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Mrs$.$ Investor $45$ will be in the $46\%$ marginal tax bracket for the next $20$ years. Every year she expects

to have savings of $$12,000$ 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 $7\%$ per year. At the end of $20$ 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 $6\%$ per year.

Mr$.$ Investor who is also $45$ will also be in the $46\%$ marginal tax bracket. Every year he also expects to

have savings of $$12,000$ from his take home pay. He has decided to invest his annual savings for $20$

years outside an RRSP in a growth portfolio, growing at an annual rate of $9\%$ per year. Of this $$12,000$

per year of savings, he will put $$5,500$ per year $($maximum allowed$)$ in a TFSA account. After $20$ 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 $6\%$ per year.

Assume that after retirement each one of them will be eligible to get maximum CPP and OAS per year

as stated in Table $17\mathrm{.}4.$

a$.$ What will be the before and after tax annual income for Mrs$.$ Investor? Use Ontario section of table

$17\mathrm{.}1$ to determine the average tax rate.

b$.$ What will be the after tax annual income for Mr$.$ Investor? Assume his average tax rate during

retirement will be $18\%.$

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