Calculate how much they will be able to save in non-registered investments each year until their retirement. This is Rose and Leonard's first look at a retirement plan. Will they be able to save enough to meet their retirement objectives or do they need to revisit some of their assumptions and plans?
Conventional wisdom states that retirees need 60 to 70% of their pre-retirement income after they retire. Prepare a retirement budget for Leonard and Rose for both the first 25 years before Leonard dies and the last 10 years after Leonard dies. Make some reasonable assumptions. The following are some of the choices they can make. You do not need to use them and you can make different choices.
a. Rose will sell the house and move to a condo after Leonard dies.
b. After Leonard dies, Rose will give up the car and take taxis, the train and rent cars as needed.
c. They will both take classes and will take up new hobbies in retirement.
d. They will not go on great cruises but want to have enough to visit their children if they do not live close.
e. Medical costs may very well increase. Certainly, like many people, they will take more vitamins and other supplements.
f. They now read the Globe and Mail. Might they subscribe to more newspapers, perhaps buy more books in retirement (or just use the library more)?
g. Will they still need life and disability insurance?
Leonard and Rose are not real people but they could be. The author has made assumptions about their preferences. You, the student, can now make some of your own assumptions. Be sure to state them and make the budget numbers realistic. If they can effectively income split in retirement, what percentage of their gross pre-retirement income do they need in retirement?
7. Investment planning. Outline an investment strategy which will give them a well-diversified investment portfolio for both their registered and non-registered assets, based on the outcome of the retirement plan and your recommendations from above. You are going to refer them to a col league who is licensed to sell securities to implement your strategy. In general, what types of securities should they be buying to meet their objectives? Since you are not licensed to sell securities, you cannot recommend specific investments. However, you can recommend categories, levels of acceptable risk and provide them some examples of securities which would meet their objectives and risk-tolerance.
8. Contingency plans. Evaluate a range of "what if" retirement planning scenarios in order to assess "best-case" and "worst-case" scenarios. For example, what if one of them becomes disabled, dies or loses his/her job? These should be brief, general considerations, not a detailed plan.