Benefits of aligning your retirement accounts.

 

The two main types of employer/sponsor pension plans in Canada are defined benefit plans (DB) and defined contribution plans (DC). While both help to fund retirement, they differ in one very important way:

Up until the last 10 years DB plans were more prevalent, however since then many companies have transferred their pension obligations to their employees to fund their own retirement. That means there’s no guarantee as to the payout that you will receive in retirement. DC plans put a lot of the onus on you, so investment performance is key. I’d like to discuss two important topics to ensure your investments, across all of your accounts, are appropriate for your goals.

 

Are your pension assets invested primarily in Canadian equities? If so, it’s a good idea to diversify the account you have with us towards global equities and fixed income. This will help protect your portfolio from weakness in the Canadian equity market. This holds true for any asset class that you may be overexposed to.

 

If your pension assets are well diversified, we should still review them. It’s possible that you’re holding too many, or duplicate, investments. For example, you may own two or more U.S. equity mutual funds. Together, we can review where your focus should be.

 

In order to create a solid financial plan, one that we can use to work towards achieving your goals, we need to have a clear understanding of your assets. With that clarity, we can measure our progress. If you have more (or less) assets than we accounted for, you may be closer (or further) away from achieving your goals than we had planned.

 

If you have a pension and other assets with us, the good news is that you’re probably in great shape to achieve your goals. And by aligning your pension assets with the investments you have with us, we can make sure you’re invested as efficient as possible.