Re: Pension and RESP
I have a financial question regarding my Pension and our daughters RESP (Registered Education Savings Plan).
My pension is managed by Sunlife and only my employer contributes to it. I’ve been assured that it’s not connected to the health of my company since it’s a direct contribution type. However, I’m unable to access it until I’m 65. The fund mix I have to choose from allows me to be less risky but essentially when we see a downturn in the stock market I’ll also see my pension fall drastically as well right? Could it be worthless at that point? Could it potentially be worth something in 10 or 20 years time?
Sunlife is the trustee holding the money “in trust” for you which is what you seem to mean by direct contribution. The pension itself is either “defined benefit” or “defined contribution” If it is defined benefit then you will, upon retirement, receive a pension defined as some fraction of, usually, your last 5 years of employment.
Since you are allowed input into the choice of investments I suspect that it is a “defined contribution” plan. This plan will accumulate your pension assets tax free until you are 65 when you will have several choices, annuities, transfer to RRSP/LRSP or RIF/LIF or some combination thereof. You should contact Sun Life as I’m sure they’ll have documentation regarding these choices. Regarding your asset mix remember that the lowest risk produces the lowest return.
You might wish to look at one of the many retirement planners/calculators to get some idea of where you stand e.g.
The second question is regarding our daughters RESP. It can also make gains depending on the investment mix which is determined by the government.
While the investment mix is determined by the government it is only very indirectly since the plan can include any “qualified” investments which are the same as those for RRSPs. The RESP is one of the better plans the government has introduced that allows tax savings. Although the contributions are after tax the RESP accumulates tax free, will attract little or no tax when your daughter makes withdrawals and includes a government contribution.
Also don’t forget to use the TFSA for family members over 18.
Finally if you put TFSA funds in a bank account at 1% you are losing due to inflation. You have to be prepared to accept more risk in order to stay ahead. The banks generally won’t give good advice and will push their own products, mutual funds and ETFs if they have them. The Globe and Mail online has a good investing section and some good educational articles. Often the best education comes from the comments section to those articles. An alternative to self education is to pay a financial planner to develop a plan for you. Since you pay for the advice the planner should work for you rather than pushing their own agenda.