Mike and Betty Gordon are both 66 years old. Mike will retire January 1from his position as
Question:
Mike and Betty Gordon are both 66 years old. Mike will retire January 1from his position as a professor of radical social thought. He will be eligiblefor a pension of $50,000 p.a., indexed to the Consumer Price Index. He willreceive maximum CPP, and is already receiving full OAS. He has $200,000invested in ethical mutual funds (adjusted cost base $150,000). Assume Mikewill receive about $5,000 in dividends from the mutual fund and $2,000 inrealized capital gains. Betty has no pension, but is receiving full OAS. Bettyhas $100,000 in a spousal RRSP, invested in Canada Trust GICs. They jointlyown a condominium in Toronto worth $250,000 (no mortgage). Their planneddonations for this year include $2,000 to registered charities, and $200 to aregistered federal political party. They have two children. One of the childrenis married, with three children of his own.
(a) How should they structure their retirement planning, both now and forthe rest of their retirement? There are some decisions they must makenow, and others that will have to be made within the next six years.
(b) What will be their marginal and average income tax rates? Assume thatthey take no payments from the RRSPs into income in this year and donot sell any mutual fund units. Other than that assumption, assume thatyou have done the best job of planning in (a). To do this question, youmust calculate taxable income for each one of them.
Fundamentals of Financial Management
ISBN: 978-0324664553
Concise 6th Edition
Authors: Eugene F. Brigham, Joel F. Houston