Nothing beats the exciting new opportunity to quit your job and take control of your own destiny. But what about your employer’s generous payment for your retirement plan?
Almost forgot, right?
It was a no-brainer because Jim Yih, an Edmonton-based financial planner who specializes in retirement planning, has to be one of the best benefits a company can offer.
“You can talk about tax benefits and other things but the fact is the best deal going is the company match,” says Yih, who helps businesses administer group RRSPs and pension plans. “You can put in a dollar and the employer puts in a dollar and you’ve just doubled your money. Nowhere else can you do that. If you have one of these you’re very lucky. Not all employers offer this.”
In fact, only about 40 per cent of employers in Canada offer some form of group retirement plan, according to Yih. Generally, contributions are based on a percentage of your wages with the most common contribution coming in at around four to five per cent of your annual income. Though much more rare, Yih has seen companies pay as much as 18 per cent toward an employee’s retirement fund.
In the finance industry, the company match is known as free money, says Yih, who adds that workers often lose sight of the significant value of this benefit and nitpick over trivial things.
What you can do with that money
If you’re participating in a group RRSP plan at work, you have different options when you leave your employer than if you’re involved in a straight-up pension plan, which generally has to be locked in until you’re 55.
RRSPs can be cashed in, but that would be ill-advised to do before retirement as it will leave you with less money for your golden years. You’ll also get slapped with a sizable tax hit.
Other options include leaving the money with the financial institution your company is using or transferring it to another.