BlackRock has created a new version of its LifePath target date funds for the Common Good Plan and other plan sponsors that offer group defined contribution retirement arrangements through a non-insurance platform. The new LifePath Target Date Funds will include very similar, but not identical, investment holdings and adopt asset allocation methodology that is used by Blackrock for its existing LifePath target date funds. BlackRock’s existing Canadian LifePath target date funds are the market leader in Canada for target date funds, have been in operation since 2007, and have over $32 billion in assets under management. Because the BlackRock funds that have been created for the Common Good Plan are new, they do not currently have a performance history. Performance history for the new LifePath Target Date Funds will be available on the fund fact sheets (available during the enrollment process and on the plan’s online dashboard) in the future.
Who is BlackRock?
Founded in 1988, BlackRock is the world’s largest asset manager, with over $8.67 trillion USD in assets under management, including managing over C$200 billion in assets for Canadian clients. The firm’s purpose is to help more and more people experience financial well-being. Steeped in innovation, BlackRock pioneered target date funds in 1993 with the launch of LifePath Portfolios. As the fastest growing target date fund manager in Canada with over C$30 billion in assets in its LifePath products, BlackRock has been serving Canadian investors since 2007, and today offers investment management services to over 65,000 defined contribution plans, reaching more than 35 million participants.
What are the target date funds offered by BlackRock?
A target date fund offers a balanced investment portfolio within a single fund, and the investment mix is calibrated by the investment manager based on a retirement date. BlackRock LifePath Target Date Funds are professionally managed, diversified portfolios and are structured to reduce risk as the ‘target date’ approaches.
You can learn more about LifePath Target Date Funds in this video.
What happens to my money if I die? Is there any benefit for my spouse?
With registered accounts, including TFSA, RRSP, and RRIF accounts, you can designate how your investments are transferred to your beneficiaries or your spouse as a successor upon your death. The assets in your accounts can be paid directly to the beneficiaries you designate on the account documentation, bypassing your estate.
Beneficiary designations for the Common Good Plan apply individually to the TFSA, RRSP and RRIF accounts (if applicable), and do not need to be the same person for all three accounts.
If you want your spouse or common-law partner (“spouse”) to be your sole beneficiary, you can designate your spouse for all three accounts – you would need to complete the beneficiary designation process individually for each account.
If you are married or common-law, designating your spouse as the “successor holder” (TFSA) and “successor annuitant” (RRIF) simplifies the process of transferring assets from your TFSA and RRIF to your spouse upon your death. This means your spouse would take over your accounts upon your death. They would then have to:
- Transfer the benefit to their own account on a tax-deferred basis if they are also a member of the Common Good Plan.
- Transfer the benefit on a tax-deferred basis to another TFSA or RRIF outside of the Common Good Plan.
If you are married or common-law, you can designate your spouse as the “beneficiary” for your RRSP. Upon your death, your spouse can transfer the assets of your RRSP to their own account either within or outside the Common Good Plan to continue the tax deferral. Generally, only a spousal beneficiary is permitted to directly transfer the assets of a bequeathed RRSP and continue the tax deferral.
If you wish to designate a non-spouse as your beneficiary for any one or more of your accounts, you can list the beneficiaries individually for each account. If you choose this option, your beneficiaries will receive a cheque in the event of your death. There is no direct transfer of funds for “beneficiaries.”
If you do not designate any beneficiary for your Common Good Plan assets, the Common Good Plan will pay assets to your estate.
You can read this educational article for more on beneficiary designation.
What happens if I decide to retire earlier or later than initially anticipated? How would that impact my contributions to the Common Good Plan?
The Common Good Plan savings strategy will be impacted by the age you say you want to retire. By changing your retirement date, your contributions to the plan and target date fund may need to be adjusted so you can still achieve your target retirement income. You will also need to consider the impact this may have on your government benefits (Canada Pension Plan and Old Age Security).
There are rules on when certain retirement payments must begin. Your RRSPs must be converted to a RRIF no later than the end of the year you turn 71, at which time minimum payments must be made. You can elect to convert to a RRIF earlier than age 71 to meet your retirement needs. Your TFSA is flexible, and you can start receiving retirement income at an age that accommodates your needs.
Can I withdraw my funds before I retire?
Common Good Plan funds can be accessed before you retire and can be transferred to another TFSA or RRSP/RRIF or paid out in cash.
When can I start receiving my retirement income?
Unlike in a registered pension plan, the Common Good Plan offers flexibility regarding when you can start receiving retirement income because it is composed of a RRSP/TFSA/RRIF. For example, you can start payments even as you are working part-time later in your career.
Your RRSPs must be converted to a RRIF no later than the end of the year you turn 71, at which time minimum payments must be made. You can elect to convert to a RRIF earlier than age 71 to meet your retirement needs. Your TFSA is flexible, and you can start receiving retirement income at an age that accommodates your needs.
The plan will provide you with planning tools to assist you with developing a retirement plan – converting savings to income in retirement and integrating various income sources, such as government benefits.
Whom do I reach out to if I have questions or need guidance?
You can contact Common Wealth, the plan provider, at firstname.lastname@example.org for factual information about the plan, its products, and features.
How can I view and change my investment details?
You can log into your account and view your current holdings and transaction history in the “My Investments” section. You can also select a different target date fund here.
How can I view my transaction history?
You can log into your account and view your transaction history in the “My Contributions” section. You can view any upcoming or past transactions there, including withdrawals or fees.