Company Pension Plan Question

[drlove]

Aside from my own private investments I also have a company pension plan. Originally, I was in a balanced fund, but then switched to a target date fund which manages fund allocation, risk etc. automatically and periodically adjusts them over time. This way, I don't have to keep that close of an eye on it. Most of the money is in Canadian equity (50%) some is in bonds (9%) some is in international equity (13%). I'm concerned about the fact that 28% is in US equity. The US economy has not been doing that well, and I think that money could be invested better - say, in international equity. IMHO, having 28% in US equity is too high. Any opinions??

 

[Questor]

There are undoubtedly people on board with more expertise and experience than me, but I don't think pension plans are not meant to maximize return. There probably weren't any dot com pension plans back in the days before it went bust, for example, although undoubtedly most pension plans put some money into the high tech/communications sector. I think most pension plans would be inclined to spread the risk through different regions and investment tools...exactly as your current pension plan has done. I'd go with what you have, or maybe slightly less in the American economy. If you were to cut that by 10 or 15%, where would you put that money? Into Asian equity? Seems like fairly high risk for a pension. Canadian equity? With such a huge chunk of our economy tied to the American one, we will get hit pretty hard when the American economy tanks anyway.

 

[brocko]

Sounds like your in a DC plan. What's really important here is your age and how many years you are away from retiring. Your risk tolerance should be based on when you expect to start receiving the pension benefits. If you are mid 40's then perhaps it is well worth being risk adventurous however if you are mid fifties then pull back. Remember you will need a million just to pull out $45000 a year if that. Assuming your private sector your one of the few who have pension plan membership.

 

[goodtime]

What's really important here is your age and how many years you are away from retiring. Your risk tolerance should be based on when you expect to start receiving the pension benefits.

Exactly. Most company pension plan will have access to Advisors & Risk assessement tools/surveys to match your goal. Or check with Financial Advisior, their services are tax deductible.

 

[drlove]

Sounds like your in a DC plan. What's really important here is your age and how many years you are away from retiring. Your risk tolerance should be based on when you expect to start receiving the pension benefits. If you are mid 40's then perhaps it is well worth being risk adventurous however if you are mid fifties then pull back. Remember you will need a million just to pull out $45000 a year if that. Assuming your private sector your one of the few who have pension plan membership.

I'm only in my mid thirties, so I have a ways to go yet. The company pension is simply an added bonus IMO, although it will have compounded substantially by the time I hit 65. Another great feature is that I get free money through employer matching.