Their concern is that taking on a larger mortgage might interfere with their ability to retire at the age of 65
Lynn and Wyatt would have to put saving on hold for the first two years as they renovate the new house and buy a used car.With two small children, Lynn and Wyatt are thinking of moving from their modest Toronto -area house to a larger one in a better school district.“We’ve been running the numbers for over a year now, looking at what we could afford,” Lynn writes in an e-mail. “We secured higher-paying jobs and got preapproved by our bank for a higher mortgage,” she adds.
How much will they have to save over their working lives to live comfortably and maintain their standard of living when they retire? They have a mortgage of $506,000, which will increase by $300,000 after the purchase of their new property. “They should expect a new monthly mortgage payment of about $4,400 a month, $1,400 higher than their current payments,” the planner says. These costs, plus renovations to their new house, will force Lynn and Wyatt to use existing savings and put their future savings on hold for two years.
Lynn should aim for a full contribution to a tax-free savings account as her top priority. Once the TFSA is maxed out, she could consider a small RRSP contribution. The TFSA will set her up for greater flexibility in the long run as it will be a pool of tax-free money. “As most ETFs are designed to track, not beat, the market, it’s important not to actively trade them because they are passive investment products,” Mr. Calvert says. “Staying disciplined, not selling into volatility, and adding capital at optimal entry points will be crucial for this type of portfolio over the long run.”
“The combined total of their retirement assets should put them in a position to fund their retirement gap without encroaching on their underlying capital,” the planner says.The Problem: Can they move to a larger house without jeopardizing their retirement goals?
Wyatt Lynn Pension Tfsa House Plan Rrsp Retirement Toronto Wyatt Lynn
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