Expert says their retirement plans are as complex as their family budget. Read on.
Their retirement plans are as complex as their family budget. Larry would like to retire in nine years at age 65. Sally would like to retire in five, at 57, when she can expect a pension from her provincial government employer. But that timeline for Sally is wishful thinking, as their mortgage will still have several more years to run before it is extinguished.
Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Larry and Sally. “The challenge is to avoid taking on too many costs,” he explains. Financial engineering of their total assets including their home will help. Their $500,000 home mortgage has ten years amortization left. Its present 2.15 per cent interest rate will rise when the mortgage note is renewed. To generate a higher after-tax return on savings and thus ease the pain of rising mortgage payments, Larry can make a spousal loan to Sally, let her make investments in her name and pay a lower tax rate.
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