Expert: Steven Taylor - 2/1/2011

Question
Hello there,

I am 24, and am contributing the standard amount into the Omers pension plan. Recently they introduced a new investment called AVC (http://www.omers.com/Members/Additional_Voluntary_Contributions__AVCs_.htm) Which is treated seperate from the Omers investment, and we can contribute additionally to the AVC pension, which provides additional income during the retirement. I have done some calculations, and it seems that if i contribute $100/bi weekly, I will get approximately 10k/year starting from age 55 not considering the risk factors. What is your opinion on this investment, or is it better to invest in other entity, or even pay off mortgage when I buy a house in the next 2-4 yrs.

Thanks for your advice,

Joseph A.

Answer
Joseph, I think it is fantastic that at 24 you are already looking to maximize your retirement. As you know, the more you put away now, the more you will have later.

As a rule, I love voluntary contributions. However, contributing more to Omers might not be the best choice, for a couple of reasons. First, contributing outside of Omers will likely give you greater diversification. Second, depending on Omers return numbers, outside investments (i.e., mutual funds) might also give you better annual returns. I don't know what Omers is returning each year on average, but I would compare that return versus what you can do with diversified mutual funds.

As far as paying off a house mortgage, that is generally not a great investment unless the interest rate is huge. Most of the time, the average annual return on investments has been greater than the mortgage rates, especially when you factor in compounding after reinvestment of dividends and distributions. However, that is certainly something you should evaluate when you do buy that house - who knows where rates will be in 2-4 years. But, for now, I think you should stick with socking away as much as you can in other investments.