Dr. Garth

The GreaterFool Anti-Stress & Canine Therapy clinic will be on extended hours for the next four months as we deal with an expected tsunami of turbulence. What an interesting hundred days lie ahead.

Stock markets had a cow after hitting three dozen record highs and amid Mag 7 delirium. A growth scare has central banks on the run. Fat rate cuts coming in September. Trump and Kamala in a dead heat. Netanyahu setting the region alight. The planet cooking. Cat ladies. Yikes.

So, big central bank flips expected in September and October. A globe-altering US election in November. A worsening real estate mess this autumn. And the march towards a pivotal vote in Canada. So much to fret and vex over. But fortunately we’re here – deeply healing with essential oils, aromatherapy and dog spit. There is, after all, nothing licking won’t make better.

Who’s first?

“We are renewing our mortgage in September 2025,” moans Antoine. “We are aware the days  of 2% interest( which we have now) are over then, and expecting something between 4 and 5%. We will owe about 270k by then.

“With the recent market run up and all these all time highs, would it make sense to sell some ETF funds and prepay a portion of the mortgage? We know you like to suggest to repay a chunk at renewal, but since it is a year away, would it make sense to sell now? Trying to evaluate if it is worth it. We have enough in our TFSA and taxable accounts to clear the mortgage, but we don’t want to…”

Thirteen months away? Dude, that’s an eternity. First, interest rates will be dropping in a serious way over the next year. Central banks waited too long to cut, economists say, and have not only stopped inflation growing but also sown the seeds of a downturn. We could see half-point chops by the Fed and our own Bank of Tiff next month, and a Canadian rate in the low 3% range by the time you renew. Besides, your debt is relatively tiny and moving the rate ahead a single percentage point will hardly matter. Stop obsessing. Sell no assets.

Here’s Ken & squeeze in BC, recently retired and wondering what the best strategy should be to fund the coming ‘golden years’ of probable cognitive decline, cataracts and knee transplants.

“We fund our retirement by making monthly deposits into our checking account from our investments helped out by CPP and OAS.  We have been taking the funds out of our joint non-registered account,” K writes.

“My question is, should we continue taking the funds from the non-registered account, our RRSP accounts or a combination of both?  Our TFSAs are topped up and we continue to top them up every year.  We leave those accounts alone letting them grow tax free. Any suggestion you may have would be appreciated.  If you require any further information, please contact me at this email or call me at 604-788-5144.  Thanks again for continuing to post your blog. “

The answer is yes. Take first from the non-reg account. As new retirees you probably have two decades of life ahead of you, so keeping tax-deferred growth inside the RRSP makes sense. When you hit 71 a small amount (starting around 5%) will have to be withdrawn annually, but with the proper investments in place inside the plan, growth should cover that. So leave ‘em be.

As for the TFSAs, if fully-funded you have two hundred grand in there. That amount should generate taxless income of about a thousand a month – unless you’ve made the mistake of tying up that money in low-yield, locked-in GICs. If so, change it. Remember that TFSA income is the best you can possibly harvest in retirement since not a single dollar counts against government pogey (OAS) or your CPP. Starve Chrystia.

Here’s a blogger known as NotLegalAdvice who wants advice. Go figure.

“My wife and I are both in our early 30s and we make a combined income of just over $250,000 a year,” he writes. “We purchased a house back in 2020 for under $800,000 and locked in an interest rate of under 2% on a 5 year fixed (thanks to your advice on that).

“We have been investing our money into a balanced portfolio of ETFs (we have over $200k invested and we earn 7 to 8 percent annually on that). Just debating if we should be dumping some money toward our principal as our mortgage comes up for renewal in December of next year. Or should we just continue to pay the bank more interest on our mortgage.  I should probably mention that we are able to save about $50,000 a year after all expenses and vacations are paid. Your input is much appreciated.”

Just another struggling Millennial couple – $250,000 income, saving fifty grand a year with a swishy house and a sub-2% mortgage. And here we thought the Boomers had stolen all the real estate, dashed the hopes of their children and desecrated the financial future of all following gens. Who knew?

Well, Not, just chill. Read the answer to Ken, above. Do nothing. Sell nothing. Enjoy that 1%+ home loan since every single month you’re winning – paying down an outsized amount of principal and financing a loan well below the inflation rate.

By December of ’25 rates will likely look tasty again. You can certainly take some savings at that time and reduce the principal, but given your age and income – and the outlook for monetary policy – focus more on building up a financial portfolio than dumping extra money into your house. In the world ahead nothing will top liquidity.

About the picture: “Responding to the drought of dog & cat submissions,” writes Randall. “Roxy in the bow, enjoying an early summer boat ride. Thanks to you and your team for the wisdom! Enjoy the summer time weather.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.