You have clients who are 30 and plan on retiring at the age of 60. They want to start their pension at the end of the year in which they turn 60. Based on family history, they believe they will live until the age of 85.
They are currently earning a combined annual income of $75,000 and their income will increase by 2.5% each year. They have calculated that their yearly pension during retirement is 70% of their salary that they earned in their last year of working.
Determine how much they must contribute at the end of each year in their Registered Retirement Savings Plan (RRSP) in order to have enough money in their Registered Retirement Savings Plan (RRIF).
They can expect to earn 4% on their RRSP and 1% on their RRIF.
Provide answers to the following:
- Salary at retirement
- Annual pension income
- Amount required in RRIF
- Amount required in RRSP
- Yearly RRSP contributions.
All work should be submitted in a Word document.