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Keep your money where it belongs

Save for retirement and take home more money on your paychque at the same time. Yes…it can really happen. Who wouldn’t want to take home more money each month?

If you are contributing to a registered retirement saving plan (RRSP) each month, congratulations. You’re on your way to the retirement you want. While you’re saving for the future there is a way to have more money to enjoy the present—participate in a group RRSP plan offered by your employer.

Contributing through a group plan means the deductions are taken directly from your paycheque, before taxes. This lowers your taxable income, which means that you pay less income tax on each paycheque and put more money in your pocket throughout the year.

The example below shows the benefits of making a group RRSP contribution through a payroll deduction versus making an individual contribution from your take-home pay.

Group RRSP Individual RRSP
Monthly salary $3,750 $3,750
Group RRSP contribution $375 $0
Taxable income $3,375 $3,750
Income tax deducted $844 $944
Take-home pay $2,531 $2,806
Individual RRSP contribution $0 $375
Take-home pay $2,531 $2,431

With a group RRSP, you have a monthly cash flow increase of $100 in this example. You see that each month as opposed to waiting all year for a tax refund.

The above chart is presented for illustrative purposes only. The information is based on federal and Alberta average tax rates for 2014. Consult a tax professional for complete details.

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