Trade-offs abound as woman must raise funds to pay down mortgage

Family Finance In Saskatchewan, a woman we’ll call Ingrid has retired. She immigrated to Canada four decades ago and built her career managing paperwork for a think-tank. Now 62, she has more than half-amillion worth of assets, close to a quarter of a million dollars of liabilities — mostly a mortgage — and a series of decisions to make on everything from life insurance to allocation to travel plans.

Retirement is a kind of extended judgment day for Ingrid. The irony of her situation is that she has retired with a hefty debt. She has the means to pay it off by liquidating assets, but each choice — to sell RRSPs or cancel life insurance, for example — has its own downside.

“I have so many choices of debt repayments,” Ingrid explains. “Just as a technical matter, balancing investment choices, spending on life insurance, and allocating money to travel on a $4,500 pre-tax monthly income is challenging.”

Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to help Ingrid make her choices. “Her current mortgage amortization is just under 18 years. That means she will not be free of her mortgage until she is 80. In the context of her health, which includes chronic illness, that’s a problem quite different from having a mortgage at age 30.”

Time is not on Ingrid’s side, but her modest spending will help with debt paydown and investing. In three years, Ingrid can apply for Old Age Security, currently $6,942 per year. She rents a suite in her home, adding $1,000 a month to her income. Her cost of living is very low. In all, she spends $3,825 per month. Her largest cost is her $1,260 monthly mortgage payment.