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Walter is 30 years old and plans to start making savings for his retirement a priority this year.
Walter is 30 years old and plans to start making savings for his retirement a priority this year. He currently has $10,000 in his RRSP and will contribute $6,000 per year to his RRSP, taking his tax refund and contributing it to the TFSA. Within the RRSP he plans to invest in a global equity fund, with an expected return of 9% per year and standard deviation of 11%. In the TFSA he will invest in Canadian balanced fund, which is expected to earn a 6%, return per year, with a historical standard deviation of 8%. His current marginal tax rate is 42%, which is expected to remain the same until retirement. In the year he retires he plans to withdraw the money in one lump sum, even though that will result in a 52% marginal tax rate.
What will be the balance of the TFSA?
