Couple who bought a house three weeks before husband got the axe fear storm clouds ahead


Situation: Concern about debt hangs over middle class couple’s retirement plan

Solution: Pay down the mortgage, ramp up RRSP contributions and invest the tax savings

A couple we’ll call Max, 53, and Loretta, 54, make their home in Alberta with children ages 18 and 20. Both kids are in university. The parents’ lives are a picture of middle-class normality. For now, their $9,995 monthly take-home income is adequate, but their outstanding mortgage of $262,606 has 19 years to run and they worry that interest rates might rise considerably. Max’s job in high tech is vulnerable, given the provincial economy. Loretta’s accounting job with a non-profit organization is also not guaranteed. They got a whiff of what could happen when Max’s former employer shut down, forcing him to settle for a new job with a 30 per cent salary cut. They did not see it coming, having bought their house three weeks before he got the axe.

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Max and Loretta will be on their own when they retire in a dozen years.  Their $815,500 house accounts for 70 per cent of their $1,155,973 in total assets. The balance is in conservative and diversified mutual funds that come with the usual fees. Max has not tracked the funds closely enough to determine if he is getting good performance for the amount he pays. The annual tab is a few thousand dollars that could go to something more useful if he swapped the balances into low-fee ETFs.

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