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The 5 Dos and Don’ts of Group RRSPs

Group retirement savings plans may be common, but they’re also commonly underused. Whether this is due to lack of communication, or a seemingly overwhelming fund selection process, those who don’t participate are missing out on a powerful employee perk.

Opting-in to your employer-provided group RRSP can help you grow the value of your portfolio faster, reach your goals sooner, and benefit from the power of compound interest – especially when an employer match is involved. Simply put, it’s free money, and it’s yours for the keeping if you choose to make the most of it.

To help you reap the rewards, here are five dos and don’ts to maximize your group RRSP:

Do participate

Employers that offer group retirement plans want to see their employees achieve their financial goals. Much like the health benefits included in employee plans, this is a benefit that helps employees manage a significant aspect of their lives. Just like you would use a dental benefit to maintain your oral health, a group retirement plan can help you stay financially fit.

Group plans encourage financial education, and have been purposefully included in employee packages for your benefit. Make your financial health as important as your physical health.

Don’t overlook your goals

Your investment accounts should be established with the intention of reaching a goal. Defining your goal will allow you to visualize a clear course of action and select the tools that will help you get there. In this case, think about the kind of retirement you want to have. Do you want to retire early? Would you like to travel or buy a retirement property? What type of lifestyle do you want to maintain?

Use your group retirement plan to help you achieve this lifestyle. If you’re fortunate enough to have an employer match, let your employer contribute to the kind of retirement you’ve envisioned for yourself.

Do make it part of your investment plan

Selecting the right funds for a group retirement account may be where some get deterred – but we promise with the help of an advisor, this process doesn’t need to be complicated. Go back to your goals and what you want to accomplish with your plan. Think about the timeline of your goal, and how much risk you’re comfortable with. Then talk to an advisor and ask them to help you pick funds that align with your retirement goal and timeline. Research investment platforms that allow you to consolidate your accounts. Taking the time to do this will help you set up an effective group retirement account that’s tailored to you and your goals.

Do pay the minimum contribution for your employer match

This is where the free money comes in. If your employer has included a match option, always try to make the minimum contribution to receive it. Thinking about the bills you need to pay can be overwhelming, but paying yourself first and taking advantage of extra money will help free up room in your budget later down the road. This is money you don’t have to work for – your employer is giving it to you as a reward for participating in the program. They’re contributing to your retirement fund for free.

Consider setting up pre-authorized contributions for each pay. This way you won’t have to think about transferring money in, and you’ll be reaping the benefits of extra cash.

Don’t forget about your RRSP contributions

Another benefit of opting-in to your group retirement plan is you can choose to transfer a portion of your pre-tax income into your account. While your paycheque is taxed, any income that goes directly into your group RRSP is tax-sheltered – i.e. you’re keeping more of your money and increasing the value of your account quicker. If you already have an RRSP that you contribute to, consider transferring it to your group plan for bigger growth.

Participating in your group retirement savings plan can be an important tool in reaching your retirement goals. Use these tips to maximize the benefits of your group RRSP this year, and enjoy the rewards.

Josh Miszk is the vice president of investments at Invisor, an online financial advisor in Canada that provides personalized investment management and insurance services.

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