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Thread: Mortgage savings vrs retirement savings.

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    Smart Canuck
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    ok. so ... I know I am simply over thinking this.. but I thought I would ask the hive mind...

    my husband job is stable. he has a rrsp. that we put money toward monthly.
    we also have a tfsa for me.

    and a mortgage that has 11.5 yrs left.


    we have a bit of room in the rrsp that we could then max that a bit. or we could put the amount to the mortgage an pay it off..
    however it would really only take 1 year off...


    so .. should we put the extra to retirement... and enjoy the power of compound interest... or try and be mortgage free sooner....
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    Mastermind Anna Michele's Avatar
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    Its def not over thinking i wish we were as prepared as you so ill follow for tips
    Last edited by Anna Michele; Thu, May 10th, 2018 at 07:05 AM.
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    the raise is not huge. however. I am a full believer in not letting money just get absorbed into the budget.. making every little dime work.

    and we are starting late to retirement.

    @MOrta gequeen any wise words of advice.
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    Contradiction in progress sweet sparrow's Avatar
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    There are so many avenues of debate on this.

    1. You could do both. Contribute to your RRSP and take your refund and put it on the mortgage.
    2. Put it on the mortgage for guaranteed savings.
    3. Put in the RRSP for future growth.

    There's no one right answer for everyone. I chose 2, because I hate owing money and it's guaranteed savings of whatever the mortgage rate is. If you put it in an RRSP, you would want to have an RRSP that yields more return than the interest rate on your mortgage. There's no guarantee on that. After the first year, I looked at the mortgage summary and saw that I paid as much in interest as we paid when we bought our two cars. I could have had two great cars. TWO! It was a harsh lesson in simple math that a little interest on a lot of money is a lot of money!

    Also, the amount on the mortgage can fluctuate if the interest rates go up so the amount you end up owing can be very different after 11 years and they're relatively low at the moment. What if it goes back to 5 or 6% within the 11 years? Will you be okay with that?

    Many people pick #1 because it's doing both at the same time. I find I get more done when I focus, so another reason why all our money went on #2. If you view both as a debt (RRSP repayment or mortgage). they always say tackle the debt with the highest interest first.

    We finally got rid of our mortgage, then moved to our RRSP. If you ask a financial advisor, the person would probably say RRSP if they make commission on your money.

    There's not really a wrong answer. All of them would put the money to work for you. There might be a better answer depending on your age, how much you have in your RRSP, how close you are to retirement, amount of risk you can take, etc. No one has a crystal ball but it really would be easy to know what to do if we did! Good luck!

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    Contradiction in progress sweet sparrow's Avatar
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    Quote Originally Posted by Giseledta View Post
    the raise is not huge. however. I am a full believer in not letting money just get absorbed into the budget.. making every little dime work.

    and we are starting late to retirement.
    If your mortgage would be extending into your retirement, I'd probably consider paying the mortgage first.
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    Mastermind Shwa Girl's Avatar
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    this is only one opinion
    Dave Ramsey says to put part of the money into retirement.
    he says to pay off the house early

    Dave Ramsey's baby steps

    • Baby Step 1 – $1,000 to start an Emergency Fund
    • Baby Step 2 – Pay off all debt
    • Baby Step 3 – Put 3 to 6 months of expenses in savings
    • Baby Step 4 – Invest 15% of household income into RRSP and/or TFSA
    • Baby Step 5 – College funding for children
    • Baby Step 6 – Pay off home early
    • Baby Step 7 – Build wealth and give!
    For a more in
    If you have a household income over 80000 per year, TFSA may better.
    If you have a household income less than 80000 per year, RRSP may be better

    Dave Ramsey says to contribute 15% towards retirement, but pay off the home early. According to him, a paid off house is a good 'insurance policy', since if you need to sell your home, you can bank the money and rent/move into a smaller place
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    Quote Originally Posted by sweet sparrow View Post
    If your mortgage would be extending into your retirement, I'd probably consider paying the mortgage first.
    nope paid off about 5 -7 years before retirement.
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    Quote Originally Posted by Shwa Girl View Post
    this is only one opinion
    Dave Ramsey says to put part of the money into retirement.
    he says to pay off the house early

    Dave Ramsey's baby steps


    If you have a household income over 80000 per year, TFSA may better.
    If you have a household income less than 80000 per year, RRSP may be better

    Dave Ramsey says to contribute 15% towards retirement, but pay off the home early. According to him, a paid off house is a good 'insurance policy', since if you need to sell your home, you can bank the money and rent/move into a smaller place
    love David ramsey. Love him.

    so much to think about .... hmmm...
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    I am a firm believer in financial plans. I would suggest getting one in place as you work towards retirement. This would include items such as this. For Fee plans are the most comprehensive. Stay away from banks as they just want to sell you their products. My 2-cents. Let the flaming begin.
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    I can't tell you what fits your situation but I can tell you what we did. Put the money in RRSP and the tax return on the mortgage. Paid off the mortgage and then focussed on retirement. Not having a mortgage has been a huge relief as DH has been unemployed for sometime but we have been mortgage free for 5 years so we have a nice cushion and I work full time. The risk now is rates are rising so getting out faster could be the better choice. We were watching interest rates drop for most of our mortgage.
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    thank you everyone for your help.
    I think I am going to put the extra into the retirement fund.. and refund will go to the house. the raise is not huge but I really do put every raise ect into something.

    Iam also reworkig a few things and thinking of how to put extra to the Mortgage. every little bit helps.
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    Contradiction in progress sweet sparrow's Avatar
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    Congratulations on the raise! I used to put the coupon savings on the mortgage, cash back apps, etc.
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    I am thinking of doing the same. cash back apps, and points I am really good at. Coupons.. I am very hit and miss. I would like to get better.
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    I agree with Lilo that having a paid of mortgage is a huge relief and oppotunity to save more in the RRSP later. One other thing that I don't think I saw mentioned-in case your husband should get a severance later on( downsizing etc) , some of it can be transferred based on your unused RRSP room. Several years ago I received a large severance of almost 2 years salary-I had faithfully pd into my RRSP every year and did not have any unused room to transfer part of the severance into. I wished I had saved some as it is always there for your use later( for eg when you pay off your mortgage and have an extra $1,000 per month). Instead I ended up paying about $50,000 in taxes-ouch!!
    Last edited by lizzie bargain; Wed, May 9th, 2018 at 09:26 AM.

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    Quote Originally Posted by lizzie bargain View Post
    I agree with Lilo that having a paid of mortgage is a huge relief and oppotunity to save more in the RRSP later. One other thing that I don't think I saw mentioned-in case your husband should get a severance later on( downsizing etc) , some of it can be transferred based on your unused RRSP room. Several years ago I received a large severance of almost 2 years salary-I had faithfully pd into my RRSP every year and did not have any unused room to transfer part of the severance into. I wished I had saved some as it is always there for your use later( for eg when you pay off your mortgage and have an extra $1,000 per month). Instead I ended up paying about $50,000 in taxes-ouch!!
    If you had deliberately paid less than the full amounts into your RRSP in previous years, you would have paid more tax for those years because your RRSP deductions would have been smaller.
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