Melissa is 36 and Michael is 38. They have two young children and a house with a mortgage in Alberta.
We asked Janet Gray, an advice-only certified financial planner with Money Coaches Canada, to look at Michael and Melissa’s situation.Melissa and Michael are off to a great start by not having debts other than the mortgage, Ms. Gray says. Their challenge now is juggling their reduced cash flow with mortgage payments, saving for their children’s postsecondary education and saving for the day when they eventually retire.
Melissa could also contribute to a spousal RRSP for Michael. She would get the tax deduction and he could pay lower taxes when the RRSP money is withdrawn. Note, though, that there is an attribution period on spousal RRSP withdrawals. As well, their TFSA could be used as emergency funds if needed. “The $17,000 in their bank account would cover about 3.5 months of expenses, which is a great hedge against financial surprises,” the planner says.
“Once both are working full-time, there could be enough to save $5,000 annually to Melissa’s RRSP and another $3,000 annually between them to their TFSAs,” the planner says. If they start saving for retirement in 2027, they could have more than $45,000 a year to spend after tax at age 65 , she says. “Additional savings and raises in pay will increase the estimated future amount they can spend.”