Recent Buy – Seg Funds

My employment situation changed recently and as part of the compensation package, I was offered RRSP (Registered Retirement Savings Plan) match on ongoing contributions. This sounds great, but the annoying part has been the fact thatthe plan is administered by an insurance company, and I need to pick from their segregated funds – all of which have exorbitant management fees.

So that I don’t leave money on the table, I decided to sign up and will be making regular contributions on a bi-weekly basis.

Of the funds available, nothing looked great – but I had to pick atleast one. So after a lot of debating, I decided to simply go 50-50 on US Equity Index and International Equity Index funds. Both these funds use Toronto-Dominion’s (I am already a TD shareholder — so, good to see my holding offering competitive products 🙂 ) mutual funds as the underlying funds.

  • The US Equity Index Fund is essentially a S&P 500 tracker and has an MER of 0.383%
  • The International Equity Index Fund tracks developed market companies ex-North America; and has an MER of 0.491%

Those MER rates are high for essentially an index fund (The other funds had even higher MERs!), but like I said – I had to pick some investment to take advantage of the employer matching.

These are front load funds – so, the charges are applied up front and I can sell them whenever I want. Upon further querying the plan administrator, I found that I get one free sale per year and all subsequent sales will incur a $50 admin fee penalty. For now, I will let the funds collect and grow. I will probably revisit in a year and possibly sell to move the funds to my self-directed RRSP investment account in order to avoid compounding of the management fees.

 

14 thoughts on “Recent Buy – Seg Funds

  1. Sorry to hear about your employment situation change. Something better is right around the corner, or maybe you have found something better?

    Take care buddy 🙂

    • The overall situation is better, for sure. I am not crazy about paying the management fees for the index fund, but it was still a good decision I think since I am not leaving money on the table.

      Thanks for stopping by
      R2R

  2. The index funds in my plan have expense ratios over 0.75%…the index funds! We’re a small company, so I guess this is all we get? Supposedly we’re switching plan providers next month but I’m not optimistic it’ll improve that much.

    But, as you mentioned these types of plans have other major advantages like tax deferred earnings and/or free money in the form of a match, which I guess is how they get away with the fees.

  3. It’s a shame how many companies get suckered into really horrible retirement plans for their employees. Especially since so many employees don’t pay attention to it at all. It might be worth it to ask someone in HR about the retirement plans and see if they can get some better options for y’all.

    • It was the first thing I checked – and looks like I either take this option or dont contribute to the retirement plan. So that I dont leave money on the table, I signed up.

      Hope things are going well and you are adjusting to the new life. Any decisions on what lies ahead for you?

      • Nothing’s set in stone yet. But as of now my plan is to try and push my blogging/writing while doing some soul searching and coming up with a plan. My wife already has a job lined up for the next school year so we’ll have one income to work with. I pretty much don’t want to try and get a job lined up just yet since I don’t want to then ask for a couple weeks off since she’s due in July. I also hope to meet up with some people in the various fields that I’m looking at going into to try and get the inside scoop on what to really expect for the jobs because that could very well be the deciding factor in all of this.

        • Sounds like a good plan, JC. Its good that your wife has a job lined up and you are looking into options in July/Aug. Take advantage of this time and enjoy some family time — even though it can be a stressful time of life.

          Thanks for sharing
          R2R

  4. Congrats on the Employer match, but I’m sorry that the investment choices are so crappy. I did the same thing at my previous employer. I picked two low cost index funds, which still cost way too much. They were also a S&P500 Index and an International Index. Over the 18 months I was at that employer, I gained $6,600 dollars of my employer’s money. I left that employer in February for our extended roadtrip and to pursue more interesting activities…..and will roll that money out of the horrible plan on June 1st…..The first day after my waiting period expires.

    I think we’ve managed to make lemonade out of lemons, but it’s a shame HR doesn’t care enough to allow a quality plan administrator. There must be some cost advantage or kick back for the employer. Hope you have a great week buddy

    -Bryan

    • Thats a neat sum over a course of 18 months. It is annoying to think that I am paying such a high fee for essentially a index fund. But oh well. I will set it and forget it for a year and probably pull the funds. That should give my self-directed account a nice shot of cash infusion 🙂

      Thanks for stopping by and commenting.
      R2R

  5. What a poor set up, why do people deliberately choose the bad choices? Plus, why are all these expensive options roughly the same, why don’t they try to achieve something better? How rubbish.

    Congrats on the free money R2R, I hope it all pays off for you when you cash it out 🙂

    Tristan

    • Tell me about it. I was first excited when I heard that we will get RRSP matching, but after I saw the options, I just groaned. Not a very good setup.

      I take comfort in knowing that I am getting free money and try to rationalize by thinking that the company is paying for the management fee for me

      R2R

  6. Hey R2R,
    Be happy you had index funds to pick. My company I joined in January has no index funds to pick from and they don’t even match until after 1 year with the company. Needless to say I am not putting any money into it this year. But next year I will. Even with the fees the company match is worth it.
    Cheers,
    DFG

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