8 assumptions that create bad retirement surprises for employees - #3
Stephanie Holmes-Winton
Helping financial professionals find the money to fund their clients' dreams
This is probably one of the saddest mistakes we see employees make. While making an RRSP a default choice for all retirement savings isn’t a great idea for most, group RRSPs with employer-matched funds is a different story. This is essentially like getting a raise. These programs are often not utilized to the extent they should be. Some focus on the fact that their take-home pay will be reduced, losing sight of the fact that their total compensation will be increased by the match their employer makes.
Behaviourally, this type of program is also very effective. First, it’s automatic and deducted at source, so the employee tends to forget about it. This helps us get out of our own way. Several studies have proven making the default of your program that employees opt-in automatically (so they have to manually opt-out if they don’t want to participate) actually increases enrollment and, therefore, employee financial well being.?
Humans like short cuts, and things that are easy. Sometimes getting us to act in our own best interest is as simple as making us put in the slightest effort to act against our interest. So having to fill out a form and follow up to opt-out of retirement contributions could be just enough to keep us saving.?
Check out #6 in this article that includes the potential cost of passing on an employer-matched RRSP program.
Behavioural cash flow expertise that lets you do money like it makes sense ? Certified Cash Flow Specialist ? Qualified Associate Financial Planner ? Financial Coach
1 年I am trying not to deliver a very sarcastic retort to this myth. But WHAT? How would it ever make sense not to take free and guaranteed growth without very little risk exposure? As an advisor, I always coach my clients to maximize their opportunities at work, and I would be remiss not to! Thanks for bringing these to light!