B.C.-based couple Tina*, 38, and Brian, 37, are busy. They have three young children under the age of five, including a newborn. Still, they are trying to think long-term and save for

retirement

, but keeping up with expenses doesn’t leave much.

“How can we invest smarter and be more tax efficient?” asked Tina.

Ideally, Tina and Brian would like to retire by age 60, but said their online research suggests they would need to save $3,000 a month for the next 20 years to generate an annual retirement income of $100,000 after tax – something that is simply not doable for them. Their current monthly expenses are about $10,000 including $2,200 in mortgage payments.

The couple’s home is valued at about $1.1 million with a mortgage of about $506,000 at 2.3 per cent, which matures next fall. “We are aiming to upgrade in the next five to 10 years, but is it better to stay where we are and pay off the mortgage? Or should we consider buying sooner while we can still get a low-rate mortgage?”

Tina and Brian both have employer defined benefit pension plans that are indexed to inflation. Brian earns $78,000 a year after tax. Prior to the birth of her youngest child, Tina, who had worked full-time for a public sector employer, decided to set up a private consulting practice and now splits her time between the two. She earns about $102,000 a year before tax as a contractor and $46,800 a year after tax working two days a week for her public sector employer. She started maternity leave this past summer and receives $30,000 in employment insurance payments.

“I earn much more through my private business, but I wanted to keep the benefits from my public sector job. Was this a good decision? Should I go back to working full-time in the public sector or should I incorporate and focus on growing my business and save on my own? Or, is it possible for me to scale back and work part-time while the kids are little?” she asked.

Tina bought back her maternity leave, paying to restore lost pension contributions while she was still working full-time. Now that she is only working part-time for that employer, should she buy back another to further increase retirement income down the road?

The couple have saved $78,000 in

tax-free savings accounts

(TFSAs) and about $90,000 in

registered retirement savings plans

(RRSPs), all invested in stocks. They also established a

registered education savings plan

(RESP) for their children, which has about $19,000 invested in

exchange-traded funds

(ETFs) and stocks. They have saved $13,000 in cash earmarked for Tina’s 2026 income tax.

Brian has a $750,000 life insurance policy through his employer and Tina has $230,000 employer-funded life insurance. “Should I buy supplemental coverage because I am the primary earner?” she asked.

Over the past five years as the couple have grown their family and Tina has left the workforce during maternity leaves, they have not been able to save much money. They contribute $3,000 a year to Tina’s RRSP to repay the funds she withdrew through the home buyer’s plan and they try to make one extra mortgage payment a year to pay down the principal.

“What should we be investing in: ETFs or property? How strict should our budget be? What can we afford to spend annually on vacations; we haven’t taken one since 2019?” asked Tina. “We’re a young family and want to ensure we are making the right financial decisions for today and tomorrow.”

What the expert says:

“Research shows that working with a financial professional to create a financial plan reduces stress and anxiety around money, increases hope and leads to better financial readiness, but most Canadians do not work with a financial professional. This is especially true for young people like Tina and Brian,” said Eliott Einarson, a retirement planner at Ottawa-based Exponent Investment Management.

“The best investment they can make to gain clarity and confidence and to set them up for the financial future they want is to create a financial plan with retirement income projections that will give them the information they need.”

Einarson said the rate of savings their online research revealed likely shows they will need about $2 million in investable assets at retirement to meet their current spending needs, which are typically greater than what their retirement spending will be.

“These types of simple retirement calculators also often fail to consider other sources of retirement income, such as work pensions or savings plans, the Canada Pension Plan (CPP), and Old Age Security (OAS) payments, or the effect of income tax and tax changes for retired seniors.

That said, if Tina and Brian do need the projected $100,000 in retirement income, Einarson’s preliminary planning suggests if they stay in their current jobs until age 60, they will likely have enough defined pension income, coupled with CPP and eventual OAS payments, to meet all their after-tax retirement needs. Their defined benefit pension plans will provide the bulk of future income needs.

“If they see this mapped out in a retirement plan, they can make more informed decisions about working, living and saving today versus just focusing on the idea that they must put everything into retirement savings now or face a bleak future,” said Einarson.

“Their plan will also integrate the best use of all account types, like RRSPs, locked-in retirement accounts, TFSAs and unregistered accounts. This becomes important in deciding what investments to place in each account type for maximum efficiency based on individual planning goals. For example, an elderly person who is looking for short-term savings would hold different investments in their TFSA than a couple who is looking for estate growth and tax efficiency.”

When it comes to what they should do when their mortgage matures, Einarson suggested that at this stage in their lives it is better to stay where they are and focus on using low interest rates to pay down their current mortgage. This may change in five years when the children are older and Tina has likely gone back to full-time work hours. They should wait until they have extra cash flow before deciding on upgrading the house, he said.

A financial plan can also help them assess the tradeoffs between each of Tina’s career options, Einarson said. “If Tina enjoys the private business more and can make much more money, she can use those funds to purchase any health and life insurance benefits she has forfeited and invest for the future by contributing more to her RRSP.”

Einarson said buying back her current maternity leave is likely a good decision but again there are tradeoffs. In this case, it is the security of future pension income versus the flexibility of having and controlling her own investments.

Given their young family, Einarson said the couple should prioritize a life insurance analysis as part of a comprehensive financial plan. This will help them determine the appropriate level of coverage to meet their needs.

“The planning can include budgeting, education planning, investment management, risk analysis and retirement planning. A big advantage of the planning process is that it encourages individuals to clarify their priorities before any recommendations are made.”

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*Names have been changed to protect privacy.

Are you worried about having enough for retirement? Do you need to adjust your portfolio? Are you starting out or making a change and wondering how to build wealth? Are you trying to make ends meet? Drop us a line at wealth@postmedia.com with your contact info and the gist of your problem and we’ll find some experts to help you out while writing a Family Finance story about it (we’ll keep your name out of it, of course).