- Canadian Tax Resource Blog - http://blog.taxresource.ca -

Free Money? No Thanks!??

My company offers to match its employee’s contributions to their RRSP’s.  In the program I’m enrolled in my employer will match my contributions to a maximum of 5% of my annual salary plus bonus.  The funny thing is that there are a large percentage of people who do not contribute to an RRSP and thus don’t take advantage of the match. 

I am shocked that someone would turn down free money.  The way I see it, I am giving up 5% of my annual salary and in return I am getting a 100% return on my investment right at the bat.  Three are very few investments out there that can tout a 100% immediate return on investment.  In my case, my plan is fully vested when the company makes the contribution, so if I had to make a withdrawal, I’m already ahead of the game since half of the money was not mine to begin with.

Now I have heard over the years that people say that in these types of program the funds are invested in a mutual fund and the fees associated with mutual funds eat away at the returns.  But perhaps those that feel mutual funds are expensive (and I am one of those people) are missing the point here:  It doesn’t matter of the funds are expensive as long as they have a somewhat decent positive return and remember half of the investment is free money.

Any matching is better than none in my opinion!