Mortgage or retirement? Where to get the most bang for your extra bucks
BNN Bloomberg
The question of whether to save for retirement or pay down mortgage debt is one of the most-asked questions by homeowners with some additional cash flow
Jennifer Woodfine is constantly wondering whether she should use any extra money to pay down her mortgage faster, or put it towards retirement savings instead.
“The question I always ask myself is, if I am putting away $10,000 a year for retirement, but paying more than $10,000 a year in interest on my mortgage, am I better off to put that $10,000 against my mortgage to pay if off faster, and then when the mortgage is paid off, increase my retirement contributions exponentially?” Woodfine said.
The 35-year-old project manager, who lives in Hamilton with her husband and two daughters, has been contributing that extra cash flow to Registered Retirement Savings Plan (RRSPs). Her husband contributes $4,000 annually to an RRSP and she contributes $6,000 a year through employee shares in an RRSP. They both began this habit at a young age, with Woodfine starting at 15.
“We were always taught to contribute to RRSPs for retirement planning and the tax benefit. My employee shares are matched at 60 per cent so I consider that a non-negotiable,” she said. Woodfine is also putting some money in Registered Education Savings Plans (RESPs) for her kids’ educations.
The question of whether to save for retirement or pay down mortgage debt is one of the most-asked questions by homeowners with some additional cash flow, said Ron Haik, a wealth advisor and client relationship manager at Nicola Wealth in Toronto.
For homeowners in a position to choose either to pay down a mortgage faster or further fund a retirement plan, Haik said the first goal should be to maximize your RRSP contributions with a goal of using the tax deduction toward your mortgage.
