Retirement Plan Modifications – Part I

Welcome to my three part series on modifications to my retirement plan.  If you haven’t previous read them I suggest you read my series “How Much Do I Need to Retire” for some of the background of the numbers.

Well several significant changes have occurred since I’ve last updated my plan.  The obvious ones include the stock market crashing down, Tax Free Savings Accounts (TFSA)’s are now available and I started a new job in December last year.  Today’s post is going to look at the changes coming out from my new job.

Now for those of you with good memories you might recall I was excited by my last employer’s pension plan because in fact it wasn’t a pension plan at all, but rather a group RRSP.  Which in simple terms meant I didn’t have any age restrictions to using any of that money I got and I also didn’t have any waiting period to ensure I vested in the group RRSP (therefore when I left I got to take all the company matching payments with me regardless of how long I had been there).

Well with my new pension plan I’m back to having an age restriction.  I can’t access the money until I’m 50.  Which all in all isn’t too bad.  It’s only leaves me with five year to fund out of RRSP’s and other savings before I can use my pension money.

The good news on my new pension plan is first off the fees are incredibility cheap.  The MER for my particular investment choice is a 0.35%.  Which is so cheap in fact I might take advantage of the fact I can keep my money in the plan even after I retire.  The highest fee I’ve seen on any investment choice is 0.45% which firmly puts the fees in the range of ETF.

The really good news on my new defined contribution pension plan is I put in 5% and they match with 6%.  Oh, but it gets better.  I also have access to two other programs that allow me to put in an additional 3% and 2% respectively in the pension plan as well (an aside note here, I also have the option of putting these additional funds in a group RRSP in stead if I like).  So in total I put in 5% and the company puts in 11% for a grand total of 16% of my salary. Yes, that wasn’t a typo, 16%.  So I only have to put away 2% of my income per year into my RRSP’s to maximize my contribution room for a given year.  Have I mentioned I LOVE my new job’s benefits?

So using an average rate of return of 5.5% I should have around $260,000 in today’s dollars when I retire at 45.  Needless to say that is going to help me pull off a early retirement.

Also I should point out I’m still using the same % returns as previously because I’m still considering things on a long term average.  A -35% return is unusual as is a +20% return.  So I’m not going to beat myself up about any given years return, but rather focus on the long term plan.  Keep living below my means and save a lot of my income.

Tomorrow I’m going to look specifically at what that -20% return from last year did to my retirement plans.

7 thoughts on “Retirement Plan Modifications – Part I”

  1. Your employer’s plan sounds incredible! With respect to the pension portion, are there penalties for accessing the funds at age 50? Is there any benefit to waiting a few extra years before using that pot of money?

  2. I think there’s a decent chance gov’t regulations might change in the next 10 years so that pensions such as yours become ‘unlocked.’ I too have a ‘cadillac’ pension where my employer contributes a ton more than I do.. but I do wish it wasn’t locked.. fingers crossed the legislation changes.

  3. Very interesting, I look forward to reading the rest of this series! Is there a penalty to take your pension at age 50? I have a defined benefit plan which the company contributes to for me BUT I can only touch it at age 55 (with severe penalties) and to boot it’s NOT indexed (so lets hope those money managers know what they’re doing). Even if I slave away here for 20 years I think I’d be getting something like $15K a year in future dollars which I doubt will go too far!

    It sounds like you really lucked out with your job.

  4. MGL and Mintycake,

    No there is no penalty to take the money at 50. I asked back when I got the offer.


    It’s unlikely your pension will become unlocked. With the workforce aging you can bet most employers will want to keep people and not rush them out the door.


  5. Ironically, I did a search yesterday and found the 5 part series from March and went home thinking it would be nice to see what you thought now. I must say, this was excellent timing.

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