Mark, 25, plans to put $6,500 per year in his RRSP until age 65. He plans...

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.

Answer:

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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jeff jeffy answered 1 year ago

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