Couple finance – big age gap

If a couple has big age difference such as 10 year or more, they might want to watch out for the dual goals to balance paying off mortgage and saving for retirement.

Here is a hypothetical case as an example. The husband is the bread winner and in his late 40s. The wife is 15 years younger. They have a big mortgage balance and little savings.

First, they should try their best to pay off the mortgage before the husband retires. Otherwise, the household income will drop significantly, and they might have difficulties making ends meet. That means they need to make extra pre-payment regularly if possible.

Second, save aggressively for retirement. The husband will retire first and will dip into his retirement savings first. If there is little saved there, their living standard will drop.

Third, make sure to create a spousal RRSP under the wife’s name but use the contribution room of the husband’s because husband is in much higher income tax bracket. Moreover, this can even out the retirement income of both spouses to lower future income tax.

With careful budgeting and planning, they can meet the dual goals and avoid the retirement cliff of income drop to have a smooth transition to financially secured golden years.

Published by Worthfy

Financial literacy and counselling

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