jerome pays for his group long-term disability (with benefits of 60% of salary) and group life insurance on each pay. He has group life insurance coverage equal to two times his salary. He contributes 5% of his salary to a defined contribution pension plan which the employer matches in full. He has this invested in a moderate investment portfolio of funds provided by the DCPP and hopes to earn 5% in this fund. After the deduction of income taxes, CPP, EI and his DCPP contribution, Jerome's bi-weekly take home pay is $3671.54 for each pay. Once CPP and EI max out, at the end of April, due to the bonus payment, he will have a take home pay of $3842.54 per pay. Natasha works as a high school teacher and earns $102,000 per year. She is has group LTD (benefit is 60% of salary) and she pays the full premium. She also has an excellent health and dental plan and has employer provided life insurance of 1.5 times her salary. She contributes 12% of her salary to her defined benefit pension, she has 16 years of pensionable service to date with her employer. She pays union dues with each pay as well. Her take home pay after CPP, EI, DBPP contribution and union dues is $2,346 on a bi-weekly basis. Once she maxes out on CPP/EI, in September, her take home pay will increase to $2,517. Assets Jerome and Natasha own, as tenants in common, a 4-bedroom house, which they purchased 14 years ago at $600,000. They anticipate that the house has appreciated substantially in value based upon the housing market in their area and some minor value-added renovations that they did over past 6 years. They have just completed some major renovations, with a cost of over $200,000, some of which they put on a line of credit. This was their "out of pocket" cost since they received insurance monies last summer due to a major flood, which they also spent on the renovation. They received 2 appraisals recently and both agreed that the FMV of the house today is $1,400,000. They were happy with that since the FMV of the house went up by almost the same amount as they spent on the renovations. The current combined mortgage and home equity line of credit on the house is $647,000. They have a mortgage of $397,000 that is five-year fixed term, rate of 2.85%. It will come up for renewal in 12 months and has amortization period of 11 years remaining. They are currently paying $1,616.23 biweekly towards this debt. They also have $250,000 from the renovation and Natasha's time off to care for her mom on a secured line of credit. It has an interest rate of prime plus 0.50%. The minimum payment on the LOC is interest only. They have $50,000 more credit available on this LOC. They wonder if it is best to leave it as a line of credit or convert it to a conventional mortgage and how much they should pay down and when. They know that they should treat it like a formal loan since it was intended to be long term and only paying the interest is not going to pay down the debt. They own a SUV, 5 years old, that they own outright. They will keep it for 10 years. By then, they figure that the monies that they currently using for education savings and children's activities will fund the new vehicle. (Hint: no change in cash flows - just reallocate the funds from education/kids to vehicle). They lease another vehicle at $600 per month. At that time, they will likely lease another vehicle but, since kids will be gone, it will be smaller. They assume the lease payments will remain constant. Other than their clothing and personal assets (furniture/TVs/computers) there are no other substantial assets. Assume that all personal assets have a FMV of $16,000.

Investment Assets: (all values are as of December 31, 2021) Jerome has a RRSP with a FMV of $125,000 and is invested in blue chip dividend stocks. He has a group RRSP from his previous employer valued at $17,275 and it is invested in a bond fund. Jerome also has $1500 invested in cash in his TFSA. His DCPP has balance of $434,000 and is invested in a balanced portfolio of indexed linked mutual funds. His registered assets have provided an average rate of return of 5%. Natasha has a RRSP with a FMV of $62,201 and this is invested in a 3 year fixed rate GIC at a rate of 2%. This GIC will be coming due next month. She also has $20,000 in her TFSA that is invested in a high interest savings account earning 0.5%. This was a small inheritance that she received from her mother. Much of her mother's estate was used to pay for her care in her final years. Natasha is unsure of what she would like to do with this money. She is thinking a nice family vacation to Hawaii, as that was her mother's favourite place in the world. Jerome and Natasha have saved $85,625 in a family RESP for the girls' education as of December 31, 2021. Unfortunately, they had to scale back on their contributions during the time Natasha was off work. Based upon there previous contributions, they know they will not max out on the CESG for Max. They usually split their contributions evenly but think they should allocate more to Max in the next year or so. They have just restarted their contributions to the RESP now that Natasha is back to work and they are currently contribute $415 per month per month. Jerome has a non-registered investment account that has a FMV of $5,500. The shares held have an ACB of $2,200. He has a net-capital loss carry forward of $6,000 from a bad investment years ago. He is thinking of disposing of this asset but is unsure of the tax implications. Jerome and Natasha have a joint chequing account where their paycheques are deposited. They maintain a balance of approx. $4,000 in the account.

Liabilities: As mentioned above, they have a mortgage as listed above In addition to borrowing from their line of credit while Natasha was off looking after her mom, they also ran up some credit card debt. They have a Visa card where they are currently carrying a balance of $14,300. It has a credit limit of $20,000 and an interest rate of 19%. They are making the minimum monthly payments of $425. In addition, they also have a Mastercard with a balance of $6,200 and a limit of $10,000. This card has an interest rate of 19.9% and they are making minimum monthly payments of $186. They would like to pay more than the minimum payments, but they are unsure of what they can afford. They would like this debt paid off as quickly as possible.

Expenses: Before they came to see you, Jerome and Natasha tried to figure out exactly where they were spending their money. They have tried to help you by putting it into categories for you. Housing: They have mortgage payments as listed above and must account for payments on both LOC. Property taxes are $7,850 per year. The utilities for the house are $6,707 per year. Total insurance, including automobile, disability and life insurance, are $650 per month. They also calculate that they spend $1,000 per year on pool chemicals and maintenance. Automobiles: Insurance is included in the total insurance bill above. The lease on 2nd car is $600 per month. The total cost of gas per year is $6,400. Cost of parking per year is $1,500 as it is expensive for Jerome to park at his office. They estimate that Jerome's van requires maintenance of $75 per month. Household: Groceries are $9,500 per year and the cleaning lady is $2,400 per year. Fast food and restaurants are about $4,500 per year as they are on the road a lot with hockey. Internet/telephone and cable is $3,600 per year. Clothes are $6,000 and they make charitable donations of $1,000. Personal grooming is about $1,400 per year. Other miscellaneous expenses are $2,400 per year. Their family dog also brings them great joy but costs about $1,800 per year. Family: Jerome and Natasha usually take the family away on a trip at Christmas time. This is usually about $7,000. The hockey and soccer fees are usually about $12,000 per year for both boys. The boys will play hockey until they go to University and then they will give it up. Jerome belongs to a golf club and, since he has paid the full initiation, will spend $6,000 per year, which includes annual fees and meals and drinks. Financial: Since they both contribute to pensions, Jerome and Natasha stopped contributing to their RRSP while Natasha was off work. They hope to begin contributing again and they are hoping for your help to determine the amount they need and can afford. Other: Natasha calculates that, due to big family, she spends about $4,200 on Christmas/holiday gifts. Both Jerome and Natasha pay annual membership fees for the engineering and teaching certification bodies. Jerome's work pays for his membership fees of $1000 per year and Natasha pays $1,400 out of her own pocket. They wonder if there are any tax implications regarding these payments.

Risk Management: Jerome and Natasha have never maintained a formal emergency fund. Except for keeping part of a LOC available to them, and their cash balances in their bank accounts. They wonder if they need an emergency fund. As mentioned above, both have group life insurance at their place of employment. Jerome also has an individual life insurance policy, guaranteed renewable, convertible, term 10 policy with coverage for him of $500,000. It expires in January 2024. Jerome also has the coverage with his employer. Natasha has an individual life insurance policy, which gives her, individual life insurance policy, guaranteed renewable, convertible, term 10 policy for $500,000. It expires in January 2024. Natasha has 1.5 times her salary from her employer. The family life insurance policy also offers $10,000 in coverage for the children up until age 25. Jerome holds $25,000 in group term life insurance from his engineering body and $100,000 in personal accident and dismemberment coverage. Jerome tried to get more coverage through this offering, because the rates were good, but, was declined due to his ulcerative colitis. They are unsure if they have too much or too little insurance. Since they have so many friends who have died recently, they would rather be over-insured than under-insured. However, since the kids are getting a little older, they really just want to make sure that, upon one spouse's death, that all the liabilities are paid off (on date of death) and that they will replace $50,000 (after-tax) income, until they retire. They have sought some advice to get another term policy, perhaps a term 10 or term 20 because they know their debt went up during reno and they do not want to be forced to sell house if one should die soon. They are willing to do so if you think it is necessary. They ask your opinion on this.

Retirement Planning: Up until now, Jerome and Natasha have really just saved whatever they could in their RRSP. That was their strategy. Jerome has $120,000 of unused RRSP contribution room and Natasha has over $50,000. Since they have so much RRSP contribution room available, it is not necessary to calculate their RRSP limits for the future. Instead, they are looking for strategy for contributions going forward. To date, all contributions have really been made in an effort to minimize taxes, as opposed to meeting retirement goals. Jerome and Natasha hope that you can help them determine how much they will need in retirement. Looking ahead, they do not have much in the way of special plans for retirement... Jerome hopes to retire at age 65 and Natasha hopes to retire at age 62. Since Jerome's golf membership will be fully paid, with only annual dues of $6000 per year. They hope that, as retirement comes, Natasha can join also, she will pay $15,000 initiation and then $6,000 per year as well. They suspect that their medical expenses will go up by $3,000 per year since they will no longer have extended health coverage. Of course, by retirement they will no longer pay for hockey, education, debt reduction or saving for retirement. Jerome and Natasha suspect that, once the kids leave, they will dine out more so they figure that it is reasonable to leave the grocery bill at same level. The clothes expense will go down by 50% and they think that gifts will stay the same because they want to spoil their grandchildren. Once they hit retirement, they will only need one car. They want you to help them calculate how much they will need, per year, in retirement. And calculate the amount they will need to have on retirement date to meet this goal. They also want to know if it matters who earns the income in retirement. Natasha's pension will provide her with a benefit of 1.75% x best 5 years average x years of service. Assume that, by the time she retires, Natasha's average salary, with current employer, will be $110,000. Since there are government cutbacks, she does not want to assume that her salary will keep increasing by too much. They will both be eligible for maximum CPP and OAS at age 65. CPP will provide $15,000 per year (indexed for inflation). OAS will start at age 65 and will be $8,000 per year, indexed for inflation. For all other investments, assume the rate that was stated for the investment assets and a rate of inflation of 2%. You can assume a rate of return on their assets in retirement of 5%.

Taxation: Jerome and Natasha are not sophisticated when it comes to their taxes. They file their returns on a regular basis and usually get a small refund. However, they are worried that they have missed some things. They hope that you will review their tax returns for past few years but, in the meantime, want you to think of issues that they may be facing. Currently, Jerome has a Marginal tax rate of 48% and Natasha has a MTR of 40%. Their average tax rate in retirement is assumed to be 30%.

Estate Planning: Jerome and Natasha created wills and power of attorney shortly after the children were born. They have not been updated since that time. In the will, their assets will go to each other first and then pass to the children. For estate planning, their main goal is that they want the children to split the assets equally as they have ALWAYS been fair to both of them. They are wondering if their affairs are structured for efficient distribution to each other, in the event of an untimely death. They wonder if there are any ways that they can minimize the taxes/fees payable upon the death. They anticipate a life expectancy of age 90. If they have the good fortune of living to retirement, they suspect that they will have significant assets to pass to their children. They wonder if there are any ideas that they should consider ensuring the transfer of assets is efficient. Also, they wonder how they can minimize the tax implications on their estates to maximize the a

Calculate:

Retirement Planning Will they have enough money to retire?

Education Planning Analyze what the children will need, Compare to the savings the family will have and Recommendations

Life Insurance Analysis Needs analysis based on goals, Comparison to current coverage and Specific recommendations Long Term Disability Needs analysis and Recommendations

Other Insurance Needs analysis and Recommendations Investment Planning Analyze KYC info and provide a recommended asset allocation versus current asset allocation.

Estate planning Do they have Wills and POAs? Are they current?