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Couple needs to step up savings to put kids through school, hit retirement goals

Situation: Couple, almost 50, has one big income, 3 kids, modest education and retirement savings

Solution: Use cash and non-registered savings for kids, start TFSAs, grow RRSP savings

In Ontario, a couple we’ll call Ralph, 49, a corporate middle manager, and Ellen, 47, a self-employed management consultant, are raising three teens on monthly after tax incomes of $7,900 and $1,000, respectively. Ralph receives annual bonuses that average $18,000 after tax. That pushes total annual income to $124,800 per year after tax.

Ralph and Ellen live far from the red hot property market in Toronto. Their $600,000 house is spacious. They owe $327,386 on a mortgage with a 15-year amortization and $130,000 on their cottage financed with a loan from their parents.

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Family Finance asked Eliott Einarson, a financial planner with Exponent Investment Management in Winnipeg, to work with Ralph and Ellen. “They need to catch up savings for the cost of putting three children through university and their own retirement,” he explains.

The mortgage on their primary residence requires them to pay $475 per week. They add $100 to accelerate payment. With the present payments, $575 per week, the outstanding balance of $327,386 with a 2.49 per cent interest rate will be eliminated in about 13 years when Ralph is 62 and Ellen is 60. Ralph and Ellen pay $600 per month with no interest for the cottage. It will be paid in 18 years.