Have an RRSP Match at Work? You Need to Watch This

An idea that can make a huge difference, yet gets little attention. Listen up! And send black nibs!

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Hey, this video has the potential to make a big difference in some of your lives. Really. We’re going to look at an idea that gets almost no attention. But should. Yes, that all sounds dramatic. But it’s true. I know this idea can make a big difference in people’s lives because for many it already has. In fact, I was prompted to do this video by a woman who contacted me recently to thank me for introducing this thinking to her way back in 2010.

Implementing this idea has put her tens of thousands of dollars ahead. To be honest, I don’t remember that specific chat, but I’m thrilled she listened. On the original call, she told me about her group, RRSP. Dollar for dollar match on the first 3% of income an employee contributed. She took full advantage. And she should have. Fantastic.

“But,” she complained to me, “our plan doesn’t offer any low-cost-index-fund options. If I want to invest in equities, I’m forced to buy a high-cost mutual fund. That’s all the plan has available. That could really cost me over the long-term, especially because I’m planning on contributing not just the 3% of my income to the group RRSP, but 15%.” This, she tells me, was my response. And I stand by to this day. I don’t remember saying it, but I stand by it.

“Only contribute 3% to your group RRSP. Take full advantage of the match. Then open up a self-administered RRSP and contribute the additional 12% of your income to it. That money can then be placed in your desired low-cost index fund. What’s more, there is no vesting period for the employer’s 3% matching contribution.

In other words, once it’s in your RRSP, it’s yours. Check with your employer to see if there are any fees to transfer to your self-administered plan. Sometimes there aren’t. And usually if there are fees, they’re relatively modest. So transferring when they allow and at an amount that makes the fee worth it may be a good move. That gets all of your RRSP money into the low-cost index funds.

But know your company’s rules. Some firms may stipulate the transfers affect future matches. Hey, don’t risk that! Talk to your HR department.” Well, she followed through in that advice. Tens of thousands of dollars ahead now. And I said, “I’m happy for you. I’m thrilled to have helped. All you owe me is one bag of black nibs.” And she responded, “That’s disgusting.”

There is no accounting for some people’s taste.