Retirement savings - bank vs insurance co

Riley
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March 12th, 2018, 3:07 am #1

Not sure how well my questions can be answered here, as I'm sure Canadian financial rules are a bit different from the US.

I currently have an RRSP with my bank that I contribute $50/week into. An RRSP(Registered Retirement Savings Plan) is an investment account where any funds you contribute are deducted from your taxable income, giving you a tax refund on any $ contributed.

A friend at work told me his RRSP is with an State Farm Insurance. I didn't even insurance companies offered RRSP's. He says you get a better ROI through an insurance company than with a bank. I did find quite a few links claiming that insurance co RRSP's are the better option, but they all seem to be either from insurance industry groups, or the insurance companies themselves.

Seems to me like asking a car salesman if he thinks I need a new car.

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Davis
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March 12th, 2018, 3:10 am #2

If it is similar to an IRA it is a great idea. If there is a life insurance component then you have other homework to do.
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Riley
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March 12th, 2018, 3:16 am #3

Davis wrote:If it is similar to an IRA it is a great idea. If there is a life insurance component then you have other homework to do.
I don't think I need life insurance. I'm 27 and have no dependents.

I have a $30k life insurance policy through work that would more than cover funeral expenses were I to die. Plus there is less than $50k still owing on my condo's mortgage and it is likely worth $130k plus.
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Kincaid
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March 12th, 2018, 5:26 am #4

Can you find out the ROI and if it is variable? I am not sure if this is something offered in the US. I know you can get annuities from Insurance Companies but I have heard those here offer a poor ROI, compared to mutual funds and stuff like that.
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jon-nyc
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March 12th, 2018, 10:27 am #5

Bogleheads has a sister site in Canada. Search there on the topic of post the question. I’m sure there’s plenty there already on this question.


http://www.financialwisdomforum.org/forum/

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Mikhailoh
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March 12th, 2018, 11:27 am #6

In any event, Riley, you seem to be in pretty sound financial position for your age. Bravo.
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Riley
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March 12th, 2018, 11:50 am #7

Kincaid wrote:Can you find out the ROI and if it is variable? I am not sure if this is something offered in the US. I know you can get annuities from Insurance Companies but I have heard those here offer a poor ROI, compared to mutual funds and stuff like that.
The RRSP’s offered by the insurance companies are mutual funds, same as banks. (You can also have GIC’s and savings accounts as RRSP’s but don’t make much on them).

https://www.statefarm.ca/finances/mutual-funds
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Riley
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March 12th, 2018, 11:52 am #8

jon-nyc wrote:Bogleheads has a sister site in Canada. Search there on the topic of post the question. I’m sure there’s plenty there already on this question.


http://www.financialwisdomforum.org/forum/
Thanks, I’ll check that out.
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Jolly
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March 12th, 2018, 11:58 am #9

In the U.S......State Farm has an investment division, with mutual fund offerings. The couple of times I ran into it, the offerings are nothing special and the fees are no lower than other company's.

Jon's advice is sound. Educate yourself before investing and moving money. The worst people to listen to are casual aquaintances. Everybody is making tons of money, everybody has a hot tip, everybody knows better where to invest money than you do. Just one problem.

People lie.

I commend you on saving for your future. It is a wise thing for a young man to do.
The main obstacle to a stable and just world order is the United States.- George Soros
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Larry
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March 12th, 2018, 12:05 pm #10

Buy real estate.
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Jolly
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March 12th, 2018, 12:13 pm #11

A couple of pieces of advice:

1. Look hard at how ROI is calculated. I've seen one company include contributions when doing ROI's for clients. Well, duh... Didn't that make everything rosy!

2. Be very aware of fees. I worked on a roll-over with one guy who had his money with a certain "bullish" firm and it cost him thousands of dollars in fees to withdraw his own money. So look at what the maintenance fees are, but also look at the fees for other services you might think you may need or require.

I only did small potatoes stuff during my time working in the retirement industry and we were relegated to a small subset of people - state, parish and municipal employees. But because of our contract and limited offerings, we were dirt cheap on fees, if you did your own investing. My best client had almost $2M with us and paid $90/yr. He had other money with other firms and his ROI before fees was better, but we were able to outdo many of his other investments simply because of the fee structure.
The main obstacle to a stable and just world order is the United States.- George Soros
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Copper
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March 12th, 2018, 3:07 pm #12


You will never regret saving.
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Jolly
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March 12th, 2018, 4:48 pm #13

Copper wrote:You will never regret saving.
Amen.

And a funny thing...A person can do certain things to help them save, but it's my observation saving is kinda like teaching... It's a talent some people are born with.
The main obstacle to a stable and just world order is the United States.- George Soros
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Klaus
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March 12th, 2018, 6:56 pm #14

Copper wrote:You will never regret saving.
Not true.

I know a couple of people who have saved everything for retirement but their health is now so bad that they can't do all the things they wanted to do anymore.

Not saving enough is certainly more common than saving too much, but both of them occur.
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Jolly
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March 12th, 2018, 7:12 pm #15

Klaus wrote:
Copper wrote:You will never regret saving.
Not true.

I know a couple of people who have saved everything for retirement but their health is now so bad that they can't do all the things they wanted to do anymore.

Not saving enough is certainly more common than saving too much, but both of them occur.
There is an outlier for everything.

It is more common, much more common, for people to come up short in their retirement funds. People shouldn't plan as much for what might be, as much as plan for what will most likely be.

You could get killed by lightning tomorrow. Chances are you probably won't. Therefore, I wouldn't plan for it.
The main obstacle to a stable and just world order is the United States.- George Soros
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George K
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March 12th, 2018, 7:46 pm #16

Jolly wrote:It is more common, much more common, for people to come up short in their retirement funds.
How common is that, really?
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Jolly
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March 12th, 2018, 8:56 pm #17

George K wrote:
Jolly wrote:It is more common, much more common, for people to come up short in their retirement funds.
How common is that, really?
I've tried to find some hard data for you, and I don't have the access to the white papers I used to have. Jon may know a lot better than I do...

I never worked the 70% rule. I feel it is too low. I'm more comfortable at 80% replacement of gross pre-retirement income, or even better, a dollar-for-dollar replacement of net income of last year worked vs. first year retired. Especially for early retirees.

My personal experience would say 20%, or less, have the funds needed to retire well. 80% or more, fall short, especially bad at the low end and at the high end.
The main obstacle to a stable and just world order is the United States.- George Soros
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Klaus
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March 12th, 2018, 10:07 pm #18

Jolly wrote:I never worked the 70% rule. I feel it is too low. I'm more comfortable at 80% replacement of gross pre-retirement income, or even better, a dollar-for-dollar replacement of net income of last year worked vs. first year retired. Especially for early retirees.
70% of your last income when the kids no longer require money and the house is paid off means you have much more money than when the kids were small and loans on the house had to be paid.
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jon-nyc
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March 12th, 2018, 10:48 pm #19

I’ve never personally liked the income rule though I understand its utility.

It implies you live more or less at your means.


Really it makes more sense to figure out what percentage of pre-retirement *expenses* you should budget for in retirement.

But everyone knows their income, and few of us really understand our expenses.
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Jolly
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March 12th, 2018, 11:20 pm #20

Klaus wrote:
Jolly wrote:I never worked the 70% rule. I feel it is too low. I'm more comfortable at 80% replacement of gross pre-retirement income, or even better, a dollar-for-dollar replacement of net income of last year worked vs. first year retired. Especially for early retirees.
70% of your last income when the kids no longer require money and the house is paid off means you have much more money than when the kids were small and loans on the house had to be paid.
No, it doesn't.

Surprising fact...Most people spend more money in the first year or two of retirement than they do the last year or two before they retire! You're still in decent health and you've got this bucket list of things you want to do. Doesn't take long and you're spending more than you think you are.

And as you grow older, inflation keeps gnawing at your nest egg and health care costs tend to creep upward.

As I said, I don't like the 70% rule. I think 4% withdrawal per year is too optimistic. And I think anybody who followed Buffet's advice of a 90/10 allocation is fvcking nuts.
The main obstacle to a stable and just world order is the United States.- George Soros
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