Business Administration - Financial Planning RFC230 Lecture 4: 10 Lesson 3 & 4 Retirement Planning

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greenmuskrat329

8 Mar 2017

School

Seneca College

Department

Business Administration - Financial Planning

Course

Business Administration - Financial Planning RFC230

Professor

marysavona

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Document Summary

If you start receiving your pension in the first 6 months of the year, the amount will be reduced based on your income as per the tax return filed in the 2nd preceding taxation year. If you start receiving your pension in the last 6 months of the year, the amount will be reduced based on your income as per your tax return filed in the preceding taxation year. Example: oas payments beginning in january to june 2017 will be clawed back based on your income as per your 2015 tax return. Oas payments beginning in july to december 2016 will be clawed back based on your income as per your 2015 tax return. However, when your 2016 tax return is filed, the oas clawback is recalculated based on your 2016 tax return, so you may recover some of the tax. . 39 monthly from july 2016 through june 2017: instead of receiving her full basic oas of . 37 monthly,

Related Questions

home / study / questions and answers / business / finance / your friend john asks you for advice concerning ... Question Your friend John asks you for advice concerning life insurance. John is 40 years old and graduated from law school last year. He currently earn $43,000 per year as a first year attorney. John is married and has two children, Billy, age 12, and Sarah, age 4. John's wife, Mary, is a professor who currently earn $56,000 per year. Mary is 38 years old. John and Mary pay $1,700 per month for their home mortgage, which will be paid off in 15 years. The interest rate on their mortgage is 3.5%. (Their current equity in the home is $50,000) The couple owns two cars, both 8 years old, and personal property( such as cloths, electronic, furniture, etc) valued $35,000. Their investments have been used up paying for John's law school education, so they currently have only $1,000 in savings and checking accounts, and $2,000 in a mutual fund. John has no life insurance. Mary has $125,000 of life insurance provided by her employer. Mary' pension plus social security are expected to total $65,000 per year, beginning when she is 67 years old. If John should die, Mary would receive approximately $12,000 per year from social security until Billy reaches age 18, and $6,000 per year after that until Sarah reaches age 18. Mary'semployer subsidizes 75% of family' healthcare costs, so the family only pays about $3,000 per year out of pocket. John and Mary spend most of their current income, although they do try to save about $50 per month. Their investments earn approximately 4% per year. Inflation is currently rather low at about 2% per year, but John wonders if it will increase after the Federal Reserve stops their expansive monetary policy. In addition to their home mortgage, John makes student loan payment of $400 per month. He plans to pay back the loan in 4 years and the loan' interest rate is 6% per year. Given that Mary enjoys a flexible work schedule, and because Mary' mother lives close by and watches the kids two days per week, they currently are not paying any child care expenses. John is worried about what may happen to his family is he should die. He is considering the purchase of life insurance and asks your advice. question: Assuming neither John nor Mary will receive large inheritance, how much life insurance do you think John needs on his life? (Use the needs approach.) Show all calculation and explain your answer. Make any assumptions you believe are reasonable, and make sure your assumptions are clearly stated. Also indicate the type of insurance you would recommend, whole life or term, and explain why. If you select term insurance, indicate the number of years of coverage to purchase

orangewombat84

A cash-flow budget uses the same format as a cash-flowstatement. It is prepared on a monthly basis and it reflectsbudgeted income and expenses.

In addition to the cash-flow statement, Deon and May made a listof budget assumptions, listed for you here:

â¢	Deonâs income will increase by 5%, effective January 1. Hisbonus is generally 10% of his income in the previous year, and hereceives it in January.
â¢	Mayâs raise will be 3%, effective January 1.
â¢	Interest and dividend income will conservatively be the same in2017 as it was in 2016 and will be received on a monthlybasis.
â¢	Mortgage payments will be the same in 2017 as they were in2016.
â¢	Federal income taxes are estimated at 20%, state income taxesat 6%, and social security taxes at 7.65% of wages, includingDeonâs bonus.
â¢	Property insurance and property taxes are paid every sixmonths, in June and December. The amount is expected to be the samein 2017 as it was in 2016.
â¢	May will contribute $60 per week for the employee portion oftheir medical insurance. According to her pay schedule, April andJune are five-week months.
â¢	Auto insurance is paid at the end of each calendar quarter andshould not be more than it was in 2016.
â¢	Deon and May would like to purchase a new car in the next fewyears and will put $500 a month away specifically for thatpurpose.
â¢	Deon and May donât expect the amount of variable expenses tochange in 2017 except that they would like to double theircharitable contributions and go on a vacation to Ireland in June.The vacation will cost $6,000.
â¢	Gift purchases are made mostly around the holidays, so Deon andMay are planning to pay half of the gift expense in December andhalf in January when the credit card bill comes in.
â¢	Water and sewer is billed quarterly, in January, April, July,and October. The cost of heat should be spread over six months fromNovember to April.
â¢	All other variable expenses can be spread evenly every month at2016 amounts.

Use the information from their cash-flow statement (listed inthe first column of the following annual budget) and their budgetassumptions to fill in the missing amounts for the first six monthsof Deon and Mayâs monthly budget for 2017. Note: Be sure to fill inevery blank space with a value.

Annual Budget	Cash-Flow Statement	2017
Name: Deon and May Daley	Cash-Flow Statement	2017
	2016	Jan.	Feb.	Mar.	Apr.	May	Jun.
INCOME
Deonâs salary	59,000
Mayâs salary	53,100
Deonâs Bonus	5,000
Interest and dividends	150
Total Income	$117,250
EXPENDITURES
Fixed Expenses
Mortgage	14,976
Deonâs federal income taxes	12,800
Deonâs state income taxes	3,840
Deonâs social security taxes	4,896
Mayâs federal income taxes	10,620
Mayâs state income taxes	3,186
Mayâs social security taxes	4,062
Property taxes	4,100
Property insurance	1,200
Medical insurance	2,400
Automobile insurance and registration	700
Savings for auto purchase
Total Fixed Expenses	$62,780
Variable Expenses
Food	1,620
Entertainment	3,000
Dining out	4,700
Electric	350
Water and sewer	800
Heat	1,250
Cable TV	3,000
Telephone	600
Cell phone	900
Gifts	2,000
Personal care	600
Medical expenses	3,700
Vehicle gas and maintenance	2,530
Charitable contributions	1,500
Vacation
Total Variable Expenses	$26,550
Total Expenses	$89,330
SURPLUS (DEFICIT)	$27,920

Deon and May have an emergency fund of $40,000. They would liketo start saving for retirement, but they have not signed up fortheir companiesâ 401(k) plans. Neither company matches 401(k)contributions.

What do you suggest for Deon and May based on their goals andthe budget that they have put together?

The $40,000 that the Daleys have saved for an emergency is___three months of expenses. They have not, however, takenadvantage of the employer 401(k) plans that are available to them.If an employer does not match contributions, it is ____advantageousto contribute to a company-sponsored retirement savings planbecause the contributions to the plan are invested with___earnings. If the Daleys invest part of their surplus in their401(k) plans, they will save the designated amount plus another___of that amount because of the tax savings.