Q – My partner (age 67) has given his ex-wife the total of his RRSPs as a settlement payout. This has left him with no retirement income, he has no pension, and gave up 48 per cent of his CPP. He still works and can save $2,000 per month. We have a mortgage of $300,000 on a small suburban home we purchased together. Is it smarter to put that extra $2,000 toward the mortgage or to start a new RRSP? My idea is to start a new RRSP to get the refund and put that back into the mortgage. Barring any health issues, we expect him to continue working to 70. What do you think? Thanks. — Catherine M.

A – On the surface, your idea sounds like a good one. Paying down debt, especially coming up to retirement, is always a good strategy. But there are a couple of factors to consider.

First, how much of a tax refund will be received? That, of course, depends on his income level. If it is relatively low, then the amount of the refund won’t make much of a dent in the mortgage.

Second, is there any chance he might qualify for the guaranteed income supplement (GIS)? That will depend on the total household income. If the answer is yes, then opening an RRSP would be a bad idea because any income from the plan (or a subsequent RRIF) would reduce the amount of the GIS payment. Better to pay off the mortgage, which will have no effect on income. – G.P.

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