Little confused about CFAI 2007 vs CFAI 2010 return requirements for INDIVIDUAL investors
In 2010, I see only Withdrawals being taxed. Asking for Nominal Pre-tax. Going thru the example it needs value of FV=2million in the TDA, PV=225 000, Invests Pre-tax savings = 12000 over 25 years.
Solving for i=7.05%. This would be the Nominal Before tax rate
In 2007, I see everything being given as pretax. The current pre-tax income need is 200 000. FV = 1M, N = 35, PV=4M.
Solving for i= 4.84%. Here the rate we find is the REAL required rate(Assuming Pre-tax Real Rate)
They then solve for nominal Pre-tax = 4.84% + inflation
Confused. When solving the second one I had the 4.84% as the nominal rate pre-tax rate as well. I just always assumed the Annuity type questions and given pre-tax payments were always just NOMINAL when solving for i.
One has a payment into the portfolio Pre-tax of 12000 and the second one withdraws from the account at 200 000 Pre-tax
Thanks, Much appreciated.