Maximizing Employer Benefits for Personal Finance

Recently a lot of my followers on LinkedIn, Social Media and general meetings with clients have been about personal financial planning. Many come to me and want to know how much they need to save for retirement or other goals like purchasing a home or saving for education etc.

During my initial conversation I always ask each client about their employer and what financial benefits they provide first - as I believe its important they know this and take advantage of it before coming to the bank, and often times task them with homework of going to find out and report back.

Often times employers provide many programs that can significantly enhance your savings, health, and retirement plans. I've highlighted some of the key benefits to consider and how they can impact your budget and overall financial strategy.

Stock Purchase Plans (ESPP)

Employee Stock Purchase Plans (ESPP) allow employees to purchase company stock at a discount, often through payroll deductions. This not only provides an opportunity to invest in your company but can also lead to substantial financial gains if the company performs well. Participating in an ESPP can be a savvy way to diversify your investment portfolio, but it's essential to assess your financial situation and risk tolerance before committing.

Matching Savings Programs

Many employers offer matching contributions to retirement savings accounts like Registered Retirement Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs). This is essentially "free money" that can significantly boost your savings. For example, if your employer matches 50% of your contributions up to a certain limit, maximizing your contributions not only enhances your retirement savings but also reduces your taxable income.

Deferred Profit Sharing Plans (DPSP)

DPSPs offer a way for employers to share profits with employees through contributions to a plan. These contributions are tax-deferred until withdrawal, usually at retirement. Understanding the specifics of your DPSP, including eligibility and vesting periods, is crucial for long-term planning. The growth of these funds over time can substantially contribute to your retirement nest egg.

Health and Wellness Accounts

Employers are increasingly recognizing the importance of employee well-being, offering Health and Wellness Accounts (HWAs) to cover various health-related expenses. These accounts can be used for everything from gym memberships to mental health services. Utilizing these accounts not only promotes a healthier lifestyle but also helps manage out-of-pocket expenses, freeing up budget for other financial goals.

Pension Plans: DBPP vs. DCPP

Pension plans can vary widely between employers, with Defined Benefit Pension Plans (DBPP) and Defined Contribution Pension Plans (DCPP) being the most common. DBPPs provide guaranteed payouts in retirement based on salary and years of service, while DCPPs depend on the contributions made and investment performance. Understanding the structure and benefits of your employer’s.

Homework for You:

Speak with your employer about what benefits they offer and really understand how they work. Get all the information you can and then speak with a Financial Advisor/Professional about how this affects your plan.

1. Do they offer a stock purchase plan?
2. Do they match any portion of your contributions to these plans?
3. What types of accounts and plans do they offer (RRSP, TFSA etc.)?
4. Do you have a DCPP or a DBPP and what are the details of it?

Have questions? Book a call with me by sending me a direct message!