Is A Group RRSP Right For Me?

A Registered Retirement Savings Plans (RRSP) is a form of personal savings plan that is registered with the Canadian government. RRSPs are ideal for saving money for retirement on a tax-sheltered basis. A Group RRSP is a form of RRSP administered by an employer. Group RRSP can provide a less stressful, costly and more smooth retirement savings process. Businesses utilize group RRSPs so that employees can work together towards a prosperous future.

Group RRSPs differ from individual RRSP in many ways. A group RRSP is completely controlled by an employer. Group RRSP contributions are made by pre-specified paycheque deductions. Employees commonly define their desired contribution amount, either as a percentage of their paycheque or as a fixed dollar amount. Depending on your specific policy, employers can also provide contributions to the group RRSP.

Group RRSP individual investment decisions are still made by employees and provide the same option as an individual RRSP:

* GICs and GIAs (Guaranteed Interest Annuities)
* Mutual funds
* Segregated funds
* Unlike individual RRSPs, employees cannot usually purchase individual securities with a group RRSP.

If an individual employee chooses to leave the company providing the group RRSP, their money and contributions are not lost. Employees can receive their contributions in one of three ways:

* The contributions can be transferred to your own individual RRSP or your Registered Retirement Income Fund (RRIF) if you are looking for immediate income.
* Your group RRSP contributions can be used to buy an annuity. Annuities are guaranteed retirement income amount to be paid for specified number of years.
* Your contributions can also be taken in cash. This cash sum will be taxed s income the same year that you receive the amount.

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Group RRSPs can provide a range of great benefits from employees and employers alike. Some great employee advantages of a group RRSP are:

* Contribution Efficiency Contributions are made directly from employee paycheques. This allows employees to ensure a smooth contribution stream while elevating the thought of consistent contribution from the employeeÕs mind.
* Employer Contributions Employers can provide contributions or bonuses to a group RRSP.
* Tax benefits contributions are made with pre-tax income. This means that your contribution amounts will cost you much less after they have been made and taxed.
* Contribution Control Employees can decide how much and what form of contributions they would like to make.
* Consistency Continual contributions alleviate the needs for a large last minute individual RRSP payment. This helps to keep employee financial situations secure.
* Fees Employers often absorb administration fees or RRSP set up fees.
* Access Your contributions are accessible at any time. Employee contributing may not be available at any given time.

Some great employer advantages if a group RRSP are:

* Employers can dictate investment options in plan set up
* Employer contributions are taxable deductions for employers
* Plans are completely controlled by employers and can be canceled at any time.
* Employers can dictate when their contributions are available for withdrawal.

Group RRSPs can be the ideal form of retirement planning for your business. As an employer, if you are looking for a way to increase employee commitment, motivation and receive possible tax benefits, consider a group RRSP. Employees should consider group RRSP if they are struggling to make consistent payments to their individual RRSP or if they RRSP set up fees are causing financial issues for employees. If your company is looking for a way to collectively work towards a retirement plan, in less expensive and often more beneficial ways than individual plans, consider a group RRSP today!

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