Rock Street, San Francisco

FINANCIAL PLANNING AND WEALTH MANAGEMENT

APPLIED PROJECT
CPL-5559

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Submitted To: Diana Oliveira

FPWT – 0056

SUBMITTED BY-
Navdeep Kaur (C0687396)
Daljeet Kaur (C0699887)
Gurpreet Kaur (C0705588)
Amrutha Lilly (C0690981)

Introduction
In this project, our client Darya’s family is thinking about creating a retirement plan. They contacted us to achieve their retirement goals. For this we identify the following:
• Each Investment Policy Statement item.
• Correct calculation of the required rate of return.
Amount to be invested for retirement
There is a rise in Darya’s salary is \$35,558 from the second job. All this money after-tax they want to be invested towards their retirement as well as considering the risk tolerance of the investor. The following are some calculation has been shown below:
RETURN OBJECTIVE:
• Calculation of Future Value of the fund:
Darya’s Age= 32 years
She wants to save till retirement, i.e., 65 – 32 = 33 years
(Assuming Darya will take retirement at the age of 65)
The annual rate of return from investment in the fund= 3.84% over the past ten years.
Present value (PV)= \$35,558
Annual contributions (PMT)= \$35,558
The rate of interest = 3.84%
Number of years (N)= 33 years
Future value (FV)= \$1,275,039.67
• Calculation of monthly retirement:
The following is the calculation for the number of years they will be using the fund
Life expectancy in Canada – Age of Retirement
= 82.30 years – 65 years
= 17.30 years
The amount that they will get from the fund
= Future Value of the Fund/ Number of years of use of fund
=\$1,275,039.67 / 17.30 years
= \$73,702 (Approx.) per annum
Therefore, the yearly retirement fund = \$73,702 (Approx.)
(Presuming the way that they are not reinvesting this money after retirement and are keeping this in a financial balance to be utilized for their residual life)
Based on the above calculations the investment in the fund will give them with a yearly retirement wage of \$73,702 which is \$6,142 per month approximately.
The present value of the above calculated monthly pension
Future amount of contributions from the fund on maturity after 33 years is \$73,702 (Calculated above).
Maturity period = 33 years
Present value = \$38,342 (Approx.)
Present value of pension per month from the fund= \$38,342/12 months
Therefore, the present value of pension fund per month = \$3,195 (approx.)
Conclusion: The present estimation of every month future pension amounts demonstrates that the value probably won’t be adequate for the financial survival of the couple after retirement, in this way they should think about putting their money in different assets with better performance.
Risk Tolerance:
Darya’s family is in the first stage, and she is looking to save money for their retirement. She can take the medium risk. She can afford investments in the riskier class like equities. In these investments she has the highest rate of returns. When we analyze this fund “Natixis Canadian bond fund – series F “having low-risk volatility and the low-risk rating it meaning low return. When we consider their objective, they need high profits from their investment.
Liquidity preference:
Now, at this age, Darya and her family want to save some money for their retirement, and they don’t have any requirement to spend money in any investment because the couple is near to retirement age, so their liquidity is not a constraint. So, they are concentrated in long-term liquidity preferences. When analyzing this fund, it can be used for short-term liquidity, but also for long-term fixed income and preservation of capital.
Life expectancy:
According to the statistical record in 2018, people of Canada life expectancy is 82.50 years. Generally, in Canada, men’s life expectancy is less than women. Darya’s family is about 32-34 years before retirement. She has 17.30 years to save money after retirement.
Time horizon:
Darya’s family have a long-term horizon for investment. At that time, she has 30years for investment after the age of retirement she has 17.30 years for saving. That is enough period to save money for the future.
Tax status:
Since their investment is in the non-registered account, so they’re all capital gains are going to be taxable at 50% of their marginal tax rate. In the equity fund, if there are any dividend funds, then their income going to be taxed at grossed up value as per the Canadian rules.
Legal and any other constraints:
There are two aspects we are considering in this liquidity and taxation. As we discussed the cash and tax status above, the fund has a long-term liquidity position, and for the tax, it will have 50 % of taxable for capital gain. The following explains below:
• Liquidity: To get a considerable profit from their investment, they must contribute their cash for a significant period and trust that the store will perform and create reserves fundamental for retirement.
• Taxation: Taxation is a process to collect money from people by their earning or property by their investment and use that for government purpose.
Special Needs:
The couple should also try to save money for disability as no one knows when the impairment occurs and save for long-term diseases that may arise in future which need a lot of money for treatment.
Suitability of the fund and Final Recommendation
Darya’s family looking to save money for their retirement and both are young. She has a long-term horizon and medium risk tolerance. Therefore, she must consider about investing all their retirement savings in a low-risk fund “Natixis Canadian Bond Fund-Series F.”

The Fund seeks after a steady flow of income while saving capital basically through investment in Canadian fixed income securities. The Fund may contribute up to 50% of the expense of its net resources in foreign securities. The Manager has evaluated the volatility of this Fund as low. The yearly compounded return of the Series F units of the Fund was 3.84% during recent years. The investors are the individuals who ought to consider this Fund on the off chance that they are looking for moderate longer term settled income returns with an emphasis on protection of capital. No business charges apply to this series of the Fund, and you don’t pay these expenses directly. As of December 31, 2017, the Fund’s costs were 0.88% of its value. This equivalents \$8.80 for each \$1,000 invested.

( Natixis Investment Managers Canada LP, 2018)
Conclusion
From the above analysis, we conclude that by changing their investments in both the funds the couple would have the ability to develop the estimation of their retirement fund to a satisfactory level as required for the smooth life after retirement.

References