Understanding Your Registered Pension Plan

A registered pension plan (RPP) is the Canadian equivalent of the common 401k or other employee pension plan used in the United States. These plans are created by an employer to both provide an employee with retirement savings options and to contribute to these contributions. If you are lucky enough to have an RPP through your employer, it is essential to take the time to understand the account fully. Only through a solid understanding of your benefits can you both maximize your savings and avoid tax problems in the future.

Know your Provider

The most important thing to know about your RPP is which financial firm is handling your account. Even though you are given the account through your employer, your employer is using a third-party service to manage the holdings in your RPP. You should know the name of this provider and contact information for any specific account manager assigned to your plan. This will give you the chance to ask questions when you need clarification on your account.

Read your Annual Statement

Your employer will provide you with regular statements regarding the health of your RPP. Any major changes will be reported in this statement. Most employers issue these annually, but many will choose to issue statements on a more regular basis. Pay close attention to any bulletin that comes your way announcing a change. Typically, employers will listen to their employees' concerns about any change, so it is important to voice your opinion.

Report your Contributions

Your employer should report your contributions to the account. This occurs when you withhold money from each pay check to be deposited into your retirement savings. At the end of the year, you will receive a statement of the money you deposited. This money is tax deductible, and you will be able to greatly reduce your tax burden each year through these contributions.

Watch Employer Matching

If your employer matches your contributions, you are in luck. This means you can increase your salary each year just by putting money away. Try to put in the maximum value your employer will match if you have the income to do so. This ensures you will not be "leaving money on the table" by not contributing as much as possible to receive your full employer match. Further, you should make sure your employer's contribution is fully-vested in the appropriate time. Employers who match contributions have to deposit those contributions in a specific period of time. Watch for the contribution; if it is tardy, contact your plan administrator immediately.

Track Savings if you Change Jobs

One of the largest challenges facing an individual is claiming the benefits of an RPP when he or she changes jobs. You can roll over your RPP into a new retirement account, including another RPP or an independent account of your choice. Rolling over the account properly will ensure you do not expose yourself to increased tax burden in the present. If done correctly, your rollover will ensure your money continues to grow on a tax-deferred basis even though it is held with a new plan provider.

blog comments powered by Disqus