Financial Planning Review Prepared for Mark & Maria Green

Transcription

1 Financial Planning Review Prepared for Mark & Maria Green Prepared by: Lynne Myles PlanPlus Page 1 May 29, 2014

2 Table of Contents Financial Planning Review Process... 3 Your Planning Scorecard... 4 Net Worth Review... 5 Cash Flow Review... 6 Savings Review... 7 Debt Management Review... 8 Investment Portfolio Review... 9 Asset Allocation Review...10 Life Goals Retirement Strategy Review...11 Life Goals Retirement Strategy Behaviour Changes...13 Retirement Planning Life Goals Summary Your Strategy...14 Risk Management Life Insurance Review...16 Risk Management Disability Insurance Review...17 Other Risk Management Issues for Consideration...17 Appendix 1 Cash Flow Statement...18 Appendix B Net Worth...20 PlanPlus Page 2 May 29, 2014

3 Financial Planning Review Process This review will help to ensure that your personal financial plan is on track to achieve your long term goals and objectives. The process we use does a detailed comparison between where you are today with your position when we did the financial plan for you on January 1, When we measure your progress in this way, it provides us with the information we need in order to make adjustments and changes to ensure that you stay on track to achieve your goals and objectives. PlanPlus Page 3 May 29, 2014

4 Your Planning Scorecard On the following pages you ll see some detailed comparisons that identify your progress in various areas. The following is a snapshot view of your results in each key area we review Planning Component Results Net Worth Review Cash Flow Review Savings Review Debt Management Review Investment Portfolio Review Asset Allocation Review Life Goals Retirement Strategy Review Risk Management Review PlanPlus Page 4 May 29, 2014

5 Net Worth Review Your Net Worth it provides a benchmark to measure your financial progress from year to year. Ideally, in a perfect world we would like to see your assets always growing in value and your liabilities always reducing each year. However as we go through different phases of life there may be times when it s natural to see assets decrease or liabilities increase. The important thing is to always be aware of how your decisions will impact your overall financial position Description Jan/01/2013 Today $ Change % Change Total Assets $ 597,367 $ 659,470 $ 62, % Total Liabilities $ 160,000 $ 145,000 -$ 15, % Net Worth $ 437,367 $ 514,470 $ 77, % Your net worth has increased by over 17% since your last review. This is a result of new savings, debt reduction and the increase in the value of your assets. This is good progress in one year. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 5 May 29, 2014

6 Cash Flow Review Cash flow is the life blood of our financial lives. Changes to our cash flow will impact our lifestyles today and also our ability to achieve our goals for the future. During our accumulation years, before retirement, we generally like to see our income and savings increasing. Once in retirement it s more typical to see our income decrease and savings stop. We also know that after retirement our income needs to be supplemented by withdrawals from our accumulated savings Description Jan/01/2013 Today $ Change % Change Total Income $ 135,000 $ 159,748 $ 24, % Total Savings $ 10,000 $ 13,000 $ 3, % Income Taxes $ 30,623 $ 36,700 $ 6, % Living Expenses $ 94,377 $ 110,048 $ 15, % It's good to see your savings increasing faster than your living expenses. The only issue is that your savings have not increased to the level we agreed upon in your last review. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 6 May 29, 2014

7 Savings Review Another key aspect of improving our financial position is save more. Each year we set a target savings number and work with you to ensure that you achieve this level of savings. The following is a review of how you did since our last review Description Jan/01/2013 Today $ Change % Change Mark's Savings $ 5,000 $ 6,500 $ 1, % Maria's Savings $ 3,000 $ 4,000 $ 1, % Education Savings $ 2,000 $ 2,500 $ % Total Savings $ 10,000 $ 13,000 $ 3, % Your increase of 30% is good, nowever we agreed in our last review that you would increase your savings to $15,000 so you are off the target by $2,000. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 7 May 29, 2014

8 Debt Management Review One key aspect of improving our financial position is to reduce our outstanding liabilities. The following illustrates you re your liabilities have changed since your last review Description Interest Rate Renewal Date Jan/01/2013 Today $ Change % Change Personal Use Assets N/A N/A $ 160,000 $ 0 -$ 160, % Residence Mortgage - CIBC 5.00% Jan/01/2016 $ 0 $ 125,000 $ 125, % Car Loan - Toyota Canada 6.00% N/A $ 0 $ 12,000 $ 12, % Mastercard 18.00% N/A $ 0 $ 5,000 $ 5, % Sears Credit Card 28.00% N/A $ 0 $ 3,000 $ 3, % Total Liabilities $ 160,000 $ 145,000 -$ 15, % While your debt is coming down slowly, you have not done your annual mortgage prepayments for the past two years. We agreed this would be your strategy in order to have you debt eliminated by the time you retire. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 8 May 29, 2014

9 Investment Portfolio Review The change in the value of your investment portfolio is a function of a number of factors, the most obvious being the rate of return you earn on your investments. Another significant factor is new contributions or withdrawals you make from your investment accounts since these will often have the most significant impact in the short term on your account balances Description Jan/01/2013 Today $ Change % Change Mark's Investments $ 104,078 $ 124,970 $ 20, % Maria's Investments $ 128,289 $ 144,500 $ 16, % Total Investments $ 232,367 $ 269,470 $ 37, % Description Mark Registered Investments Non-Registered Investments Mark Tax Free Savings Account Registered Education Savings Maria Registered Investments Maria Tax Free Savings Account $ Change Since Last Review Jan/01/2013 Known Known Withdrawals Contributions $ Change From Growth % Change From Growth $ 9,502 $ 0 $ 5,000 $ 4, % $ 9,382 $ 0 $ 4,000 $ 5, % $ 5,213 $ 0 $ 4,500 $ % $ 2,971 $ 0 $ 2,500 $ % $ 4,822 $ 0 $ 3,500 $ 1, % $ 5,213 $ 0 $ 4,500 $ % Total Investments $ 37,103 $ 0 $ 24,000 $ 13, % When we look at your overall change in your investments it's 15.97%. However, when we recognize the known contributions that have gone into your various accounts since last year, the part of this increase attributable to investment is approximately 7.18%. In this economic environment and given your balanced portfolio, this is an excellent return. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 9 May 29, 2014

10 Asset Allocation Review Asset Class Current % Low Target High Variance Cash 10.50% 0.00% 5.00% % -5.50% Short-Term Fixed Income 24.40% 0.00% 15.00% % -9.40% Fixed Income 20.39% 0.00% 15.00% % -5.39% Canadian Equities 19.45% 0.00% 11.00% % -8.45% Canadian Small Cap Equities 6.03% 0.00% 7.00% % 0.97% US Equities 9.76% 0.00% 12.00% % 2.24% US Small Cap Equities 2.69% 0.00% 10.00% % 7.31% International Equities 2.61% 0.00% 10.00% % 7.39% Emerging Markets 0.80% 0.00% 10.00% % 9.20% Real Estate 3.37% 0.00% 5.00% % 1.63% While your portfolio is moving closer to your target asset allocation, we still have to work towards achieving these targets. As more of your locked in GIC's mature, we should be able to achieve these targets. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 10 May 29, 2014

11 Life Goals Retirement Strategy Review Each year when we review your plan, our first step is to do a current situation analysis to determine if your current behavior will allow you to achieve the goals you have identified. Our second step is to identify any behavior changes that fit within your personal parameters that will have a positive impact on your results. That modeled scenario then becomes your Life Goals Retirement Strategy. Below you ll see how your strategy has changed this year in comparison with the strategy that was identified during your last review. Description Your Goals Strategy Mar/14/2014 Change Mark - target retirement age Maria - target retirement age Target Retirement Income $ 70,000 $ 65,000 -$ 5,000 Goal: David's Education $ 14,288 $ 14,288 $ 0 Goal: Kitchen Renovations $ 20,000 $ 20,000 $ 0 Goal: Roof on House $ 10,000 $ 10,000 $ 0 Goal: Retirement Cruise $ 15,000 $ 0 -$ 15,000 Mark's Registered Retirement Savings $ 5,000 $ 5,000 $ 0 Maria's Registered Retirement Savings $ 2,500 $ 2,500 $ 0 Joint Open and TFSA Savings $ 1,500 $ 6,500 $ 5,000 Joint Open and TFSA Savings $ 1,500 $ 1,500 $ 0 Education Savings $ 1,250 $ 1,250 $ 0 Education Savings $ 1,250 $ 1,250 $ 0 Estate Surplus or (shortfall) in todays $ -$ 422,458 $ 11,339 $ 433,797 PlanPlus Page 11 May 29, 2014

12 As we determined last year, your goal to retire at age 55 with $70,000 of spendable income is not realistic given your current age and accumulated assets. The above strategy illustrates the need to work 3 years longer and reduce your overall all retirement goal to $65,000. Several other adjustments are also identified. I'd like to suggest that we change your goals to age 58 and $65,000 spendable income so that we have an achievable set of goals that are realistic. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 12 May 29, 2014

13 Life Goals Retirement Strategy Behaviour Changes Savings Current Situation Your Strategy Variance From To From To Amount Amount Year Year Year Year Mark's Annual Registered Savings $5, $5, $0 Maria's Annual Registered Savings $2, $2, $0 Mark's Open Savings $1, $6, $5,000 Maria's Open Savings $1, $1, $0 Mark - Education Savings $1, $1, $0 Maria - Education Savings $1, $1, $0 Age of Retirement Mark's Retirement Age Maria's Retirement Age Retirement Objectives Retirement Lifestyle (After Tax) $70, $65, $-5,000 Other Objectives David's Education $14, $14, $0 Kitchen Renovations $20, $20, $0 Roof on House $10, $10, $0 Retirement Cruise $15, $ $-15,000 Portfolio Returns Portfolio Rate of Return* 6.18% % % Based on the above strategy, there is a projected estate surplus of $11,339 in today's dollars or $88,011 in future dollars. PlanPlus Page 13 May 29, 2014

14 Retirement Planning Life Goals Summary Your Strategy $ Per Year Index Rate From (Year) To (Year) Present Value Age Age INFLOWS Salaries, Pensions & Other Revenues Mark's Salary 100, % ,651 Mark's CPP/QPP 8, % ,219 Mark's OAS 6, % ,339 Maria's Salary 50, % ,195 Maria's CPP/QPP 8, % ,148 Maria's OAS 6, % ,428 Mark's Pension 26, % ,128 Maria's Small Business 59, ,485 Mark's Whole Life Ins. 25, ,551 Education Savings % ,005 Total Salaries, Pensions & Other Revenues 2,292,149 Investment Income Mark's Investment Income 20,007 Mark's Dividend Income 1,120 Maria's Investment Income 10,257 Maria's Dividend Income 574 Total Investment Income 31,957 Withdrawals from Capital Mark's Registered Withdrawals ,428 Maria's Registered Withdrawals ,346 Education funds 47,693 Mark's Non-Registered Withdrawals 100,313 Mark's TFSA Withdrawals 89,604 Maria's Non-Registered Withdrawals 64,415 Maria's TFSA Withdrawals 80,307 Total Withdrawals From Capital 643,107 Total Income & Capital From All Sources 2,967,213 Taxes Payable Taxes Payable Mark 363,676 Taxes Payable Maria 110,333 Total Taxes Payable 474,009 Net Inflows 2,493,204 OUTFLOWS Savings Mark's RSP Savings 5, ,433 Maria's RSP Savings 2, ,860 Mark's Planned Open and TFSA Savings 6, ,235 Mark's Unplanned Other Savings 15,917 Maria's Planned Open and TFSA Savings 1, ,516 Mark Education savings 1, ,015 PlanPlus Page 14 May 29, 2014

15 Maria Education savings 1, ,015 Maria's Unplanned Other Savings 17,134 Mark's TFSA Savings 54,142 Maria's TFSA Savings 46,058 Total Savings 288,324 Life Goals Current Lifestyle 95, % ,473 Retirement Lifestyle (After Tax) 65, % ,404,329 David's Education 14, % ,620 Kitchen Renovations 20, % ,048 Roof on House 10, % ,070 Total Life Goals 2,193,540 Total Outflows 2,481,864 Estate Surplus 11,339 PlanPlus Page 15 May 29, 2014

16 Risk Management Life Insurance Review Life Insurance Needs Description Jan/01/2013 Today $ Change % Change Mark's Life Insurance Shortfall N/A $ 1,206,086 N/A N/A Maria's Life Insurance Shortfall N/A $ 1,323,588 N/A N/A PlanPlus Page 16 May 29, 2014

17 Risk Management Disability Insurance Review Disability Insurance Needs Description Jan/01/2013 Today $ Change % Change Mark's Disability Insurance Shortfall (Monthly) N/A $ 8,455 N/A N/A Maria's Disability Insurance Shortfall (Monthly) N/A $ 8,715 N/A N/A Other Risk Management Issues for Consideration In addition to the above needs on death or disability, risk management is an area that is often overlooked relative to other areas of potential risk To ensure that you are protected adequately you should review your other insurance coverage annually with a licensed insurance specialist. Home and Contents Insurance Auto Insurance Professional Liability Insurance Umbrella Liability Insurance and Identify Theft Insurance Critical Illness Insurance & Long Term Care Insurance Key Man and Buy Sell Insurance for Business Owners Last year I recommended both life and disability insurance to eliminate your shortfalls. To date you have not moved forward with these recommendations. We need to either put these important coverages into place, or look at reducing your goals for your family in the event of death or disability so that you have a good understanding of what the impact of death or disability will be on your family. Planning Scorecard Poor Fair Good Excellent PlanPlus Page 17 May 29, 2014

18 Appendix 1 Cash Flow Statement The following illustrates your cash flow for the current year. Over time your income, savings, taxes and expenses will fluctuate, however, this cash flow statement identifies your current situation. Mark Maria $/Mth $/Yr Cash Inflow Employment Income Salary 8,333 4,167 12, ,000 Investment Income Interest ,658 Dividends Total Inflows 8,536 4,369 12, ,874 Cash Outflow Family & Living Groceries ,000 Clothing ,000 Home Telephone ,200 Internet Services ,200 Cell Phones ,500 Cable/Satellite TV and Radio ,200 Housekeeping ,000 Personal Care ,400 Transportation Vehicle Payment ,600 Gas/Oil ,000 Repairs/Maintenance ,500 Car Insurance ,200 Public Transit/Parking ,000 Accommodation Mortgage Payment ,000 12,000 Property Taxes ,800 Utilities (Heat/Hydro/Water) ,600 Property Insurance Miscellaneous Housing ,400 Landscaping and Snow Removal ,200 Personal Expenditures Insurance Premiums (Life, Disability, etc.) Holidays/Vacations ,000 Gifts ,000 Entertainment/Dining Out ,500 Club memberships/dues ,800 Cash/Pocket Money ,400 Credit Card Payments ,000 12,000 PlanPlus Page 18 May 29, 2014

19 Miscellaneous Expenses ,400 Unallocated Expenses ,068 Hockey Expenses ,500 Savings & Reinvestment RRSP Contributions ,500 Other Savings ,000 Education Savings ,500 Reinvested Investment Income ,874 Taxes Taxes Payable 2, ,055 36,657 Net Outflows 7,284 5,621 12, ,874 Unallocated Cash Flow 0 0 Cash Flow Savings Analysis You have identified your current savings to be per annum. This represents % of your total family earned income of. Where Your Money Goes This is a picture of where your money goes, based on how we have interpreted the information that you provided to us. PlanPlus Page 19 May 29, 2014

20 Appendix B Net Worth Your net worth statement measures your financial position at a specific point in time. It also provides a benchmark from which you can measure your progress. Presently your net worth is $219,469 comprised of $659,469 of assets less $145,000 of liabilities. Assets Mark Maria Other Total Personal Use Assets 2010 Toyota Highlander $ 20, $ 20, $ 0.00 $ 40, Residence $ 175, $ 175, $ 0.00 $ 350, Total Personal Use Assets $ 195, $ 195, $ 0.00 $ 390, Business/Other Assets Maria's Small Business $ 0.00 $ 50, $ 0.00 $ 50, Total Business/Other Assets $ 0.00 $ 50, $ 0.00 $ 50, Registered Investments Acuity Canadian Equity Class F $ 15, $ 0.00 $ 0.00 $ 15, AGF US Value Class $ 6, $ 0.00 $ 0.00 $ 6, AGF Traditional Balanced $ 12, $ 0.00 $ 0.00 $ 12, Bond Portfolio $ 0.00 $ 17, $ 0.00 $ 17, AlarmForce Industries Inc. $ 0.00 $ 6, $ 0.00 $ 6, Royal Bank of Canada $ 0.00 $ 5, $ 0.00 $ 5, AGF Canadian Bond $ 26, $ 0.00 $ 0.00 $ 26, Acuity Pooled Canadian Balanced $ 6, $ 6, $ 0.00 $ 12, Total Registered Investments $ 67, $ 36, $ 0.00 $ 104, Non-Registered Investments Ethical Balanced Class F $ 15, $ 0.00 $ 0.00 $ 15, Ethical Balanced Class F $ 0.00 $ 15, $ 0.00 $ 15, AGF Global High Yield Bond $ 16, $ 16, $ 0.00 $ 33, Fidelity Canadian Growth Company Sr A $ 7, $ 7, $ 0.00 $ 14, AGF Canadian Money Market $ 6, $ 6, $ 0.00 $ 12, AGF Canadian Asset Allocation $ 9, $ 9, $ 0.00 $ 18, Desjardins Global Real Estate $ 2, $ 2, $ 0.00 $ 5, Total Non-Registered Investments $ 57, $ 57, $ 0.00 $ 115, Total Assets $ 319, $ 339, $ 0.00 $ 659, Liabilities Mark Maria Other Total Personal Use Liabilities Car Loan - Toyota Canada $ 6, $ 6, $ 0.00 $ 12, Residence Mortgage - CIBC $ 62, $ 62, $ 0.00 $ 125, Mastercard $ 2, $ 2, $ 0.00 $ 5, Sears Credit Card $ 1, $ 1, $ 0.00 $ 3, Total Personal Use Liabilities $ 72, $ 72, $ 0.00 $ 145, Total Liabilities $ 72, $ 72, $ 0.00 $ 145, Net Worth $ 247, $ 267, $ 0.00 $ 514, PlanPlus Page 20 May 29, 2014