Q&A With Gordon Pape: Paying Down Debt Ahead of Retirement and Investing in Europe


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In a pair of Q&As, financial expert Gordon Pape tackles a tricky retirement dilemma and advises a reader on how to break into the European stock market.


Pay Mortgage or Keep TFSA?


Q – I am 63 years old and may be retiring at 65. I have a mortgage of $451,000 at 2.69 per cent and a line of credit with a balance of $120,000 at prime (eight per cent). The mortgage renewal is coming July 1st.

I have $85,000 in my TFSA, growing at five per cent this year. 

What is better for me? Pay $85,000 on the line of credit? Pay down $85,000 on the mortgage, knowing that the renewal is coming at very high interest? Or leave the money growing in the TFSA? José P.

A – The five per cent return on your TFSA in 2023 is not impressive. The TSX is up 8.4 per cent for the year (as of Dec. 27). The Dow has gained 13.6 per cent while the S&P 500 has added 24.5 per cent. It appears that you are holding very conservative securities in your TFSA, without much growth potential.

Based on that, the money would be better used paying down the mortgage or the line of credit, whichever is carrying the higher interest rate. Right now, that’s the line of credit. – G.P.


Investing in Europe


Q – I read an article in the G&M titled “16 Outperforming Passive ETFs” by Ian Tam and wanted to ask for your opinion. The ETF that caught my attention was the Horizons Europe 50 Index ETF (HXX-T). It interests me because of the foreign content aspect and the need to diversify out of North America inside my wife’s RRSP. Its performance is respectable over the last five years, and it even outperformed the S&P this year. – Paul C.

A – HXX invests in 50 of the largest companies in Europe. European stocks had lagged until this year, but the fund is now on track for its best annual performance since it was launched in late 2016. It showed a year-to-date gain of just over 22 per cent as of the end of November. The five-year average annual compound rate of return was 9.44 per cent. The MER is 0.19 per cent. 

I checked the results of European stock funds from BMO, iShares, Vanguard, CI, and Brompton. Only the CI WisdomTree Europe Hedged Equity Index ETF (EHE.B-T) comes close to matching the Horizons fund in year-to-date returns, However, it’s an inferior performer over five years with an average annual compound rate of return of 6.51 per cent. The MER is also much higher, at 0.6 per cent.

In this category, the Horizons fund looks like the best choice for your wife’s RRSP. – G.P.

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