With the RRSP season contribution deadline quickly approaching on February 29, 2016, now is a good time to think about your retirement savings strategy.
Most people look forward to a secure retirement but in order to achieve that, you need to start saving now. There are a number of investment vehicles to do this but one of the most common and most convenient is to contribute to your company sponsored pension plan or group RRSP.
For employees fortunate enough to have a group retirement plan, it is important to maximize the contribution amount from their employer. For instance, if your employer is willing to match whatever amount you contribute up to a maximum of 3%, ensure you also contribute 3% (or more). Far too often employees leave free money on the table that their employer is willing to give them for investing in their future.
By contributing regularly through payroll deductions, the amounts can be deducted from your pay cheque before you have a chance to spend it elsewhere. This makes saving a little less painful. Also, your retirement contributions reduce the income tax you pay and investment earnings grow tax-free until withdrawn.
The sooner you start, the more opportunity you have to grow your money. In fact, your retirement savings can almost double when you save the same amount over a longer period of time. Let’s look at the following example:
- $100 per month invested for 40 years = $48,000 at 5% rate of return = $148,856
- $200 per month invested for 20 years =$48,000 at 5% rate of return = $81,492
This represents a significant $67,364 difference to your retirement by starting earlier than later.
By participating in your employer sponsored group plan, you also receive lower investment management fees because of the group buying power than you would with an individual RRSP. This difference in fees can have a dramatic impact on your savings over your lifetime.
As you can see, there are a lot of reasons to save for your retirement through your group RRSP or pension plan but the most important part is to start now if you haven’t already done so.
The post Why You Should Contribute to Your Group Retirement Plan appeared first on TRG Group Benefits & Pensions.
