Personal Finance

FINA 12

Personal Finance

Case Study

Yvonne and Murray live in a modest home in downtown Toronto that will be paid off in a few years.

He is 49, she is 45. Both have managerial jobs, with Yvonne making $96,000 a year and Murray $65,000. Neither has a company pension.

Their investment returns have been poor over the past few years so they worry about whether they will have enough money to retire.

“I fear that we will fall short,” Yvonne writes in an e-mail. They have some money to spare in their budget and wonder whether they should add to their registered investment portfolios or perhaps trade up to a larger home with a rental unit to supplement their retirement expenses.

“But that will involve more debt,” Yvonne writes. While she is concerned about investing so much of their savings in the stock market, she is worried as well about the alternatives. “With the financial crises all around the world, I’m not sure if now is a good time to buy real estate,” she says. Their goal is to retire in 16 years when Murray is 65 and Yvonne 61.

The people

Yvonne, 45, and Murray, 49.

The problem

How best to build their own personal pension plans – invest surplus funds in the stock market or buy a house with a rental unit.

The goal

A secure and comfortable retirement on target in 16 years.

Monthly net income

$9,240

Assets

Bank accounts $12,100; GICs, term deposits $48,000; stocks $38,000; TFSAs $21,500; her RRSP $163,000; his RRSP $116,300; home $540,000. Total: $938,900

Monthly disbursements

Mortgage $1,515; other housing costs $771; transportation $670; groceries, clothing $920; line of credit $40; gifts, charitable $135; vacation, travel $420; entertainment $350; dining out $225; club membership $126; personal discretionary $180; drugs, dentists, disability insurance $129; telecom, cable, Internet $255; RRSPs $1,742; TFSAs $200. Total: $7,678

Liabilities

Mortgage $56,433; line of credit $9,800. Total:...