Solution: Keep the life insurance until mortgage paid off and roll all savings into RRSPs, then retire
Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Scott and Mary.The couple’s goal is to retire as soon as possible, Mary from her job as a health-care professional, and Scott from his own IT consulting company. If Scott winds up his company, he could transfer $85,000 in retained earnings to his RRSP. There would have to be some taxes paid when money goes from the company ledger to dividends or wages, but there is a side benefit: the tax refund would be enough to pay off the remaining $29,576 home mortgage, Moran explains.
Their TFSAs, with a present balance of $41,000 including some investment gains, have $85,800 in combined contribution space. Once Mary hits 65, her CPP of $11,777 and OAS of $7,290 would boost their income to $64,305 per year, or $5,360 per month.