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Paying off her 30-year mortgage is a good defensive strategy. She is paying 2.7 per cent now. When the mortgage comes up for renewal in the fall of 2023, rates are likely to be higher. Paying off the mortgage by sale of the house and downsizing makes sense given that her children will have left home by then.

She is also considering selling her cottage and upgrading by buying her sister’s half of their parents’ retreat for $650,000. The extra cash generated by downsizing could be put to that use, but would not solve the problem of bolstering her retirement income. She should abandon the idea.

If she captures the $1,270,000 equity in her house and then allocates $770,000 of that to buy a condo instead, she will have an additional $500,000 for investment.

Retirement income

If Jackie were to cut spending and max out her $331,577 RRSP with a $26,230 contribution for 2019 and a similar amount until she retires to fill her available space, the RRSP would rise to $908,876 and, generating 3 per cent after 6 per cent growth and 3 per cent inflation, it would support payouts of $45,019 per year for 30 years to her age 95. The contributions would generate hefty refunds that could go to her TFSA.

Jackie’s TFSA has a balance of $61,237. If she adds $6,000 per year for the next 13 years and it grows at 3 per cent after inflation, it will become $186,446. Spent over the next 35 years with the same 3 per cent real return it would support payments of $9,235 per year.