# My complicated situatin, need advise



## rsal59 (Dec 2, 2016)

I'm 58, married, 11 yeras old autistic son, 23 y.o. daughter. I am employed with almost an empty ( 5K) RRSP. I have unused contribution of about 50K. My wife, 50 years old, software developer has RRSP of about 100K and unused contribution of about 80K. No TFSA. We have a house of about 800K with a 30 year mortgage of 550 K on it. My business worth about 250K. No debt on it. We have life insurance (term and universal) too. About 300k universal and about 900K term which will continue for next 20 years.
My yearly income is about 140 K. My wife salary is about 90K. The priority and purpose of our life is to leave as much as possible for our son after we are not there for him. He has a RDSP of 38K and we contribute to it regularly. I don't have any intention to retire and want to work until I can, at least for the next 15 years if there is no other unexpected surprises(beside my son) in life.
What is the best way to go? Assuming that we spend about 6-7 K per month (2 K for mortgage) should we contribute to our RRSP or should we pay our mortgage faster or should we invest or a combination of all? 

ANY advice is greatly appreciated.

Thanks
rsal


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## mordko (Jan 23, 2016)

I don't know the answer. For what it's worth, here are my thoughts... It depends on the type of autism but I don't think you should set an objective of trying to provide enough funding for his whole life. It's not possible and might not actually help. 

Perhaps the answer to this situation isn't really financial. Could something be done to make him as independent as possible? When he grows up, could you help him to find a job/volunteer/join some kind of community? He'll need a social support network rather than just $s.

With regards to $s, if you plan to carry on working for ever then you should fund your TFSA before funding RRSP. Personally I would bring the mortgage down to ~200K. After that I would focus on maxing out TFSA. I don't know anything about RDSP; assume it works like RRSP but taxed on his future salary. If so it's a better vehicle than TFSA but you should still pay off ~300K off your mortgage first. Otherwise you could be at risk if the rates go up.


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## Just a Guy (Mar 27, 2012)

My first question would be, where is all your money going currently?

You're making nearly a quarter million a year and have virtually no savings. 

It's fine to say I plan to continue working however what would you do if you suddenly couldn't work anymore? Speaking as someone who experienced that exact scenario, let me warn you something unexpected could change your life at any time. 

First thing you need to do is find out where the money is currently going. Then you need to see if you can change your behaviour and start putting money away...not as easy as it sounds, especially when you haven't been doing that for 50+ years.


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## rsal59 (Dec 2, 2016)

Just a Guy said:


> My first question would be, where is all your money going currently?
> 
> You're making nearly a quarter million a year and have virtually no savings.
> 
> ...


I should have told you the full story. I did not want to make my first post a drama. 
I became unemployed three months before my son was diagnosed with Autism in 2007. For three years I took care of his therapies when my wife worked. The therapies were a financial burden to our life but we had to do that and had to borrow money for part of that. In 2010 I was fooled by a guy and bought his unsuccessful business with a family loan. Got rid of that business after one year and took over my current business 4 years ago with an another family loan. My siblings were very helpful after my son was diagnosed. Since then I had been paying back the loan to my siblings. Now I have no family debt. So it is a new chapter in our life. we have paid back the family loan and can start saving.


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## MrsPartridge (May 15, 2016)

You don't say which province you're in. 

In Ontario, you son would be able to get disability starting at age 18 (ODSP). We also have organizations to help people like him live a more independent lifestyle. One is community living. They can come out and help a young adult learn to shop, have some work etc. Of course, it will depend on the severity of his autism.

I think it's important to learn what is available to your son when he becomes an adult.


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## rsal59 (Dec 2, 2016)

MrsPartridge said:


> You don't say which province you're in.
> 
> In Ontario, you son would be able to get disability starting at age 18 (ODSP). We also have organizations to help people like him live a more independent lifestyle. One is community living. They can come out and help a young adult learn to shop, have some work etc. Of course, it will depend on the severity of his autism.
> 
> I think it's important to learn what is available to your son when he becomes an adult.


Thank you for your reply. We live in Ontario. We are well aware of the services available for him and we are using them. We just don't want him to have a welfare style of living after us. What you want for your children is what we want for him too. We just don't know where we should start. I'm getting old and I feel it day by day.,,,


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## MrsPartridge (May 15, 2016)

Yes, ODSP is very much like welfare. For this reason, I'm looking into a Henson Trust for my daughter. This way we can leave her money for any things she may need and it won't claw back ODSP. 

Currently, Ontario is looking into Basic Income for everyone. So we would each get about $1,320 per month. The disabled would get an additional $500 per month since they can't work in addition. This is a long time off, but perhaps in 10 years.

https://www.thestar.com/news/canada...d-provide-monthly-payments-of-least-1320.html


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## lonewolf :) (Sep 13, 2016)

thats a lot of life insurance how much does life insurance cost


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## lonewolf :) (Sep 13, 2016)

Suzy Orman whole life insurance video on you tube guy was paying 14,000 year for life insurance Suzy said about 10,000 of that money was going as commission. I would check out Suzy Ormans site regarding life insurance. there are also some good videos on you tube regarding life insurance by Suzy Orman


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## lonewolf :) (Sep 13, 2016)

800,000 for a house seams high though if living in TO or Vancouver it probably is not to bad.


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## rsal59 (Dec 2, 2016)

We close to 4000 a year for our life insurance. I think for the peace of mind we have it worth it.


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## rsal59 (Dec 2, 2016)

Now the question is that what should we do with the 50-60 K per year extra cash in our pocket?


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## lonewolf :) (Sep 13, 2016)

rsal59 said:


> We close to 4000 a year for our life insurance. I think for the peace of mind we have it worth it.


I would consider dropping the universal & investing that money instead. Google compound interest rate calculator do the math enter the monthly payment amount, the number of payments & interest rate check the value amount compare it to the cash value of your universal insurance.


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## lonewolf :) (Sep 13, 2016)

switch the universal to term then reinvest savings would be good also


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## lonewolf :) (Sep 13, 2016)

Can safe 10% - 30% by spreading payment out instead of one lump sum for example instead of insurance paying out 500,000 all @ once can set up so 50,000 for next 10 years is paid out.

Another way is to have 2 term policies with the same amount as investments grow first policy can be dropped 10 or 15 years latter.


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## OhGreatGuru (May 24, 2009)

rsal59 said:


> ...We have life insurance (term and universal) too. About 300k universal and about 900K term which will continue for next 20 years...?


With a special needs child, that is probably not an unreasonable amount of insurance. But as others have suggested, consider switching the universal to term, and use the savings to contribute to RDSP and other savings vehicles that will secure your family's future.


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## OhGreatGuru (May 24, 2009)

rsal59 said:


> Now the question is that what should we do with the 50-60 K per year extra cash in our pocket?


You are 58 and your wife 50. Yet you have a 30-year mortgage. In spite of the tax advantages of RRSP contributions in your bracket, I would suggest paying down as much of your mortgage as you're allowed. You don't want to retire with that monthly mortgage payment still hanging over your head. That is the safest, risk-free investment. Or, since you have so much free cash, split it - half to mortgage prepayments, and half to RDSP, RRSP, or TFSA as seems most appropriate.


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## rsal59 (Dec 2, 2016)

Thanks every one for your answers. 
I'm thinking now that the mortgage rates are historically low and any reasonable investment is almost guaranteed to return more than 2.5% of my current mortgage, maybe it makes sense that I invest the extra cash inside a TFSA and whenever the mortgage rate increases then pay lump sums of mortgage from the TSFA. 
Does this make sense?


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## lonewolf :) (Sep 13, 2016)

rsal59 said:


> Thanks every one for your answers.
> I'm thinking now that the mortgage rates are historically low and any reasonable investment is almost guaranteed to return more than 2.5% of my current mortgage, maybe it makes sense that I invest the extra cash inside a TFSA and whenever the mortgage rate increases then pay lump sums of mortgage from the TSFA.
> Does this make sense?


 No, 

The highest 5 year GIC rate is about 2.3% trying to get over 2.3% is speculating not really investing. If your mortgage is fixed @ 2.5% & GICs go above 2.3% then pay mortgage @ a slower rate. Your not in a position to speculate while still having a mortgage best to take the safest path possible.


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## Just a Guy (Mar 27, 2012)

I would consider switching your payments on your mortgage to something more aggressive, say make payments as if the mortgage was a 20 year mortgage (maybe even bi-weekly rapid payments). Don't change anything other than the payment amount, if something goes wrong, you still have a 30 year amortization and can switch back. 

The difference in the payments aren't significantly different, but you'll save a ton of interest. 

As for investing, it takes a while to learn your investment personality. You need to learn who you are and how you like to invest. You can't just copy someone else. For an extreme example, let's say you knew a successful day trader, chances are you couldn't copy them and be successful, it takes a certain personality and skill set. 

During this time you'll probably lose money as you try to discover how you can make money. Then you'll need some years to learn how to be successful at investing on a consistent basis...even if you know your strategy, you need to learn to spot the right companies and time to put them into your strategy.

I don't know many overnight investors, so be prepared to pay for your education. Of course, don't be scared off of investing just because you suffer some losses, it's the price of your education.


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## rsal59 (Dec 2, 2016)

Thank you every one for your answers. Much appreciated.


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## humble_pie (Jun 7, 2009)

my heart goes out to you & your desire to do your utmost for your 11 year old son. Blessings to you & family this holiday season.

only a few thoughts:

- recommendations to pay down the mortgage as a first priority sound excellent. This approach will also provide time & space for you to study a bit & determine what kind of investor you wish to be.

- in general, because of future need for the portfolio, you would want to manage it conservatively i imagine. At least i would want to manage conservatively, in the same place.

- will your 23-year-old play a role in caring for her brother some day in the future? if so, the planning should include her.

all the best.

.


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## rsal59 (Dec 2, 2016)

humble_pie said:


> my
> 
> - will your 23-year-old play a role in caring for her brother some day in the future? if so, the planning should include her.
> 
> ...


Thank you for your kind words. 
Yes my daughter definitely will have an eye on him where we are gone. We just don't want to leave on her shoulders anything more than "keeping an eye". He needs to have sufficient back up to be able to have a descent life. My daughter would be one of the three who will manage his Hensen trust.


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## lonewolf :) (Sep 13, 2016)

OhGreatGuru said:


> You are 58 and your wife 50. Yet you have a 30-year mortgage. In spite of the tax advantages of RRSP contributions in your bracket, I would suggest paying down as much of your mortgage as you're allowed. You don't want to retire with that monthly mortgage payment still hanging over your head. That is the safest, risk-free investment. Or, since you have so much free cash, split it - half to mortgage prepayments, and half to RDSP, RRSP, or TFSA as seems most appropriate.


 Be careful on this one the banks will give BS advice they want to collect interest from mortgage by paying off slowly & make fees on investments. The bank has conflict of interest as they want to make money from fees & interest. A lot of people get burned by paying of mortgage slow by investing in RRSPs. A lot of people lose a lot of money listening to bank salesman which is why I recommend dealing with credit unions as no conflict of interest. The math has to be done usually best to pay of mortgage no RRSP then once mortgage paid off then RRSP unless short time period left in mortgage.


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## yyz (Aug 11, 2013)

lonewolf :) said:


> Be careful on this one the banks will give BS advice they want to collect interest from mortgage by paying off slowly & make fees on investments. The bank has conflict of interest as they want to make money from fees & interest. A lot of people get burned by paying of mortgage slow by investing in RRSPs. A lot of people lose a lot of money listening to bank salesman which is why I recommend dealing with credit unions as no conflict of interest. The math has to be done usually best to pay of mortgage no RRSP then once mortgage paid off then RRSP unless short time period left in mortgage.


Uh what do you think a bank exists for?To make money off of fees and interest.Not sure how that is a conflict of interest it's called a business model.Without that do they exist?
A credit union might charge less but they still need to make money from fees and interest to survive.


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## OhGreatGuru (May 24, 2009)

rsal59 said:


> Thanks every one for your answers.
> I'm thinking now that the mortgage rates are historically low and any reasonable investment is almost guaranteed to return more than 2.5% of my current mortgage, maybe it makes sense that I invest the extra cash inside a TFSA and whenever the mortgage rate increases then pay lump sums of mortgage from the TSFA.
> Does this make sense?


You are comparing apples and oranges.

1. Because of the way mortgages are structured, with constant monthly payments, nearly all your payments at the beginning of the amortization period are interest, not principal repayments.

2. You are paying your mortgage with after-tax dollars.


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## rsal59 (Dec 2, 2016)

OhGreatGuru said:


> ... You are paying your mortgage with after-tax dollars.


Don't I pay for any TSFA with the after tax dollars?


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## OhGreatGuru (May 24, 2009)

I suggest you review some mortgage calculators, such as this one http://calculators.mackenzieinvestm...ortgLoanAmortScheduler/mortgloanscheduler.jsp
See how much interest you will pay over the life of the mortgage, and the effect of making pre-payments.

I overestimated the amount of your payments that are going to interest - I'm not used to thinking in the current low rate environment. nevertheless, over 30 years you will have paid $231k in interest at the current rate. If you instead pay down $40k/yr, you will reduce your interest cost to $53,707, and be paid off in 10 years.


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## OnlyMyOpinion (Sep 1, 2013)

I don't find it helpful to compare an investing return vs my mortgage rate and trying to decide if I can outperform my mortgage *if* my long term intention is to own my home. 
If my intention is to own my home, it is the monthly cash flow that gets freed up and the massive amount of interest that gets saved that is the rationale for paying off my mortgage asap.
Consider that on a $550k, 2.5%, 5yr term, 30 yr amortized mortgage you will pay $130.2k in the first 5 years. Half of that ($64.5k) is nothing but interest. At the end of 5 years you will still owe $484.3k. We then rinse and repeat this 5 more times at whatever the going rate is. If the rate stays at 2.5% for the 30 year period you will pay ~$232k of interest (and the $550k of principal).
From the longer term or 'total estate' perspective, feeding a mortgage that long chews up an awful lot of (after-tax) money.
Also, everyone has there own priorities but your house appears to be the bulk of your net worth. You should give thought to how it figures into your estate and to meeting the needs of your beneficiaries (wife/children).


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