# 2009 Morning Section question 1

In the answer key, they took the difference of \$80k and \$125k, which is \$45k and adjusted it back for pre-tax which becomes \$56 250, I understand this part. But why did they not also adjust the \$100 000 that will be withdrawn to pay for the mortgage back for pre tax. Which will be \$125 000.

whystudy Wrote: ------------------------------------------------------- > In the answer key, they took the difference of > \$80k and \$125k, which is \$45k and adjusted it back > for pre-tax which becomes \$56 250, I understand > this part. > > But why did they not also adjust the \$100 000 that > will be withdrawn to pay for the mortgage back for > pre tax. Which will be \$125 000. The question says " If they retire at age 60, they plan to pay off their mortgage and associated taxes by withdrawing CAD 100,000 from their portfolio upon retirement.". CAD100k is the total withdraw from the portfolio. The mortgage payoff probably only need CAD80k, so the additional CAD20k withdraw takes care of the associated taxes.

Im with you whystudy…well not the why study part… The question also states `Briscoe expects a tax rate of 20% to apply to all withdrawals` Lets look at this statement, *If they retire at age 60, they plan to pay off their mortgage and associated taxes by withdrawing CAD 100,000 from their portfolio upon retirement." How are we supposed to know that the `associated taxes` comment refers to taxes on the withdrawal and not some other tax associated with the re-payment of a mortgage. I dont think the question makes it abundantly clear.