Aiden is 25, single and the proud owner of his first home, a half duplex in Alberta. He’s enjoying his second career job, earning $85,000 a year in public relations. He previously worked for the government.
Long term, Aiden wants to retire at age 55 with lifestyle spending higher than he has now and enjoy the good life – skiing in the winter, concerts and travelling. Some of Aiden’s mortgage interest is tax deductible because he rents out his legal basement suite, so this makes his cost of borrowing a bit less, Mr. Heath says. If Aiden thinks he can earn a higher rate of return investing in his TFSA than the borrowing rate on his mortgage, he may come out ahead by investing. “That said, the new normal of higher interest rates makes investing rather than debt repayment less compelling.
Once Aiden pays off his student loan later this year, he should consider directing at least some of his $1,000 of extra monthly cash flow to RRSP contributions, Mr. Heath says, “especially given he has a healthy TFSA balance of $30,000.” “The result is his investments are projected to be depleted by about age 87 and he may need to borrow about 10 per cent of his home equity by age 95,” Mr. Heath says. “Obviously, if he wants to significantly increase his spending to his $12,000 after-tax monthly target, he will have to work way past age 50.”
It depends...
Neither. He should donate more to charity.
Pay down that mortgage. 1 priority