Many employers offer defined contribution pension plans or group RRSP accounts where your big bad boss will match your contributions up to a specific amount. All you have to do is get enrolled in the plan and start making contributions. Yes, usually you will have to contribute some of your own money to get the free money but you 100% need to do that! I know, I know...you're probably thinking that you might not be able to spare that extra $50 or $100 per month, but I'm here to tell you that you can. It's going to automatically come off your pay cheque, and I promise you won't even miss it. Then you're doing yourself a favour by getting a jump on saving, and you can think of it as getting a raise at the same time. If your boss is matching your $100 per month contribution that's like an extra $1,200 added to your salary every year. You wouldn't think twice about it if your boss offered you a $1,200 bonus, would you? By not enrolling in your group plan that is exactly what you are doing. Plus, if you're saving into an RRSP you'll also get a bump on your tax return.
It really is that easy, and that's why it is so shocking how many people don't take the time to learn about what job perks are available to them. There was a study done in the States in 2005 by James J. Choi, David Laibson, and Brigitte C. Madrian called '$100 Bills on the Sidewalk'. They studied this exact phenomenon in the US and found that between 20% and 60% of participants lost up to 6% of their salary by passing up matching plans offered by their employers. Six percent might not sound like a lot, but it's money that's owed to you. I certainly wouldn't throw away 6% of my salary just for being a little lazy or uninformed.
The typical process for employer-offered plans is that the employee has to 'opt-in'. I would love to see this changed so that the default option is automatic enrollment, and if you don't want to contribute you have to actually 'opt-out'. That way people aren't forced to save but it makes it that much more challenging not to and laziness would actually impact you positively for once! You can understand why employers would be against this; right now they get to boast about having a good pension plan but don't actually have to pay out the benefit to all of their employees.
If you're not sure if you're missing out on a plan at work, then it is 100% worth your time to find out. You were likely given an employee package when you first started your job, pull that out and read it if you still have it. If not, talk to your HR department or your boss and see what perks are available that you might not be using. Here are a few examples that go beyond retirement savings...
- Health benefits: you likely know if you have coverage for medical expenses but are you actually taking advantage of it? Make sure you are going to the dentist, doctor, optometrist, physiotherapist, etc.
- Travel insurance: many benefit plans also include travel insurance. Maybe you can avoid that added vacation expense if your coverage through work is good enough.
- Life/Disability insurance: most plans don't pay out high amounts of life insurance so you'll likely need to supplement that, but you should look and see just how much is available.
- Corporate discounts: if you work for a large company you might be able to get a discount on your cell phone plan, gym membership or even hotel bookings. Many companies are signed up for discount plans like Venngo that give group discounts for a variety of stores and services. For example, I always order movie passes through Venngo and they are almost 40% off the price at the theatre.