Klara is 25 years old and is planning for her retirement. She wants to consider both...

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Klara is 25 years old and is planning for her retirement. She wants to consider both options of retiring at age 60 or at age 65, and has no savings into her RRSP yet. She figures she would like to earn in retirement the equivalent of $25,000 annually today. In retirement, she estimates the account would earn 4.35% compounded annually until age 82 before being depleted, all the while receiving end-of-month payments. She believes her RRSP can earn 8.4% compounded quarterly and she wants to grow her end-of-month contributions by 0.4% each. Supposing that annual inflation is expected to average 3%, what percentage larger will her first contribution be if she wants to retire at age 60 instead of age 65? Klara is 25 years old and is planning for her retirement. She wants to consider both options of retiring at age 60 or at age 65, and has no savings into her RRSP yet. She figures she would like to earn in retirement the equivalent of $25,000 annually today. In retirement, she estimates the account would earn 4.35% compounded annually until age 82 before being depleted, all the while receiving end-of-month payments. She believes her RRSP can earn 8.4% compounded quarterly and she wants to grow her end-of-month contributions by 0.4% each. Supposing that annual inflation is expected to average 3%, what percentage larger will her first contribution be if she wants to retire at age 60 instead of age 65?

Answer rating: 100% (QA)

We can begin by calculating the present value of the retirement income for both scenar... View the full answer