What do I need to know about my defined benefit pension plan?
- How much am I putting into my pension plan? Your plan may require you to save some money toward your pension. This is called your employee contribution. It usually is taken off your pay.
- How is my contribution calculated? The amount you contribute is based on the plan's formula. Find out how it works.
- How much is my pension plan likely to pay me? Ask your company to help you estimate what pension you may get at retirement. Your pension plan booklet may also provide information that will help you figure this out.
- Is there a maximum amount that I can get as a pension? Many plans set limits on how much you can get when you retire. If yours does, find out what the maximum is and if you are likely to get it. Tip: Find out if there are things you can do to help your chances to get the maximum benefit.
What do I need to know about my defined contribution plan or Group RRSP?
- How much can I put into my plan this year? There's a maximum amount you can put into your pension and RRSPs in one year. This includes a defined contribution plan, a Group RRSP, and any other RRSPs you have. This limit can change from year to year, and is shown on your tax notice each year. Tip: Putting in as much as you can will help your savings grow, and help you pay less in taxes.
- How much will my employer put into my plan?Ask if the amount that your employer puts into your Group RRSP or pension plan each year may change. If so, find out what would make it change. This can affect how much you will have in savings and how fast your savings will grow. Tip: This won't happen very often in a defined contribution plan.
- How much have I made on my investments? Your Group RRSP or defined contribution plan pension savings will be used to buy investments. Most of these plans allow you to choose how you want to invest your money. The better your investments do, the faster your savings will grow. Tip: Check often how your investments are doing, and how much money they are making for you.
- What costs did I pay? When you invest your savings, you may pay some costs, such as fees and commissions. Find out how much you are paying. Are the costs what you would expect, or do you think you are paying too much? If you think the costs are high, ask about them.
- Can I change my investments? Most, but not all, Group RRSP and defined contribution pension plans let you invest in more than one product. Do the investments you have now still fit with your goals and your comfort with risk? If you make changes, you may need to get some advice.
Remember: Your pension will play an important role in your retirement income
Don't put your statement or other information in a drawer and forget about it. You don't want to find out when you retire that you don't have as much income as you thought.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.
