Solution: Delaying RRSP payouts can help make retirement at 60 a reality
Family Finance asked Caroline Nalbantoglu, head of CNal Financial Planning Ltd. in Montreal, to work with Nick and Helen. Each has $63,500 of space in their tax-free savings accounts. As the mortgages are paid, their cash flow will rise and they can contribute to TFSAs. Nick has $25,000 in his company’s bank account. However, because the company is not incorporated, it is his after-tax money. He should keep the money liquid in case they need emergency funds for spending or perhaps for servicing the rentals, Nalbantoglu suggests.
Helen contributes $250 per month to her RRSP. In eight years, assuming that she retires at the same time as Nick and with the same assumptions, her RRSP, with a $120,000 present balance would have appreciated to $178,700 in the following 15 years to her age 71, the account, with no further contributions but the same growth rate, will have grown to a value of $286,700 and support payouts of $16,430 per year to her age 95.
When the rental mortgages are paid off in full in nine years, the couple’s rental income will rise to $36,456. They can add Helen’s $34,000 job pension for nine more years until she is 65. That’s $70,456 per year.