Many Canadians are entering retirement with significant home equity but relatively modest investment portfolios. If you've recently paid off your mortgage or are approaching that milestone, there's a powerful strategy that could add over $2,000 per year to your retirement income—without increasing your out-of-pocket contributions.

At Parallel Wealth, we often work with clients in their 50s who are transitioning from mortgage payments to having extra monthly cash flow. Many are eager to "catch up" on their retirement savings by investing into RRSPs and TFSAs. But what if you could do that even more efficiently?

A Common Catch-Up Plan

Let’s say you’re 55, mortgage-free, and planning to retire at 65. You decide to invest your freed-up $25,000 per year into your TFSA and RRSP. Over the next 10 years, assuming a 5% return, this strategy could build nearly $389,000 in retirement assets, providing an estimated $25,400 per year in retirement income (with about 48% of that income being taxable).

A More Efficient Strategy

Now, let’s reimagine this plan.

Instead of contributing $25,000 annually, you front-load your investments by taking out a $225,000 mortgage at age 55. That money is immediately invested: $151,000 into your and your spouse’s TFSAs and $74,000 into your RRSPs. When tax refunds come in, you reinvest them into your RRSP and TFSA over the next few years.

The result? By age 65, your investments grow to over $418,000. That’s nearly $30,000 more than the traditional strategy, and it generates an extra $2,000 per year in after-tax income for 30 years.

Why It Works

This strategy works because you’re maximizing time in the market by investing a lump sum upfront. The returns compound faster, and with proper tax planning, more of that income can come from your TFSA (which is tax-free), reducing your taxable income in retirement.

Is This Right for You?

This approach isn't for everyone, but for those with little TFSA or RRSP savings and a fully paid-off home, it can be a powerful tool. It doesn’t increase your overall risk—just reallocates how you use your equity.

If you’re in this position and want to explore whether this strategy fits your financial plan, connect with us at Parallel Wealth. We work with clients across Canada to build personalized retirement plans that maximize income, minimize taxes, and help you retire with confidence.

Parallel Wealth Financial Group Inc. is based in Langley, British Columbia with offices in Calgary, Alberta and the Niagara Region in Ontario. We are here to serve Canadians with their financial planning needs.