Asked by stephanie santacruz on May 09, 2024
Verified
Dean has already implemented the first stage of his financial plan. Over a 30-year period, he will continue to increase his annual year-end RRSP contributions by 2% per year. His initial contribution was $2,000. At the end of the 30 years, he will transfer the funds to an RRIF and begin end-of-month withdrawals that will increase at the rate of 1.8% compounded monthly for 25 years. Assume that his RRSP will earn 6% compounded annually and his RRIF will earn 3% compounded monthly. What will be the size of his initial RRIF withdrawal?
RRIF
Registered Retirement Income Fund, a tax-deferred retirement plan in Canada that an individual can use to generate income from the assets inside their Registered Retirement Savings Plan.
Compounded Annually
Interest calculated once a year on both the initial principal and the accumulated interest from previous periods.
Compounded Monthly
Interest on an investment or loan calculated and added to the principal balance monthly, where each month's interest calculation includes the previous month's interest.
- Comprehend the principles and uses of contributions to and the expansion of the Registered Retirement Savings Plan (RRSP) over periods.
- Compute the necessary initial input to reach a designated monetary objective in a predetermined period.
- Evaluate the economic viability and expense involved in acquiring indexed annuities with different compounding rates.
Verified Answer
Learning Objectives
- Comprehend the principles and uses of contributions to and the expansion of the Registered Retirement Savings Plan (RRSP) over periods.
- Compute the necessary initial input to reach a designated monetary objective in a predetermined period.
- Evaluate the economic viability and expense involved in acquiring indexed annuities with different compounding rates.
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