What will be the before and after tax annual income

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Reference no: EM132162148

QUESTION - IAMBEST will be in the 46% marginal tax bracket for the next 35 years. Every year she expects to have savings of $5,000 from her take home pay. She will save everything of this by putting it in an RRSP. The money in RRSP will be invested in a diversified equity portfolio earning a before tax rate of return of 6% p.a. At the end of 35 years she will retire and will use all the money in her portfolio to buy a 25 year annuity earning a before tax rate of return of 5%

METOO will also be in the 46% marginal tax bracket. Every year he also expects to have savings of $5,000 from his take home pay. He has decided to invest his annual savings for 35 years outside an RRSP in a growth portfolio, growing at an annual rate of 10% per year. After 35 years he will also use all the money in his portfolio to buy a 25 years annuity earning a before tax rate of return of 5%. Assume that after retirement each one of them will be eligible to get maximum CPP 986.67 and OAS 544.98 per year.

What will be the before and after tax annual income for IAMBEST?

What will be the after tax annual income for METOO? Assume his average tax rate during retirement will be 32%.

Reference no: EM132162148

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