“We paid off our mortgage early. What now?”

Redirect your money towards retirement savings

Paying off a mortgage with 20 years until retirement is not that common, says Akilah Allen-Silverstein, CFP, RRC, of the Mandeville wealth advisory firm. “But as a financial planner I am very excited for clients when this is their reality; this provides the extra cash flow to fund retirement savings. (My husband and I are giving each other a retroactive pat on the back.)

The conventional wisdom for the post-mortgage period of life is to pay off any high-interest debt, pay for car repairs or other large purchase items, then focus on your retirement goal; set that goal, and allocate funds accordingly, says Allen-Silverstein.

With 20 years left, she says, my husband and I have put ourselves in an ideal spot for retirement planning. The cost of living is high, and not likely to go down anytime soon. Those who plan to stay in a big city or any developed country are going to need a sizeable nest egg to support their lifestyle. But the good news is, the longer you have to invest, the better chance your investments have to grow. “CPP and OAS on average pay out $672 and $613 per month which isn’t nearly enough,” she notes.

If you have 20 years to invest and commit $1,500 a month invested aggressively and with an estimated 6% rate of return, you could potentially have $693,061 in 20 years. 

But what if we waited another 10 years to invest?” Allen-Silverstein posits. “We would have to invest $4,500 a month invested at a 6% rate of return to potentially have $696,487,” she says. Obviously the former is a better strategy. 

Set aside money for emergencies

What about COVID-19? Experts say even though there is a pandemic happening, it’s important to continue setting financial goals and invest for retirement. Even though markets are more uncertain than usual due to COVID, the very nature of investing is that it comes with uncertainty and risk, says Saijal Patel, CFA, founder and CEO of Saij Wealth Consulting.

“No one, not even the most seasoned investor, can successfully predict the markets. There are far too many variables and outside factors that can change the course. The timing and intensity of COVID is just one example,” she says. “The key to managing volatility is to create a diversified investment portfolio aligned to your goals and risk tolerance that varies across different asset types.”

That being said, the financial reality of COVID-19 for many will require an adjustment of expectations for retirement, and the actions we take to plan for that potential new reality. 

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