Strong RRSP savings will help this pensionless couple get to their $90,000-a-year retirement goal

Solution: Follow priorities, save for RESPs and build wealth in three decades to retirement

“We would like to optimize our mix of savings and debt payments,” Mel explains. “Our goal is to have $90,000 in annual pre-tax income when we retire in twenty years.” The current mortgage loan rate is 3.14 per cent for 11 years, so the adjustment would save them 1.96 per cent. That’s a 30 per cent cut in the student loan interest rate. Even with the additional cost of the student loan, their mortgage would be history by Mel’s age 49.

If the $17,792 contribution rate is maintained for 20 years to Helen’s age 60, and added to the present balance of $328,000, it will become $1,070,500 assuming a three per cent growth rate after inflation. That sum, still growing at three per cent after inflation, and spent over the following 35 years to Helen’s age 95 and Mel’s age 92, would support taxable income of $48,400 in 2020 dollars.

Once they are mortgage-free, there should, in theory, be $1,770 per month available for TFSA savings. If that is saved for nine years to Helen’s age 60 at three per cent after inflation, they could accumulate $234,256. That sum could provide tax-free income of $10,884 indexed to inflation for the following 35 years to her age 95. Another five years with annual contributions at $6,000 per person would lift TFSAs to $315,366 and raise payouts for the following 30 years payouts to $16,100 per year.

Who are these people with a combined take home income of over $10,000 per month?

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