For years, the appeal to working for large corporations or the public sector was the promise of a comfortable retirement. Provided you put your “nose to the grindstone”, and “toed the company line”, many dedicated employees looked forward to, and often were rewarded with a pension when their careers wound down.
As time marched on, most enterprises changed their benefit plans to Defined Contribution Pension Plans and Group RRSPs, and leading companies offer perks to match regular contributions.
In the ongoing competition for highly skilled employees, small businesses have been daunted in the effort to offer the sort of retirement plans that large enterprises do. Group retirement plans for small businesses are within reach though. Many of the concerns that EGSPs are too costly are created from rumours and scare tactics.
Read on, because it’s myth busting time!
Entrepreneurs should know these five facts before leaving their employees to sort out their own retirement financing.
Myth: Group Retirement Plans require many employees
Fact: In Canada, If your business has even a couple employees, your company can set up a group RRSP plan. Contributions are a deductible expense, and payroll deductions help employees to lower their annual taxes. There are many classifications of “small business” depending on who you talk to, but two employees is pretty clear.
Myth: Group RRSPs are too hard to administer for new/departing employees
Fact: Investment advisors with the right expertise and experience can help small business owners navigate through the group RRSP onboarding/closing process with ease. When you consider a Robo-Advisor which is programmed to facilitate this process, you will appreciate how consistent, error-free and easy this process can become.
Your ex-employees may choose to use the money to buy an annuity, take it as cash, transfer the funds to another RRSP, or move it to a Registered Retirement Income Fund.
Myth: Group RRSPs are too expensive
Fact: Just like with many services, with the right provider, a group retirement plan can be made affordable for your small business. When you offset the tax savings you and your employees will realize from defined and matching RRSP contributions, and work with a provider like Nest Wealth that makes every effort to minimize mutual fund fees, you can mitigate the high costs that banks and traditional investment firms charge.
Myth: It’s easier to just pay my employees a higher salary, and let them decide how to invest for retirement.
Fact: The truth is, many prospective employees would rather take a lower salary and avoid the tax bracket increase if possible. There are many opportunities for tax savings with TFSAs, RRIFs and others, but contributions each pay period forces savings, and often an employee won’t notice their pay deduction. If you don’t offer a group RRSP plan, you’ll likely find it difficult to hire top talent.
Myth: Our management team is working flat out already to grow our business. We don’t have the time to manage a group RRSP plan.
Fact: Once you set up a company plan, ongoing management activities are minimized, when you partner with the right investment advisor. If your team is busy, relieving them of the burden of managing their own retirement portfolio will help keep them focused.
Small business benefits like dental and medical are becoming increasingly commonplace. Investing in your employees’ future with a small business group RRSP from Nest Wealth will pay great dividends over the long term for your business. You’ll have an edge in the race for top talent, and your business will be the better for it.
Your employees won’t have to take time off every year to sort out their retirement investments. Their savings will grow each pay period, and your business can avoid the high mutual fund fees from the banks and traditional investment advisors.