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Rrsp Investment Funds document sample
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You invest for 40 years, either INside an RRSP or OUTside. Which is better?
Tax Rates INSIDE your RRSP OUTSIDE your RRSP MORE over here >>>>>
1 45.0% Available Money $10,000 Available Money $10,000 TOTAL years investing 40
2 45.0% Return on Investment 10.0% Return on Investment * 11.5% After 40 years, your portfolios are:
Inflation Years of Contributions 40 Years of Contributions 40 INsideRRSP: $4,425,926
2.0% Investment $10,000 Investment (after taxes) $5,500 OUTside RRSP: $3,673,173
Year INside portfolio Year OUTside portfolio Year If you withdraw funds from each
0 $0 0 $0 0 so as to last for 20
1 $10,000 1 $5,500 1 get (after-tax, in TODAY's dollars):
2 $21,000 2 $11,633 2 $129,494 from INside
3 $33,100 3 $18,470 3 $144,629 from OUTside
4 $46,410 4 $26,094 4
5 $61,051 5 $34,595 5 INside portfolio
$1,800,000
6 $77,156 6 $44,074 6
7 $94,872 7 $54,642 7 $1,600,000
8 $114,359 8 $66,426 8
9 $135,795 9 $79,565 9 $1,400,000
10 $159,374 10 $94,215 10 $1,200,000
11 $185,312 11 $110,550 11
12 $213,843 12 $128,763 12 $1,000,000
13 $245,227 13 $149,070 13
$800,000
14 $279,750 14 $171,714 14
15 $317,725 15 $196,961 15 $600,000
16 $359,497 16 $225,111 16
17 $405,447 17 $256,499 17 $400,000
18 $455,992 18 $291,496 18
$200,000
19 $511,591 19 $330,518 19
20 $572,750 20 $374,028 20 $0
21 $640,025 21 $422,541 21
0
5
22 $714,027 22 $476,633 22
23 $795,430 23 $536,946 23
24 $884,973 24 $604,195 24
25 $983,471 25 $679,177 25
26 $1,091,818 26 $762,783 26
27 $1,210,999 27 $856,003 27
28 $1,342,099 28 $959,943 28
29 $1,486,309 29 $1,075,837 29
30 $1,644,940 30 $1,205,058 30
31 $1,819,434 31 $1,349,140 31
32 $2,011,378 32 $1,509,791 32
33 $2,222,515 33 $1,688,917 33
34 $2,454,767 34 $1,888,642 34
35 $2,710,244 35 $2,111,336 35
36 $2,991,268 36 $2,359,639 36
37 $3,300,395 37 $2,636,498 37
38 $3,640,434 38 $2,945,195 38
39 $4,014,478 39 $3,289,393 39
40 $4,425,926 40 $3,673,173 40
Note: numbers in BLUE are in TODAY's dollars (after 40 years of investing)
ORE over here >>>>> ASSUMPTIONS: the money for investing
INside is not taxed. For the OUTside
investment it's $5,500/year: What's left after taxes! Years = 40
(It's assumed you start at the END of year 1.) Portfolios after 40 years
$4,425,926 $3,673,173
* If there are taxes on the OUTside investments, (during INside OUTside
years, you'll the investment phase) the "Return on Investment" should be after-tax.
from INside It's also assumed that taxes on OUTside
from OUTside funds are Capital Gains, hence you only
pay taxes on 75.0% of the Gains (or, equivalently,
INside portfolio OUTside portfolio your tax rate is only 75.0% of 45.0%).
If you want to change this 75.0% to something else
put it here: 75.0%
The annual withdrawals (from Inside and OUTside)
are given in TODAY's dollars (else you'll get too
excited about getting $100K /year which is only worth
$45,289 in TODAY's dollars!).
Note: Tax Rates 1 and 2, namely 45.0% and 45.0%, are before and after the annuity.
You may put any starting values into the Inside and OUTside portfolios, and
change stuff in a RED box.
If you rely on this spreadsheets for your financial health,
please take alternate medication.
10
15
20
25
30
See also: http://home.golden.net/~pjponzo/RRSP_IN_or_OUT.htm
Gain Factor 110.0% 111.5% 20-year Annuity (annual, in today's dollars, with 2% inflation and after taxes) vs Years of Investing
Inflation Factor = 2.208039664 $10.0K/year, either INside an RRSP (at 10.0% Return), or OUTside (at 11.5%).
(after 40 years) Tax Rate=45.0% while investing and 45.0% while withdrawing.
Years Your Portfolios INside
of Portfolio Portfolio $160,000
Investing INside OUTside
0 $0 $0 $140,000
1 $10,000 $5,500 20-year Annuity (annual, in
2 $21,000 $11,633 $120,000 today's dollars, with 2% inflation
3 $33,100 $18,470 and after taxes) vs Years of
4 $46,410 $26,094 $100,000
Investing $10.0K/year, either
5 $61,051 $34,595 INside an RRSP (at 10.0%
6 $77,156 $44,074 Return), or OUTside (at 11.5%).
$80,000 Tax Rate=45.0% while investing
7 $94,872 $54,642
8 $114,359 $66,426 and 45.0% while withdrawing.
$60,000
9 $135,795 $79,565
10 $159,374 $94,215
11 $185,312 $110,550 $40,000
12 $213,843 $128,763
13 $245,227 $149,070 $20,000
14 $279,750 $171,714
15 $317,725 $196,961 $0
16 $359,497 $225,111
12
15
18
21
0
3
6
9
17 $405,447 $256,499 Years of Investing
18 $455,992 $291,496
19 $511,591 $330,518
20 $572,750 $374,028
21 $640,025 $422,541
22 $714,027 $476,633
23 $795,430 $536,946
24 $884,973 $604,195
25 $983,471 $679,177
26 $1,091,818 $762,783
27 $1,210,999 $856,003
28 $1,342,099 $959,943
29 $1,486,309 $1,075,837
30 $1,644,940 $1,205,058
31 $1,819,434 $1,349,140
32 $2,011,378 $1,509,791
33 $2,222,515 $1,688,917
34 $2,454,767 $1,888,642
35 $2,710,244 $2,111,336
36 $2,991,268 $2,359,639
37 $3,300,395 $2,636,498
38 $3,640,434 $2,945,195
39 $4,014,478 $3,289,393
40 $4,425,926 $3,673,173
41 $0 $0
42 $0 $0
43 $0 $0
44 $0 $0
45 $0 $0
46 $0 $0
47 $0 $0
48 $0 $0
49 $0 $0
50 $0 $0
llars, with 2% inflation and after taxes) vs Years of Investing
at 10.0% Return), or OUTside (at 11.5%). Note: For the OUTside portfolio, your "Taxable Income" arises ONLY on the portion
45.0% while withdrawing. of your annual income which comes from the investment GAINS.
OUTside INside OUTside ... calculations !@#$%^
after-Tax nonTaxable Taxable Cap. Gains "Other" Total
Income Dollars Dollars Annuity Annuity Income
$0 $0 $0 $0 $0 $0
$293 $5,500 $0 $0 $713 $713
$614 $11,000 $633 $82 $1,427 $1,509
$968 $16,500 $1,970 $256 $2,140 $2,396
$1,358 $22,000 $4,094 $531 $2,854 $3,385
$1,786 $27,500 $7,095 $920 $3,567 $4,487
$2,257 $33,000 $11,074 $1,436 $4,280 $5,717
$2,776 $38,500 $16,142 $2,094 $4,994 $7,087
$3,346 $44,000 $22,426 $2,909 $5,707 $8,616
$3,973 $49,500 $30,065 $3,900 $6,420 $10,320
$4,663 $55,000 $39,215 $5,086 $7,134 $12,220
$5,422 $60,500 $50,050 $6,492 $7,847 $14,339
$6,257 $66,000 $62,763 $8,141 $8,561 $16,701
$7,175 $71,500 $77,570 $10,061 $9,274 $19,335
$8,185 $77,000 $94,714 $12,285 $9,987 $22,272
$9,296 $82,500 $114,461 $14,846 $10,701 $25,547
$10,518 $88,000 $137,111 $17,784 $11,414 $29,198
24
27
30
33
36
39
Years of Investing $11,863 $93,500 $162,999 $21,142 $12,127 $33,269
$13,341 $99,000 $192,496 $24,968 $12,841 $37,808
$14,968 $104,500 $226,018 $29,316 $13,554 $42,870
$16,758 $110,000 $264,028 $34,246 $14,268 $48,513
$18,726 $115,500 $307,041 $39,825 $14,981 $54,806
$20,891 $121,000 $355,633 $46,127 $15,694 $61,822
$23,273 $126,500 $410,446 $53,237 $16,408 $69,644
$25,893 $132,000 $472,195 $61,246 $17,121 $78,367
$28,774 $137,500 $541,677 $70,258 $17,834 $88,093
$31,944 $143,000 $619,783 $80,389 $18,548 $98,937
$35,431 $148,500 $707,503 $91,767 $19,261 $111,028
$39,267 $154,000 $805,943 $104,535 $19,975 $124,509
$43,486 $159,500 $916,337 $118,853 $20,688 $139,541
$48,128 $165,000 $1,040,058 $134,900 $21,401 $156,302
$53,233 $170,500 $1,178,640 $152,875 $22,115 $174,990
$58,849 $176,000 $1,333,791 $172,999 $22,828 $195,827
$65,026 $181,500 $1,507,417 $195,519 $23,541 $219,061
$71,822 $187,000 $1,701,642 $220,711 $24,255 $244,966
$79,296 $192,500 $1,918,836 $248,882 $24,968 $273,850
$87,518 $198,000 $2,161,639 $280,375 $25,682 $306,057
$96,563 $203,500 $2,432,998 $315,571 $26,395 $341,966
$106,512 $209,000 $2,736,195 $354,898 $27,108 $382,006
$117,456 $214,500 $3,074,893 $398,828 $27,822 $426,650
$129,494 $220,000 $3,453,173 $447,893 $28,535 $476,428
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
$0 $0 $0 $0 $0 $0
20-year Annuity (annual, in today's dollars, with 2% inflation and after taxes) vs Years of Investing $10.0K/year, either INside an RRSP (
NLY on the portion
OUTside SOME SORTA EXPLANATION:
Taxable after-Tax nonTaxable Dollars = (Annual after-tax investments)*(Number of Years)
Income Income Taxable Dollars = (Total portfolio) - (nonTaxable Dollars)
$0 $0 Cap. Gains Annuity = Annual annuity from Taxable Dollars = PMT(return rate, #years, -Taxable Dollars)
$438 $256 "Other" Annuity = Annual annuity from nonTaxable Dollars = PMT(return rate, #years, -nonTaxable Dollars)
$959 $537 Taxable Income = (Cap. Gains Annuity) + { ("Other" Annuity) - (total nonTaxable Dollars)/(YEARS OF ANNUITY PAYOUT) }
$1,571 $845
$2,285 $1,184
$3,112 $1,556 NOTE: the hard part (for me!) is not that ALL of the Capital Gains annuity is taxable,
$4,067 $1,967 it's WHAT portion of that "Other" Annuity is taxable?
$5,162 $2,421 Answer: All the "Gains" over the annuity payout are taxable.
$6,416 $2,921 So, you take: (total of annuity payments) - (total nonTaxable Dollars)
$7,845 $3,475 and you get the total gains (ALL of which are taxable).
$9,470 $4,087 Now the gain varies from year to year, but I have it on good authority (?) that, to get the ANNUAL
$11,314 $4,765 taxable amount, you can take this TOTAL gain and divide this by the number of YEARS OF ANNUITY PAYOUT.
$13,401 $5,515 The result?
$15,760 $6,348 It's: ("Other" Annuity) - (total nonTaxable Dollars)/(YEARS OF ANNUITY PAYOUT)
$18,422 $7,271
$21,422 $8,296
$24,798 $9,433 See also: http://home.golden.net/~pjponzo/RRSP_IN_or_OUT.htm
$28,594 $10,697
$32,858 $12,101
$37,645 $13,661
$43,013 $15,397
$49,031 $17,327
$55,772 $19,474
$63,319 $21,863
$71,767 $24,522
$81,218 $27,482
$91,787 $30,778
$103,603 $34,448
$116,809 $38,535
$131,566 $43,087
$148,052 $48,158
$166,465 $53,807
$187,027 $60,101
$209,986 $67,114
$235,616 $74,929
$264,225 $83,637
$296,157 $93,342
$331,791 $104,159
$371,556 $116,214
$415,925 $129,651 checking the math, after 40 years …
$465,428 $144,629 $3,673,173 portfolio $3,673,173
$0 $0 $220,000 nontaxable $220,000
$0 $0 $3,453,173 taxable $3,453,173
$0 $0 $447,893 cap gains annuity $447,893
$0 $0 $28,535 other annuity $28,535
$0 $0 $476,428 total income $476,428
$0 $0 $465,428 taxable income $465,428
$0 $0 $319,346 OUTside after tax: $319,346 $144,629
$0 $0 INside after tax $285,927 $129,494
$0 $0
$0 $0 INside > OUTside
if OUTside gain > 11.1%
or Withdrawal tax > 75.4%
ears of Investing $10.0K/year, either INside an RRSP (at 10.0% Return), or OUTside (at 11.5%). Tax Rate=45.0% while investing and 45.0% while withdrawing.
te, #years, -Taxable Dollars)
ate, #years, -nonTaxable Dollars)
xable Dollars)/(YEARS OF ANNUITY PAYOUT) }
to get the ANNUAL
of YEARS OF ANNUITY PAYOUT.
% while withdrawing.
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