Q: We have just paid off our mortgage and are looking for advice on how to allocate the additional funds each month. Should we top up our RRSPs or TFSAs (Tax Free Savings Account) or put additional contributions into our children’s education fund? Are there other investment recommendations that we should consider?
—Maria, Ottawa
A: Congratulations on paying off your mortgage.
I would recommend that you meet with an independent certified financial planner and have them complete a detailed financial plan to give you a better idea of your situation and help define your priorities. This plan should consider your tax situation, your level of retirement savings, values within your education fund, the asset mix of your investments, any present levels of debt and various projections. Your financial priorities should also be considered.
After completing this plan, you’ll have a better idea of your situation, your objectives and the steps necessary to achieve them.
For example, you may find the analysis determines that you need additional retirement savings and should top up your RRSPs or that your spouse’s retirement income will be higher and you should start utilizing spousal RRSPs.
You may also uncover a shortfall in funding your children’s registered education plans and additional eligibility for the Canada Education Savings Grant.
Any non-registered savings can be allocated to a Tax Free Savings Account and you may be able to accomplish a number of objectives by using your RRSP refund to top up the RESP plan.
Generally, it’s recommended that you pay off any non-deductible debt and ensure that basic life and disability (and perhaps critical illness) insurance is in place before embarking on any investment program, so ensure that your financial planner considers your entire financial picture and not just how to allocate your monthly surplus.
This article provides general information and does not constitute financial or other professional advice. Seek independent advice before implementing any of the strategies discussed. Imran Syed is an independent, fee-based, certified financial planner and can be reached at www.feebasedadvisor.ca. If you have a home-related, financial planning question, send it to him by email at homes@ottawacitizen.com.
