A milestone moment in retirement savings comes when your mortgage is paid off.
Repurposing mortgage payments as contributions to registered retirement savings plans (RRSPs) or tax-free savings accounts (TFSAs) can fill a lot of unused room in a hurry. But do you really need to redirect 100 per cent of your mortgage costs to retire comfortably? And, if you do, what’s the benefit in dollar terms?
Answers to these and other infinite money questions are available from financial planners using specialized software available just to them. These software are the essence of financial planning. They help answer client questions based on math and expertise, not on gut feelings, rules of thumb or current events. It also highlights the wide world of financial decision-making beyond what investments you own.
Still not sure what a planner or adviser can do for you beyond investments? Read on.
There are more than half a dozen software products designed specifically for planners – Conquest or NaviPlan, Planworth, Snap Projections, to name a few. No, you can’t typically download them for your own use. Some advice or planning firms may give clients online access to their plan, but elite planning software hasn’t yet been made widely available to individuals to work through on their own.
Conquest, the software adopted by roughly half of the adviser market, uses “strategic advice manager” to offer suggested strategies to planners and clients, said Ken Lotocki, chief product officer and co-founder of Conquest Planning Inc.
It all starts with the client’s background, preferences, goals and risk tolerance for investing, plus current assets. From there, Conquest offers strategies that could benefit the client.
It can answer questions like how to pivot after your mortgage is paid off. “I always love when this one pops up,” said Mr. Lotocki. “If your mortgage is going to be paid off next year, let’s not let that money go into the ether. Typically, if someone doesn’t know and they’re not super diligent, they’re going to spend that $2,000 a month or whatever their mortgage payments were.”
Using Conquest, a planner or adviser can take that $2,000 and look, first, at where to invest it. RRSP, TFSA or non-registered account? Conquest could also project how much your retirement savings would be worth at retirement if you have turned mortgage payments to bulked-up contributions and how much your estate could be worth based on your projected spending.
Speaking of spending, it’s considered normal in planning these days to address the question of whether boomer clients can afford to give their adult children money to help with a home down payment.
Mr. Lotocki said Conquest allows you to allocate money specifically for down payment help for your children as part of your retirement plan, with additional insights on which account is best to draw from. The impact of taking a chunk of money out of your retirement plan is also explored.
For example, you can look at various life expectancies and see how long your money lasts if you take out, say, $50,000 at age 65 to give to a child. Broader questions of how long your retirement savings will last can be analyzed using variables like reducing your spending or going back to work.
“I’m not trying to be corny or anything, but I kind of think of all of this as a puzzle,” Mr. Lotocki said, speaking of the struggle of planning without professional help.
When to start Canada Pension Plan retirement benefits is one of the basic questions of financial planning because of the choices available. You can retire at 65 with a standard CPP benefit, retire as early as 60 with reduced benefits or delay CPP as late as 70 to receive higher payouts. Financial planning software like Conquest quickly illustrates the costs and benefits of any particular CPP start date.
You can also play around with possibilities for downsizing your home, including the projected date of making this move and the expected amount of money left after you buy your next home or move into a rental.
It will likely cost thousands to work with a planner, or you can pay through fees charged to manage your investments. Expensive, yes. But think of the value of getting your questions answered by an empowered expert.
Where to find a financial planner
- The Financial Planning Association of Canada “find a financial planner” tool
- FP Canada, which oversees the certified financial planner designation in Canada
- The Steadyhand ( a mutual fund company) list of advice-only planners
- The Value of Simple blog’s directory of fee-only planners
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