By Chris Forman

It’s a new year and a new RRSP season. But do your employees know that? Many people know what an RRSP is, and they may even be contributing to one. On the other hand, they may not know how to fully take advantage of its benefits – both now and during retirement.

Consider sharing these 3 tips for effective retirement planning with an RRSP:

  1. Start saving now.
    No matter how old you are, it’s never too late to start to save! You don’t have to save half your salary to make it worth your while. If you’re 55 years old and you plan to retire in five years, you can save $13,618 if you save just $200 each month.1 And the numbers grow quickly if you have more time before retirement. If you’re planning to retire at 60 and you’re only 25 or 35 years old, you could save that same $200 per month and wind up with $222,596 or $117,624, respectively.
  2. Join your employer’s group RRSP.
    It’s easy. Contributions to the group RRSP are automatically deducted from your paycheque, so you don’t need to exercise any discipline to save. What’s more, these automatic contributions can lead to an immediate tax savings, as RRSP contributions made via payroll deduction are sometimes taken from your gross salary – which reduces your taxable income and lets you take home more money now.
    In addition, participating in a group RRSP means you can take advantage of group buying power. You’ll enjoy lower fees on your investments, resulting in more money left for your retirement.
    Finally, don’t forget to take advantage of employer matching. Essentially, employer matching is free money. Check with your HR department to make sure you are contributing enough to get the largest employer match possible.
  3. Take Advantage of New Home Buyer Benefits.
    If you’re looking to buy your first home in 2020, consider making the largest RRSP contribution you can right now. As long as you leave the contribution in your RRSP for 90 days, you can borrow from your RRSP for a down payment to buy your first home. There are a number of conditions to be aware of, but you can take up to $35,000 out of your RRSP under the Home Buyer’s Plan (HBP), and you won’t pay any tax on these withdrawals, as long as you pay the money back within the specified time periods.

It’s important to remind your employees that RRSP contributions made on or before March 2, 2020 can be deducted for the 2019 tax year. If they make the contribution today, they’ll enjoy all the benefits, both now and during retirement.

HUB International’s team of qualified retirement plan consultants have extensive experience designing retirement programs, including financial wellness education, and can help you plan the right way to guide your employees toward financial well-being.

1Based on a group plan rate of return (including fees) of 5%.