Kirk had accumulated $975 000 in his RRSP at the age of 55. He converted the RRSP into an RRIF at that time and started withdrawing $5000 at the beginning of each month. If interest is 4.5% compounded monthly, what is the size of his final withdrawal?

Question

Quizplus · Accepted Answer

The final withdrawal will be the present value of the remaining balance in the RRIF at the end of the withdrawal period. The present value of an annuity due can be calculated using the formula:PV = PMT * [1 - (1 + r)^-n] / rwhere:PMT is the monthly withdrawal amountr is the monthly interest raten is the number of months in the withdrawal periodIn this case, PMT = $5000, r = 4.5% / 12 = 0.375%, and n = 12 * (85 - 55) = 360.Plugging these values into the formula, we get:PV = $5000 * [1 - (1 + 0.00375)^-360] / 0.00375= $5000 * [1 - 0.2703] / 0.00375= $5000 * 0.7297 / 0.00375= $1739.27Therefore, the size of the final withdrawal is $1739.27.

Kirk Had Accumulated $975 000 in His RRSP at the Age