# Help with Group RRSP



## Erome (Jan 11, 2011)

Hi all,

I was hoping I could tap into the great wealth of knowledge and experience on these forums!

So my story:

Young professional, 26 years old, making $ 80000 / year. I am engaged to be married next year in September. I normally meet my RRSP maximum every year (this year it is 11.7k I think). I just started my couch potato earlier this year after selling off my BMO Asset Allocation fund (boo to high MERs)

I am currently 4 way invested in my RRSP portfolio:

~6k in TDB900
~6k in TDB902
~4k in TDB911
~5k in Bmo Dividend Fund (previous hold from my BMO advisor, I liked how it performed generally so I just held onto it, not adding any value to it at the moment)

(Yes, I know I'm missing some bonds, was gonna buy into them later on after the current situation, and I'm under the impression that, if I can afford it, now is a good time to buy into the market - get in low for the eventual recovery)

My company has recently started a group RRSP program at work (yay!).

The devil in the details is it is a 100% matching program, to a maximum limit.

1-4 years = $2000 max (my bracket, I'm in my third year)
4-9 years = $3000 max
10+ years = $4000 max

We have the ability to contribute (2, 3, 4, or 5%) until we meet the matching contribution and then stop there, or continue voluntary.

The group RRSPs are with Manulife funds, and the set of funds available to us are quite broad, but all are 1.7-2.8% MER. Most of the fixed income (bond funds) are around the 1.7-1.9% range while the asset allocation, balanced and equities are 1.8-2.2%.

This plan will take place in 2012.

So here's my question. With my current heavy exposure to the market, and the current market situation, and the high MERs on these funds, what is my best position?

Let's say I have 12k of RRSP room every year. Would I place my 4k of forced manulife investments into bonds, or into some balanced fund? What should I do with my Couch potato as well? Or do I mimic a balanced approach in both (despite the MER of the Manulife portfolios?)

My current thought process is to invest it into a fixed income fund for about 1.7% MER, treat that as my 'fixed income' portfolio, and continue doing market exposure investments in my couch potato (and re-balancing as I age of course).

Or on the flip side, I purchase an asset allocation class in the manulife group RRSP for a MER of about 1.8-2.0%, and then mimic a lower MER asset mix in my couch potato. Treat them as 2 seperate portfolios?

Any help you can offer would be great, please let me know if I can clarify anything!

Thank you!


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## CanadianCapitalist (Mar 31, 2009)

You are doing great. The two options you've sketched out are more or less the same. The important point here is to take the match even if the investment options available have relatively high fees. Of course, you'd want to pick the lowest fee fund available tracking the asset class you want as broadly as possible.

You haven't mentioned if you have savings outside your registered accounts and whether you want to buy a home in the next few years. If you are planning on buying a home and want to take advantage of the home buyers plan, you may want to consider investing more conservatively in your RRSP.


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## Four Pillars (Apr 5, 2009)

Ditto on the matching - take advantage of it.

Another thing to consider is that you should/might be able to transfer money from the group rrsp to another RRSP (ie at a discount brokerage) after a certain time without any penalties or losing the matching funds. Find out the rules around this and then consider doing a transfer every once in a while when you have enough money to make it worthwhile.

That way you won't be paying the excessive fees forever.


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## Erome (Jan 11, 2011)

Thanks for the input!

For further details i own my own home (half duplex, 274000 at 3.69% 5 year locked) currently in third year of the mortgage.

I have about 5k in tfsa which im slowly adding to. Half in dividend fund half in cash.

I shouldcheck into the transfer fees and timelines. I wonder if there is a cost. I imagine there would be- financial institutes dont seem like they want you to leave them easily... When i went from bmo to tdw it cost me 125$ (tdw reimbursed but that was like 20k i moved....)


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## CanadianCapitalist (Mar 31, 2009)

Good point on transferring out the funds. Some Group RRSPs allow this, so it is worthwhile to check if yours does. Also check the fees. Paying out the typical $150 or so to transfer a year's worth of contributions may not make sense but you can do it once every 4-5 years. 

When your accounts become substantial, you can always ask the receiving broker for a refund of the transfer fees.


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## slacker (Mar 8, 2010)

I do annual transfer outs from 2 of my previous employment group rrsp's. There were no fees with them (Great West Life and Manulife)


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## Desdemonia (Jan 16, 2011)

We also have a Group RRSP with Manulife through our Employer, but our rates are signifigantly lower than yours.

All of their "Asset Allocation" funds have IMF's of 0.65%, and the Canadian Equity ones range between 0.25 and 0.625. Seems like you guys are getting ripped off...?

Yeah take the match, and transfer out each year or so.


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## OhGreatGuru (May 24, 2009)

If the employer is contributing, don't transfers out have to go to a LIRA? Or does it depend on whether or not employer's contribution is added to your gross income?


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## Four Pillars (Apr 5, 2009)

OhGreatGuru said:


> If the employer is contributing, don't transfers out have to go to a LIRA? Or does it depend on whether or not employer's contribution is added to your gross income?


No. Only defined benefit plan transfer-outs go to a LIRA.


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## slacker (Mar 8, 2010)

My understanding is that group rrsp's can be transfer out to your own discount brokerage rrsp account. You can do in-kind or in-cash transfers. I have done this with 2 vendors (manulife and great west life) with no fees attached. They do limit you to doing this only once a year though.


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