John Gilbert Case Solution & Answer

John Gilbert Case Solution


Mr. John Gilbert was working as a Professor in Western University of London. In 2012, he came to the age of retirement; he was turning 65 years old. When he announced his retirement, the HR department of the university invited him to discuss the details of his pension and pension fund, they further wanted to know that what did Mr. Gilbert want to do with his pension fund. For taking the decision regarding pension fund, he consulted with his retired colleagues, who asked him that how much amount he would need for his expenses after retirement and how much income will he have after retirement other than pension to meet his expenses. Then he decided to estimate his income and expenditure after retirement, which gave him the figure of $63,470 as expenses.Whereas, for meeting the income taxes, he has have the income of $74,670.

Problem Statement

John Gilbert, a Western University professor, announced his retirement on June 2012. He needed a comprehensive investment and financial plan that would provide maximum outcomes,according to their lifestyle that would help him to meet his family expenses easily and live happily. Anne Samson, a retired colleague of Mr. Gilbert, suggested that he should make an estimated budget of his income and expenditures as well as an estimate of his assets. After estimating the required income, he should plan his investment according to his needs after retirement. He has to decide whether he should invest in debt or stock, or any other mix of securities.

Situational Analysis

The current financial situation of Mr. and Mrs. Gilbert reveals the assets amounting to $2,354,075, which comprise of pension fund, a condominium, a Cottage, securities and bank accounts balances. Now Mr. and Mrs. Gilbert have to decide that how should they invest the pension fund and how they will have to meet their expenses.

Budgeted Annual Expenditure

A detailed analysis has been performed, in order to analyze the John’s current financial position and his expected expenditures. He and his wife, Joan, planning to have a trip form Safari to Kenya in South Africa which is expensive. To fulfill this dream, they need more money than usual. Additionally, as Mr. John is going to retire on December 2012, he needs a comprehensive plan which will illustrate the expected expenditure and investment plan for living-better livelihood.

For the year 2013, their total expected expenditure would be $63,470, that does not include any heavy expected expense such as car purchase. It includes general expenses, maintenance expenses, health expense, condominium fees and other miscellaneous expenses. Furthermore, a detailed budgeted expenditure plan has been prepared by considering inflation of associated expenses for upcoming years. The traveling expense has been considered for the year 2013 that is 12,000, represents a wide margin but in the next years, this amount will not be required. (See appendix 1 and 2 for budgeted expenditure)

The total assets for the year 2012 are $2,354,075 including condominium and Grand bend cottage. (See appendix 3 for total assets).It also includes western pension funds, investment funds and saving accounts. Mr. John also considered that if he needs more money, he would have to get reverse mortgage for both of its properties of up to 40%. This loan will not require depositing-yearly interest.

Tax Planning

For calculating tax expense for the year, firstly there is a need to calculate total and taxable income for the year. (See appendix 4 for total income). Total income comprises on dividends received from stocks, returns received from bonds, pension fund withdrawal and old age benefits. Thus, this total comprises of John’s and Joan’s incomes. The total income for the year 2013 would be $82,022, which is greater than its total budgeted expenditure of the year 2013.

The prevailing tax rate is 15% which has been applied on the taxable income to calculate the total tax expense for the year. Total taxable income does not include old age benefits, because according to tax rules it is a ,deductible income. Thus, CPP and OAS payments will have been deducted. Total taxable income for the year 2013 is $61,502, which is less than $70,000. This figure makes Mr. John able to receive the OAS payments.(See appendix 4 for total taxable income)………………

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