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Six Compelling Reasons for Employees to Enroll in Your Company’s Group RRSP Plan |
1. Save Without Even Thinking About It
With your Group RSP, you just let your employer know the amount you want to regularly contribute, and it is deducted from your pay automatically. You never see it, you can’t spend it, and you hardly need to think about it – but you know that it’s invested in the plan and working hard for you.
2. Reduce Current Tax Payments By Deferring Them Until Later
With your Group RRSP, you invest a percentage of your pre-tax earnings in your choice of one or more of a variety of investment choices. The money is automatically withdrawn from your pay, reducing your taxable income. The money you invest goes into your own savings, and won’t be taxed until you retire or withdraw the money.
3. Compound Your Savings Inside A Tax Shelter
With other investments, Revenue Canada asks for a portion of the earnings. This slows down the power of investments to compound over time. However, the earnings on your Group RSP investments will never be taxed until you withdraw them. This means your earnings can compound faster, and your total savings can accumulate substantially over time.
4. Maximize Your Take - Home Pay
Because your contributions are taken out before taxes, a Group RRSP can maximize your take-home pay. Here’s an example of someone whose gross pay is $3,000 per month. The column on the far right shows numbers that might apply if the person puts away his or her savings after taxes.
| |
With a Group RRSP |
Outside an RRSP |
|
| Monthly Pay |
$3,000 |
$3,000 |
| Monthly Savings |
300 |
300 |
| Taxable Income |
2,700 |
3,000 |
| Taxes (at 28%) |
756 |
840 |
|
| Take-Home Pay |
$1,944 |
$1,860 |
|
| Increase in take-home pay after Contributions |
$84 (Multiply that amount by 12 and this person can increase his or her take-home pay by $1008 for the year!) |
5. Sit Back And Relax During The Annual RRSP Rush
Are you familiar with the lineup at the banks before the RRSP deadline every year? By contributing your maximum allowable amount into your RRSP through regular payments, you don’t have to scramble to find the money for contributions. With your company’s group plan, your money is already working for you.
6. Take Your Investments With You
Even though your company is sponsoring your group plan, your RRSP assets are yours. If you change jobs, you can take your assets with you. You may be able to keep your assets right where they are, as long as you follow Revenue Canada’s rules. The key is to work with your plan advisor to make sure your assets stay inside an RRSP and to make sure you choose the best option for your needs.
For more information, please contact: Carol Clements at (905) 642-4540.
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