1. Is it actually a retirement plan?
Many group “retirement” plans are not retirement plans at all. They are basically investment accounts that offer an overwhelming volume of fund choice and provide little to no retirement guidance.
When evaluating your plan, does it help employees:
- figure out how much to save?
- figure out how much income they need in retirement?
- turn their savings into retirement income?
- understand and make decisions about government benefits?
We know that many Canadians are stressed about saving and planning for retirement, not just about how and where to invest. A true retirement saving plan should help set your employees up for retirement success.
2. Are you paying too much in fees?
Canadians pay some of the highest fees for investments in the world. Insurance companies and banks often charge 1.5% – 2% of your savings in fees. Group fees can be lower than what you pay at the bank, but you need a large workforce to achieve a competitive rate. This is great for big companies, but smaller employers end up paying more than they should.
The industry is fraught with complex fee structures. Some plans allow brokers and agents to charge different fees. This can end up costing your employees hundreds of thousands of dollars over a lifetime. You can use our retirement calculator to see the impact of high fees on your employees.
Canadians deserve a plan that maximizes their savings.
3. Are you making the most of the Tax-Free Savings Account?
Many group retirement plans only offer RRSPs. In fact, “Group RRSP” has become synonymous with group retirement plans in many circles. This neglects the power of the Tax-Free Savings Account (TFSA).
TFSAs are great for:
- modest-income earners (e.g., those earning less than $50k per year)
- younger employees who want flexible access to their money and may not see value in a workplace retirement program
- supplementary retirement savings for upper-income earners
When evaluating a group retirement plan, make sure it supports TFSA and payroll deduction for TFSA contributions. This will benefit employees of any income level.
Save More. Retire Happy.
Common Wealth combines user-friendly retirement planning, low fees, and tax and government benefit optimization. For more information about our Group RRSP/TFSA plans, book a free consultation. You can also download our free guide to choosing a group retirement plan to learn more on navigating the market.