Group RRSP’s

What is a Group RRSP?

A Group Registered Retirement Savings Plan (RRSP) is a collective retirement savings program offered by employers. It shares similarities with individual RRSPs, like tax-deductible contributions and tax-deferred investment returns. Contributions are based on the annual room provided in your Notice of Assessment from the Canada Revenue Agency (CRA). Some plans also offer a spousal RRSP option.

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Group RRSP

How Does a Group RRSP Function?

Contributions to a Group RRSP are typically made through payroll deductions, pooling your savings with other employees. This setup allows you to select investments matching your risk tolerance and retirement timeline. Besides regular contributions, you can also make lump-sum payments or transfer funds from an individual RRSP at another institution. It’s important to check if any transfer fees apply.

Benefits of Group RRSPs

Group RRSPs boast several advantages over individual RRSPs:

  1. Lower Fees – Pooling contributions with colleagues enables your employer to negotiate lower investment management fees.
  2. Tax Efficiency – Payroll deductions are made before income tax, offering immediate tax savings. For instance, a $25 contribution effectively costs just $15 net in a 40% tax bracket.
  3. Employer Matching – Many employers match contributions, significantly enhancing your retirement savings.
  4. Disciplined Saving & Dollar-Cost Averaging – Regular payroll deductions encourage consistent saving. This approach also leverages dollar-cost averaging, buying more units when prices are low and fewer when high, avoiding market timing pitfalls.
Handling Group RRSPs Post-Employment

Upon leaving an employer, options for your Group RRSP funds include:

  1. Transferring to an individual RRSP.
  2. Moving the funds to a Retirement Income Fund (RRIF).
  3. Purchasing an annuity.
  4. Withdrawing as cash (if not locked-in), though this will be taxed as income.
Next Steps in Understanding Group RRSPs

Now that you’re familiar with the workings and benefits of Group RRSPs, you’re better equipped to leverage this tool for your retirement planning. Whether it’s taking advantage of lower fees, enjoying the convenience of payroll deductions, or maximizing employer matching, Group RRSPs can be a powerful component of your financial strategy. Please reach out to us if you would like to discuss whether this type of program would suit the needs of your company.

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