Do you find that you have multiple statements for each of your investment accounts?
A statement for an RRSP at one bank, another statement from a different local bank, and another one from your financial planner. The papers are piling up! And so are the fees for each account! Plus, how do you really know exactly how much you have invested?
This is starting to sound complicated.
Today on the Capital Newswire we’re talking about consolidating your RRSP accounts to simplify things. What are the benefits and what are some potential situations to be aware of? As well, some key strategies to help you make the best decision for your situation.
By consolidating your accounts it keeps everything in one place; you have a clear picture of exactly how much you have invested, you can watch the growth a little more closely, there is a potential for less fees and charges with fewer accounts and financial institutions involved.
We very often have people making the choice to consolidate their savings within their Capital Group RRSP – they like the lower fees, the service, the investment choices, and the list can go on.
Now, a lot of financial institutions don’t like this. They want people to keep their money where it is. And so, they’ve started to make things difficult – and expensive – to do so.
Here are some of the situations we’ve seen:
• A couple with 10 different investment accounts with a major bank being told they’d be charged $125 per account to transfer out
• A retiring teacher with a $400 RRSP being told $125 would go to the bank if she transferred
• A couple with 8 different GIC accounts in their RRSP, all with different maturities, each with their own $100-plus withdrawal fee
• A couple with 3 different TFSAs being charged $100 transfer fees for each (but $25 to withdraw)
• A client whose investments are locked in with their advisor for 7 years, with a penalty of up to 7% if they move their money earlier
We’re kind of old-fashioned here at Capital. We don’t charge any of those fees. We kind of think that if we do a great job looking after people, that’s what will keep them – not threatening them with high costs if they take money out. If you are unsure about the potential fees, when and how to transfer or consolidate your accounts; give us a call. We're happy to help you work through your own individual situation. As well, there are a few thing that you can do yourself to help prepare.
Key strategies to overcome these tactics:
If you can, consolidate accounts before doing a transfer. Get all of the investment accounts that are with the same institution together – so that there will only be one transfer fee.
Watch to make sure that your ongoing investments – new payments you’re making aren’t going toward locked-in GICs or have Deferred Sales Charges (DSC) on them, as that will set a new locked-in period for your investments.
For TFSAs, you can take money out and put it back in as of the next calendar year. If you’re under your TFSA limit, it may be less expensive to just take it out and deposit it directly into your Capital Group TFSA. Or if you’re at your limit, take it out in December and put it into your new Capital TFSA January 2.
You may want to withdraw your RRSP and then contribute directly to your new RRSP. However, if you do this, your RRSP will be subject to Withholding Tax. Also, you can only use contribution room once – so this only makes sense if you’re going to have a lot of extra contribution room to play with. So tread carefully with this one.
Keep in mind that you will likely pay a withdrawal fee or transfer fee no matter when you do it, so it may be worth taking the hit now rather than later – especially if it’s moving you to a plan that works better for you.
Before you start your RRSP or TFSA anywhere, ask about transferring the money out! If you don’t like the answer, look elsewhere.
While you’re looking at options, why not check out the Capital Group RRSP?