Question
Mark, 25, plans to put $6,500 per year in his RRSP until age 65. He plans to invest the money in an index fund that
Mark, 25, plans to put $6,500 per year in his RRSP until age 65. He plans to invest the money in an index fund that is expected to earn a rate of return of 8% per year. When he retires at 65, he will withdraw the money in one lump sum, and pay taxes at the rate of 45%. His friend recommends that he should put his money in a TFSA, invest in the same index fund, and will end up with more money at 65. His marginal tax rate before retirement is 30% throughout.
Required:
- How much money will he have at 65, after taxes, if he invests in the RRSP?
- How much money will he have after taxes if he invests in the TFSA?
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Option I If he invests in RRSP Period of investment 40 years 652540 Annual Investment 6500 Value of fund after 40 years Value of fun after 40 years 8 ...Get Instant Access to Expert-Tailored Solutions
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Financial Markets and Institutions
Authors: Anthony Saunders, Marcia Cornett
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9780077641849, 77861663, 77641841, 978-0077861667
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