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Woman on phone <\/p>\n Woman on phone <\/p>\n
Saving for retirement can feel overwhelming the closer you get to the end of your career. But for those with decades still ahead, it\u2019s often something that barely registers in the here and now.<\/p>\n
And that\u2019s a mistake that could cost you.<\/p>\n
Waiting until you\u2019re older \u2014 or earning more \u2014 to start saving for retirement means losing valuable time for your investments to grow. If you haven\u2019t started yet, one of the most powerful moves you can make is to start contributing to your employer\u2019s group Registered Retirement Savings Plan<\/a> (RRSP) \u2014 and make sure you\u2019re getting every dollar of the employer match that\u2019s available to you.<\/p>\n And if you\u2019re among the roughly 9.1 million Canadian employees (1) who don\u2019t have access to any workplace retirement plan, finding a company that does offer matching could be one of the best financial decisions you make this year.<\/p>\n Those in Gen Z whose careers are just getting started might put off saving for retirement until their 30s or 40s, but that choice can mean potentially leaving tens of thousands of dollars on the table \u2014 especially if your employer offers an RRSP match.<\/p>\n With a group RRSP matching program, your employer contributes a specified amount to your group RRSP when you contribute your own money. Because that employer contribution effectively costs you nothing extra, these programs are often considered \u201cfree money\u201d (2).<\/p>\n You\u2019ll need to speak with your employer\u2019s human resources (HR) department \u2014 or check your benefits package \u2014 to find out the specifics of your plan. Some employers will match a percentage of your pay: for example, $0.50 for every dollar on the first 6% of your salary. Others may offer a tiered match, such as a dollar-for-dollar match on the first 3% of pay and $0.50 for every dollar on the next 2%. Your employer may also set a maximum dollar cap on their contributions (3).<\/p>\n One important caveat: Employer contributions to a group RRSP are considered a taxable benefit under Canada Revenue Agency (CRA) rules, and they count against your annual RRSP contribution room (4). Your individual RRSP contribution room for 2026 is 18% of your prior year\u2019s earned income, up to a maximum of $33,810 (5). It\u2019s worth reviewing your most recent Notice of Assessment in your CRA account to confirm how much room you have available before enrolling in a group plan.<\/p>\n For lower-income workers or those just beginning their careers, it can be hard to fit retirement savings into a tight budget. But even small contributions can make a significant difference over time \u2014 and when your employer matches those contributions, the impact multiplies.<\/p>\n Let\u2019s look at a hypothetical scenario: Say you\u2019re earning $40,000 a year and you decide to contribute 3% of your salary to your employer\u2019s group RRSP \u2014 that\u2019s $1,200 saved every year for retirement. If your employer offers a 3% dollar-for-dollar match, that\u2019s another $1,200 added to your account at no additional cost to you, giving you $2,400 saved for the year.<\/p>\n Investing always involves some degree of risk. But the longer your money stays invested, the more time it has to recover from short-term volatility and grow. The S&P\/TSX Composite Index \u2014 Canada\u2019s primary stock market benchmark \u2014 has delivered an average annual total return of approximately 7% to 10% over the long term depending on the period measured. For example, the average annualized return from 1971 to 2021 was 7.94% (6). Past performance doesn\u2019t guarantee future results, but this track record illustrates the power of staying invested.<\/p>\n Based on our hypothetical scenario, if you were able to take advantage of your employer\u2019s 3% dollar-for-dollar match and add an extra $1,200 to your group RRSP, an 8% average annual return could grow that matched contribution to roughly $1,763 in five years.<\/p>\n In 10 years, that match alone would grow to $2,591. In 20 years, it\u2019ll grow to $5,593. And in 40 years, you\u2019ll have roughly $26,061 \u2014 and that all came from your employer matching your 3% contribution for a single year. Now imagine what your group RRSP could look like if you contributed \u2014 with an employer match \u2014 over many years.<\/p>\n Young workers may choose not to participate in an employer-sponsored retirement plan because they don\u2019t think they\u2019ll stay at the job for long. But missing out on even a year of matching contributions can have significant consequences. And if you do change jobs, the money you\u2019ve contributed to a group RRSP generally stays with you \u2014 you can transfer it to an individual RRSP or to your new employer\u2019s plan (7).<\/p>\n It can be much harder for lower-income workers and young people to save for retirement, but giving your investments time to grow \u2014 and boosting them by taking advantage of an employer match \u2014 can go a long way when retirement finally arrives.<\/p>\n Read more: Here are the 3 net worth milestones that change everything for Canadians<\/a> (and what they say about you)<\/p>\n More than half of working Canadians don\u2019t have any employer-sponsored pension plan, and a significant portion of those who do are employed in the private sector where retirement plan coverage sits at just over 21% for registered pension plans (RPPs) (8).<\/p>\n If your employer doesn\u2019t offer group RRSP matching or a pension plan, here are some considerations:<\/p>\n Open an individual RRSP. Contributions are tax-deductible, and growth inside the plan is tax-deferred until withdrawal. The 2026 contribution limit is $33,810, or 18% of your prior year\u2019s earnings \u2014 whichever is less.<\/p>\n Use a Tax-Free Savings Account<\/a> (TFSA). The 2026 TFSA contribution limit is $7,000, with a lifetime cumulative room of $109,000 for eligible Canadians who have never contributed (9). Unlike an RRSP, TFSA withdrawals are completely tax-free.<\/p>\n Negotiate matching as part of your compensation. In a competitive job market, employer RRSP matching is an increasingly valuable benefit. If your employer doesn\u2019t currently offer it, it\u2019s worth mentioning during a salary or benefits review.<\/p>\n Look into a Pooled Registered Pension Plan (PRPP). PRPPs are available to self-employed workers and employees of smaller businesses that don\u2019t offer a workplace plan. While employer contributions are voluntary under a PRPP, it invests your contributions in one or more products on your behalf. The amount of your investment when you reach retirement depends on how well they performed (10).<\/p>\n Whether your employer offers matching or not, retirement savings don\u2019t need to wait. Here are concrete actions to take now:<\/p>\n 1. Find out what your employer offers. Talk to HR or your benefits administrator. Ask specifically whether a group RRSP exists, whether matching is available and what the vesting rules are.<\/p>\n 2. Check your RRSP contribution room. Log in to CRA My Account or review your most recent Notice of Assessment. Your available room determines how much you \u2014 and your employer \u2014 can contribute before hitting the ceiling.<\/p>\n 3. Contribute at least enough to get the full match. If your employer matches 3% of your salary dollar-for-dollar, not contributing 3% means you are leaving free money behind. Even on a modest salary, this is one of the highest guaranteed returns available to you.<\/p>\n 4. Start early, even with small amounts. On a $40,000 salary, contributing 3% is $1,200 a year \u2014 or $100 per month. At an 8% average annual return over 30 years, that $100 monthly contribution alone could grow to over $150,000.<\/p>\n 5. When you change jobs, don\u2019t cash out. Cashing out a group RRSP triggers immediate taxation. Instead, transfer the funds to an individual RRSP or your new employer\u2019s plan to keep the tax-deferred growth working for you.<\/p>\n If you\u2019re fortunate enough to have an employer RRSP matching program, taking part in it is one of the simplest wealth-building tools available \u2014 and one that\u2019s the most overlooked. Even small contributions early in your career can grow into serious money by the time you reach retirement, especially if your employer is matching what you put in.<\/p>\n If your workplace offers a this perk, contribute enough to get every dollar of it. If it doesn\u2019t, an individual RRSP or TFSA can still go a long way. The most important move is the first one. Starting early gives your money time to grow.<\/p>\n Unclear on where to begin? A fee-only financial adviser can help you figure out how much to save, where to put it and how to make the most of any contribution your employer has to offer. To find a financial adviser, visit fpcanada.ca to access their Find a Planner directory.<\/p>\n \u2014 with files from Melanie Huddart<\/p>\n Join 19,000+ readers and get Money.ca\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n Benefits and Pensions Monitor (1<\/a>); Canada.ca<\/a> (2<\/a>, 7, 10<\/a>); Questrade (3<\/a>, 6<\/a>); Canada Revenue Agency (4<\/a>); TD (5<\/a>, 9<\/a>); Benefits Canada (8<\/a>)<\/p>\n This article originally appeared on Money.ca<\/a> under the title: $1K today, $45K at retirement: Why Canadians can\u2019t afford to skip their employer\u2019s RRSP match<\/a><\/p>\n This article provides information only and should not be construed as advice. 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