Finance
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Rob (64) and Ellen (63) were both born in Ontario and have lived their entire lives in Canada. Rob has worked for a small pharmaceutical firm situated in Mississauga for the past 30 years. Ellen is a long-time employee with the West Lake School Commission. Neither is a member of a registered pension plan, although Rob expects to qualify for the full Canada Pension, while Ellen expects to receive the Canadian average.
Rob is contemplating the couple’s retirement and is trying to "put their financial house in order" so that he can make sure that he and Ellen are properly prepared. He underwent a quadruple by-pass operation 8 years ago, while Ellen is a breast cancer survivor. But both appear in good health today, but have recognized that unexpected events can occur anytime, be it to their health or to their finances. Their two children are financially independent and in good health and they are the proud grandparents of a 1 and a 3-year old.
The couple has no debt, and the following assets (at approximate fair market value):
Home $ 400,000 Two vehicles 50,000
Non-registered financial assets:
Ellen Bank accounts 25,000 RBC Investment Account 125,000
Rob Bank accounts 12,000 RBC Investment Account 32,000 RRSPs
Ellen Bonds 75,000
Rob Bonds 72,000 Common shares 225,000 Canadian equity mutual fund 60,000
Question 1 (30 marks)
Assume that Rob and Ellen retire immediately and each opts to take the Canada Pension Plan right away. Further, assume:
- All government benefits are expected to grow at the rate of inflation, forecast at 2% per annum for the foreseeable future. - Their investment assets,