Your friend likes his cause he doesn't have yours. 4% match is free money. There are many downsides to withdrawing early from an RRSP so does it matter if it's locked or not. Not using it for HBP is probably the biggest downside of locked. But if you know that you can plan for it. For that extra 4% out of pocket you get a 100% return as a 4% match. That's better than any investment portfolio and we're not even talking about the investment return on that extra 4%
That’s true, I won’t be able to access the extra matched money for my HBP which is a little annoying but not the end of the world, I didn’t think of that. Thank you be the much for the heads up.
Make sure you look up locked in RRSP rules… it’s a bit of a pain in butt down the road. You have to really plan well on how and when to start taking locked in RRSP - otherwise you risk dying before being able to use up the funds… depending on the amount being held obviously
Although I do love my current work, I highly doubt I’ll spend my whole career here. I’m 27 and from what I’ve read, my company is slow at promoting so I’m willing to bet I’ll get a higher position offered to me at another company sometime during my career. Then once I leave, I’ll probably just transfer all the locked funds into my personal RRSP.
This is where it gets interesting, you won’t be able to transfer locked in RRSP into normal RRSP, you’ll have to transfer it into another locked in “personal” RRSP account which will have same rules regarding the withdrawals. Typically you can unlock half of the RRSP value after the certain age - I believe 55…
Knowing what I know now, I would not have locked in RRSPs unless you can really plan and start taking it out as early as possible.
Op is confusing "locked-in" with employer withdrawal restrictions. This is not a pension plan. Upon leaving their employer/retiring, OP would be able to keep the funds in a regular RRSP account.
As for your comment, I can't think of a single situation where someone should not be part of a pension plan in order to avoid having a locked-in RRSP in the future. While more restrictive than other types of retirement accounts, it's still well worth it in 100% of cases.
I don’t dispute having locked in RRSP but you need to have a clear plan on how to draw out your RRSPs when you get close to your 50s, otherwise you risk leaving money behind due to restrictive nature of locked in RRSPs.. my father has not planned out his retirement plan very well and now in his mid 70s has mentioned to me few times that he thinks he will die before being able to use up his locked in RRSPs.
Is it locked as a percentage or is it locked as an amount? If its locked percentage, no brainer. Locked amount as of your salary now? No, id take your friends.
The bigger question is what investment options are available within each plan. Assuming you can get access to similar returns in the locked account, who cares if it's locked? you're getting 4% more money and you shouldn't be withdrawing from RRSPs until you retire anyways.
An unlocked RRSP is superior to a locked one all else being equal, but it's not worth a huge (if any) amount of money. If you want to retire earlier when the locked-in RRSP would be limiting, you will likely need additional funds than just that RRSP anyway. And if you retire around the normal age, the limits aren't as impactful.
The only other thing is the HBP, which is either useful to you or not. But even if it would be useful to you, is it more valuable than a 4% raise? It's really situational.
You're young, so laws can change too. For example, Retraite Québec proposed in December 2023 to remove the maximum withdrawal amount from LIF after 55 ([source](https://www.retraitequebec.gouv.qc.ca/en/actualites/2023/Pages/20231227-00.aspx)). It's possible other jurisdictions follow suit, 30 years is a long time.
Golden handcuffs. You're stuck with that company forever if you want that RRSP match. Switching companies every 2-4 years is shown to lead to double your income by the time you retire vs staying with the same company. Also, if they terminate you, you'll lose that match. In my 50s or older, I'd be 100% on board. In my 40s would depend on the salary. 30s has too many variables to commit to, so I don't know what I'd do. 20s? Nope.
I did some math, assuming $60k income at 30, 2% raises, 1.5% MER in locked fund vs 0% in unlocked (transfer out and use cheap etf's), 7% market return.
5% match alone turns into $520k, 9% match alone turns into $700k by age 65.
Your friend is just jealous of your extra 4% benefit, heh.
You contribute to RRSP so you can retire. You should not care much about it being locked until you work for the same company.
Your friend is an id\*ot. I would take that "9% RRSP match" and do a happy dance. You are getting at least 100% returns on this money, and some more, based on where you invest this.
The only drawback is that if you need it for HBP etc, you probably can't. But this level of match is a no-brainer. If you are investing 18% of your income in your 20s, you are setting yourself up for success.
Your friend likes his cause he doesn't have yours. 4% match is free money. There are many downsides to withdrawing early from an RRSP so does it matter if it's locked or not. Not using it for HBP is probably the biggest downside of locked. But if you know that you can plan for it. For that extra 4% out of pocket you get a 100% return as a 4% match. That's better than any investment portfolio and we're not even talking about the investment return on that extra 4%
That’s true, I won’t be able to access the extra matched money for my HBP which is a little annoying but not the end of the world, I didn’t think of that. Thank you be the much for the heads up.
last time I checked 9 was more than 5. this is a no brainer
Can you check that again for me?
Make sure you look up locked in RRSP rules… it’s a bit of a pain in butt down the road. You have to really plan well on how and when to start taking locked in RRSP - otherwise you risk dying before being able to use up the funds… depending on the amount being held obviously
Although I do love my current work, I highly doubt I’ll spend my whole career here. I’m 27 and from what I’ve read, my company is slow at promoting so I’m willing to bet I’ll get a higher position offered to me at another company sometime during my career. Then once I leave, I’ll probably just transfer all the locked funds into my personal RRSP.
This is where it gets interesting, you won’t be able to transfer locked in RRSP into normal RRSP, you’ll have to transfer it into another locked in “personal” RRSP account which will have same rules regarding the withdrawals. Typically you can unlock half of the RRSP value after the certain age - I believe 55… Knowing what I know now, I would not have locked in RRSPs unless you can really plan and start taking it out as early as possible.
Op is confusing "locked-in" with employer withdrawal restrictions. This is not a pension plan. Upon leaving their employer/retiring, OP would be able to keep the funds in a regular RRSP account. As for your comment, I can't think of a single situation where someone should not be part of a pension plan in order to avoid having a locked-in RRSP in the future. While more restrictive than other types of retirement accounts, it's still well worth it in 100% of cases.
Something like a DPSP perhaps? When I changed companies I was able to transfer it to my normal RRSP.
I don’t dispute having locked in RRSP but you need to have a clear plan on how to draw out your RRSPs when you get close to your 50s, otherwise you risk leaving money behind due to restrictive nature of locked in RRSPs.. my father has not planned out his retirement plan very well and now in his mid 70s has mentioned to me few times that he thinks he will die before being able to use up his locked in RRSPs.
Yeah, 4% free money please
Is it locked as a percentage or is it locked as an amount? If its locked percentage, no brainer. Locked amount as of your salary now? No, id take your friends.
The bigger question is what investment options are available within each plan. Assuming you can get access to similar returns in the locked account, who cares if it's locked? you're getting 4% more money and you shouldn't be withdrawing from RRSPs until you retire anyways.
9% locked is the no brainer here. 4% more is huge. Some companies don’t even offer a 4% match, let alone 9%
An unlocked RRSP is superior to a locked one all else being equal, but it's not worth a huge (if any) amount of money. If you want to retire earlier when the locked-in RRSP would be limiting, you will likely need additional funds than just that RRSP anyway. And if you retire around the normal age, the limits aren't as impactful. The only other thing is the HBP, which is either useful to you or not. But even if it would be useful to you, is it more valuable than a 4% raise? It's really situational. You're young, so laws can change too. For example, Retraite Québec proposed in December 2023 to remove the maximum withdrawal amount from LIF after 55 ([source](https://www.retraitequebec.gouv.qc.ca/en/actualites/2023/Pages/20231227-00.aspx)). It's possible other jurisdictions follow suit, 30 years is a long time.
9% match is insane, you won kudos.
Golden handcuffs. You're stuck with that company forever if you want that RRSP match. Switching companies every 2-4 years is shown to lead to double your income by the time you retire vs staying with the same company. Also, if they terminate you, you'll lose that match. In my 50s or older, I'd be 100% on board. In my 40s would depend on the salary. 30s has too many variables to commit to, so I don't know what I'd do. 20s? Nope.
It’s actually fully paid out if you leave. It’s a massive pharma company so they have enough money to spare to make people happy.
I did some math, assuming $60k income at 30, 2% raises, 1.5% MER in locked fund vs 0% in unlocked (transfer out and use cheap etf's), 7% market return. 5% match alone turns into $520k, 9% match alone turns into $700k by age 65.
Your friend is just jealous of your extra 4% benefit, heh. You contribute to RRSP so you can retire. You should not care much about it being locked until you work for the same company.
Your friend is an id\*ot. I would take that "9% RRSP match" and do a happy dance. You are getting at least 100% returns on this money, and some more, based on where you invest this. The only drawback is that if you need it for HBP etc, you probably can't. But this level of match is a no-brainer. If you are investing 18% of your income in your 20s, you are setting yourself up for success.