Mortgage prepayment VS RSP contribution VS RESP - What are you doing ?
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Hi Guys,
Please advise and if possible share your financial plan for these three Goals:
Becoming Debt free by paying Mortgage
VS
Saving big nest EGG for retirement
VS
Saving money for kids education in RESP
Which one will you do first or will have more focus in your financial strategy and why ?
Also how much money to keep aside as emergency fund, i read online that it should be equal to 6 months of your monthly expenses.
Counter argument is the interest rate you get in TFSA, Savings etc...these rate can hardly beat inflation, so why to put such a big amount and not use it for mortgage prepayment or RSP or RESP. Just have worth 2 months funds as emergency ?
How are you guys handling it ?
Location: Western Hemisphere
Posted on: 30-06-10 09:35:58
All three.
I was until recently paying off more every month in mortgage to reduce the number of mortgaged years.
I continue to contribute to retirement savings and RESP.
I believe in a balanced growth (although the market seems to lately believe in going only down 
)
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Dimple2001
Location: Western Hemisphere
Posted on: 30-06-10 09:39:48
Quote:
Originally posted by kabutar12
Also how much money to keep aside as emergency fund, i read online that it should be equal to 6 months of your monthly expenses.
Counter argument is the interest rate you get in TFSA, Savings etc...these rate can hardly beat inflation, so why to put such a big amount and not use it for mortgage prepayment or RSP or RESP. Just have worth 2 months funds as emergency ?
How are you guys handling it ?
Although there are lot of "experts" suggesting varying number of months worth of emergency cash, I believe you should do what you think is appropriate for you. For instance, last year when I lost my job, I sort of sensed it coming and we had over a period of time put away 7 to 8 months worth of emergency cash. Then, I slowly reduced that to about 2 months worth. Now, I have voluntarily left my job as I didn't see myself in there long term and not kill myself, and hence back again at about 8 months worth.
Of course, to maintain such reserves, you have to sort of forecast and start planning the reserve in advance.
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Dimple2001
While on this topic, I had an interesting discussion with one of my friends. He does not invest is RRSP at all and puts them away in other securities. His logic is RRSP contribution will reduce the amount of pension and OAS he gets in future and still be taxable. Instead, any amounts you liquidate from your assets in future are not considered income, do not effect your pension/OAS from govt.
I am not sure about his logic and would like some discussion from financial experts.
Hiren
Quote:
Originally posted by hchheda
While on this topic, I had an interesting discussion with one of my friends. He does not invest is RRSP at all and puts them away in other securities. His logic is RRSP contribution will reduce the amount of pension and OAS he gets in future and still be taxable. Instead, any amounts you liquidate from your assets in future are not considered income, do not effect your pension/OAS from govt.
I am not sure about his logic and would like some discussion from financial experts.
Hiren
I do not agree with the logic. When you are eligible to withdraw RRSP (at 69 years), you can withdraw it one shot instead of annuity payment. Your pension will be affected in one year and you had to pay higher taxes in that year. There are ways around it with a cost.
RRSP contribution lowers your taxes in current years which is an attractive tool to lower taxes. Moreover, if your income is lower in any future year, say in year 58, you can withdraw part of your RRSP which will attract lower taxes (as your income will be low).
Quote:
Originally posted by dimple2001
All three.
I was until recently paying off more every month in mortgage to reduce the number of mortgaged years.
I continue to contribute to retirement savings and RESP.
I believe in a balanced growth (although the market seems to lately believe in going only down
You should not prepay your mortgage when interest rates are lower. In past 3 years, people who were on variable rates have gained. Why do you want to pay a loan which is at much lower rate than market.
