# What would you do: Rrsp transfer out or high commissions



## Ryg88 (Oct 27, 2012)

Hi guys

I'm a recent engineering grad and my company contributes to my RRSP. I have just about $5K in it right now. I use my earnings to pay off my credit card debt and rent so I haven't added much investment or RRSP contributions yet. Will be able to do that next month when I'm done paying off my credit cards. (yeah, I've learned my lesson with these)

Here's my problem:

My company does group RRSP through RBC. right now I have their mutual funds which I'm not comfortable with. I think I can take more risks at 24. I've done investing myself when I did internship and I think I'm quite comfortable with doing it myself on Questrade.

But... I'd need to pay $50 every time I want to transfer from my RBC RRSP to Questrade. Or I costays pen direct investing with RBC and pay $29 per trade.

I don't plan to trade that much but do plan to buy and sell a couple times every quarter.

What would you do in my situation. Would you pay the $50 every so often to transfer the money over to Questrade or would you open up a direct investing account with RBC and pay 29 per trade? I don't expect to hit the 50K they need for me to qualify for lower rates anytime soon.


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## jcgd (Oct 30, 2011)

My company does the same thing. I transfer out once a year to questrade to keep the fees down.


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## Eclectic12 (Oct 20, 2010)

Hmmm ... I've heard complaints about lack of choice for the MFs offered and/or the fees the MFs charge. This is a first to hear there isn't enough risk.

When you say you could pay $29 with RBC - is that with the company RRSP money? If it's a personal RRSP in addition to the company RRSP - will RBC combine the two so that you qualify for cheaper trades earlier?

Finally - if you are not transferring the company RRSP money out, are there enough choices that you won't feel stuck with that money? (Would you be happy allocating some of the company RRSP to a bond MF, the rest to an equity MF and whatever is in your Questrade RRSP takes care of everything else?)


Cheers


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## Ryg88 (Oct 27, 2012)

Jcgd, thanks for the response. I think once a year is a good suggestion.

Eclectic12, who wouldn't mind a high rate of return and no risk? I'm complaining more about the rate of return than risk. Although, I think they are related. I feel Mfs are less risky than individual stocks but if picked correctly, stocks can give higher returns. and at this point in my life, I think I can afford a bit more risk if that has a potential for better return.

I don't really like the MF choices. But then again, I'm new to MFs. Never invested in them before, all I know is that my parents lost a lot of money in their MFs.

Thanks for the responses.


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## metatheta (Oct 1, 2012)

Yeah, I hate those MFs.


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## Four Pillars (Apr 5, 2009)

metatheta said:


> Yeah, I hate those MFs.


+1 Haha.


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## k66 (Feb 11, 2012)

Given that your employer contributes to the your plan, you obviously want to max out that relationship - put as much as you have to to attract the employer contribution.

I also know what you mean regarding limited and lackluster choices in your group plan - most of us are in the same boat regardless of who the actual provider is. What I do with mine though (and I only have ManuLife to choose from), is "store" all my contri's in the lowest-fee bond fund available. Then once or twice per year I will transfer to my Questrade (soon to be CIBC) account and purchase even-lower-fee ETFs. In the end - it always comes down to what your total cost is or will be.

For example, if you are placing $5k per year in the RBC MF and it is dragging 2%/ann (the MER) off your bottom line, then you are losing $100 per year. After the first year, pull that $5k over to Questrade ($5 to $10) or CIBC ($7 flat) pay the $50 fee and put into a 0.25% to 0.50% ETF. You would then save say $15 (assuming $100 less $50 transfer out fee, $25 ETF fees and two $5 trade commissions) in year 2 and the better part of $75 for each year thereafter. I t may see like small-$, but it will accumulate. You may have guessed, I am assuming (and advocating) low-fee broad-index based ETFs. You keep these for as long as you are "accumulating" so there really is no "trading" and escalating commissions. 

As I'm sure you also know... watch out for minimum time invested. Some plans require that you keep your funds with the provider for a minimum amount of time else risk losing some/all of the employer contributions. I have an ESOP with that type of stipulation, so I have make sure I do not withdraw any more than the penalty limit!!


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## Eclectic12 (Oct 20, 2010)

Ryg88 said:


> Eclectic12, who wouldn't mind a high rate of return and no risk? I'm complaining more about the rate of return than risk. Although, I think they are related. I feel Mfs are less risky than individual stocks but if picked correctly, stocks can give higher returns. and at this point in my life, I think I can afford a bit more risk if that has a potential for better return.
> 
> I don't really like the MF choices. But then again, I'm new to MFs. Never invested in them before, all I know is that my parents lost a lot of money in their MFs...


MFs are an investment - just like a stock or bond or trust unit. The risk and potential return depend on a lot of factors such as the underlying business, costs of the investment, the way it operates etc. A good pick is going to make money, a bad pick is going to lose money and a mediocre pick will be mediocre - the same as investing in a stock or bond or trust unit.


If you don't like the choices in the group RRSP for investments - given that it will cost $50 per transfer, what in your investing knowledge, time available to you for investing and planned investing method convinces you that you will have better returns?


At the end of the day - you can setup a Questrade RRSP for money you contribute so it would appear the only dilemma is the group RRSP funds the company has (and presumably will continue to) contributed.


Cheers


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