Saving for retirement is something all Canadians should be doing, but many find it difficult for various reasons. One reason is that the majority of Canadians – 64% – do not have access to an employer pension plan or Registered Retirement Savings Plan (RRSP) matching program. This was one of the findings of FP Canada Cross-Country Checkup, a poll conducted by Leger.
There are several benefits to employer RRSP matching programs. The first, and most obvious, is that the employer contributes to its employees’ retirement savings, typically between 3% and 5% of an annual salary per year. Another benefit is that employee contributions are simple to make, usually through payroll deductions.
Even if your employer doesn’t offer a group RRSP or a pension plan, or you haven’t been participating in a savings program offered by your company, it’s vital to make retirement savings a priority, says Ron Harvey, Certified Financial Planner® professional and Fellow of FPSC™. We asked Ron for his insights on retirement planning.
Do you think the number of Canadians who have access to employer-matching savings programs will increase or decrease in the future?
Ron: Definitely decrease. In the future, more and more Canadians will be working for startup businesses. These companies typically do not start off with employer-sponsored RRSP plans, so each individual employee is responsible for funding their own retirement. You have to put aside enough cents on every dollar if you want to lead the life you hope to when you retire. So, saving for retirement is something you need to start today, not something you should put off until your 60s.
What retirement planning strategies would you recommend for middle-class income earners who don’t have access to RRSP matching?
Ron: Why plan your retirement on your own? You should work with a Certified Financial Planner professional who has the skills to help you achieve your financial goals. We use accountants for accounting and lawyers for law. By the same reasoning, you should consult with a CFP® professional for retirement planning. They are independent professionals who aren’t emotionally attached to your situation and can help you make the right decisions.
When should someone start saving for retirement?
Ron: The best time to start is today. Too many times, I’ve had potential clients say they’ll start in the New Year, and then they get there and they have to pay for the holidays, or something else happens. It doesn’t have to be a huge amount to start. If you are dealing with a professional, he or she will help guide you.
Start by talking to a couple of different CFP professionals to find one you are comfortable with, as well as asking family and friends for their recommendations. You should know that under the FPSC Code of Ethics, which CFP professionals are required to adhere to, the client comes first, and that is never going to change.
What would you say to Canadians who aren’t taking advantage of their employer’s group RRSP program?
Ron: You should always take advantage of an employer matching program since someone else is putting money into your retirement plan. Usually, the primary reason employees don't take advantage of these programs is they believe they can manage their own money better than professionals can. However, some plans allow you to choose from different investment options.
If you are concerned about the program itself, check into who provides the plan. If it is a large bank or insurance provider, they probably have the viability needed for you to trust the plan. If it is all tied to a company’s stock portfolio, then it is not ideal. It should be a separate plan that is managed by an independent third party.
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