This Ontario couple is riding rental cash flow to a five-star retirement

Situation: Couple worries mortgage payments on four rental units may be a drag on retirement plans

Solution: Keep the profitable rentals, pay down the mortgages, and enjoy the cash flow in retirement

In Ontario, a couple we’ll call Sid, 43, and Lynn, 41, are raising two children ages 10 and 13. Sid has made a solid business managing four of their own rental properties and looking after others’ rentals. Lynn is a civil servant who brings home $3,000 per month after taxes and deductions for various benefits. Combined monthly income after tax is $7,544.

Their finances have many parts: employment income for Lynn, business income for Sid, a good deal of debt to support the rentals, and a nagging question. “Do we have too much invested in real estate? Lynn asks. “Should we resume RRSP savings that we suspended or start Tax-Free Savings Accounts, and, if we manage to retire in our early 60s, what income could we expect?”

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Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Sid and Lynn. In his view, the problem is working out the numbers to determine what income the couple can have when Lynn is in her early 60s.