Couple thinking of cashing RRSPs warned: ‘Don’t count your chickens before they are hatched’ GlobeInvestor
JASON FRANSON/The Globe and Mail
If they cashed in their registered retirement savings plans and tax-free savings accounts now while Helen is still on parental leave, they could have their mortgage paid off completely in eight years, Justin writes in an e-mail. If they then redirected the money they had been paying on the mortgage to their TFSAs and non-registered investments, “would we have just as much, if not more, money than if we retained our current RRSPs?” he asks.
For the two situations to be comparable, the couple would have to continue with their current savings rate of $36,000 a year starting in 2020. These savings would go to their TFSAs and non-registered accounts rather than to RRSPs. As well, they would have to redirect the entire amount of their current mortgage payments, or $28,400 a year, to their annual savings once the mortgage has been paid off in full at Justin’s age 51.
“Justin and Helen should take into consideration that they would not reach their retirement spending goal if they could only bank on the pension entitlements they have earned to date,” Ms. Knoblach says. “My recommendation to them, therefore, is not to count their chickens before they’re hatched.”
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