Tag Archives: Forbes

Great West Life pilots employer RRSP match for student loans

Canadians enter the workforce with an average of nearly $27,000 in student loan debt. Such high amounts of debt typically take 10 years to repay, which means many delay saving for traditional life goals like home ownership, starting a family or retirement.

“So often it’s a choice between paying down student debt or making contributions to a retirement plan, but there is only so much wallet share available and student loans have to be paid off first, “ says Great-West Life Senior VP of Group Customer Experience and Marketing Brad Fedorchuk.

That’s why in January 2018 GWL is piloting a first in Canada — a voluntary retirement and savings program with select invited employers in their distribution network and their eligible employees. As participating members pay down their Canadian and provincial government student  loans, they will receive an employer-matched contribution to their group retirement savings plan. The goal of the program is to allow members to save for retirement while they focus on paying down their student debt.

Employees will send documentation verifying their outstanding student loan to GWL plus quarterly statements confirming payments have been made. “Once we have verification of student debt repayment, we’ll create a report for the employer so employer matching RRSP payments can be made, Fedorchuk says.

The level of matching (i.e. dollar for dollar; 50 cents for every dollar) and any annual cap on matching will be based on the provisions of the existing group RRSP program. He continues, “Details still have to be worked out, but we envisage this program as a self-selected alternative to group RRSP matching for employees paying down student loans.”

With Americans owing over $1.45 trillion in student loan debt, spread out among about 44 million borrowers, student debt repayment is emerging as one of the most popular new employee benefits. Some U.S. employers also assist students to pay off loans faster by helping them to consolidate or refinance their loans at a lower interest rate.

Although only 4% of U.S. companies offered student debt pay as down a benefit at the end of 2016, according to the Society for Human Resource Management, and employees are typically responsible for income taxes on the assistance received, it is expected that this percentage will grow. Fidelity, PwC, Aetna, Penguin Random House, Nvidia, First Republic and Staples are notable examples of early adopters, Forbes reports.

One advantage of GWL’s Canadian program is that by matching student debt repayments in the group RRSP, contributions are tax-sheltered. Also, subject to any limitations in the group RRSP plan design, employees can withdraw funds to participate in the Home Buyers’ Plan to buy or build a qualifying home for themselves or for a related person with a disability.

Fedorchuk acknowledges that it may be a challenge to encourage students to continue saving in the group RRSP when their student loans are paid off. Nevertheless, he believes that the pool of money accumulated in their RRSPs that they would not have had absent this program will be compelling. “Hopefully we can incent employees to continue contributing and receiving the match instead of shifting their monthly payments into ‘fun money,’ he says.

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Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Nov 27: Best from the blogosphere

Tim  Stobbs from CanadianDreamFree at 45 who met his FIRE (financial independence retire early) goal several months ago recently wrote:

“One particular lesson that has really hit home for me since I early retired is this: FIRE doesn’t change your core personality.  You see I had this lovely fantasy in my head that I would be more active and perhaps start exercising regularly when I left work. I would run or do yoga like every other day.  Of course, I’ve never made working out a priority earlier in life so this really hasn’t changed that much since I retired.” 

That must be why over 12 years since I left my corporate job and a year into semi-retirement my closets could still use a good cleaning and I struggle to make it to the gym three times a week.

That also may explain Why being rich makes people anxious. Kerry Hannon from the New York Times reports in The Toronto Star that multi-millionaire Thomas Gallagher who is retired from his position as vice chairman of Canadian Imperial Bank of Commerce World Markets says, “Emotionally, I don’t come from money; I got very lucky on Wall Street. I have more money than I had ever imagined, but I still worry — do I have enough, if I live longer than I thought?”

And financial anxiety among Canadians is not only surprisingly pervasive and but not limited to the very rich or the very poor.  Rob Carrick in the Globe and Mail discusses a survey by Seymour Management Consulting which reveals that One in two Canadians is a bundle of nerves about money. Low-income people are most stressed, but one in three people with incomes of $100,000 or more are on the list of worriers.

So How do you know when it is the right time to retire? Retire Happy’s Jim Yih says retirement readiness is not tangible. He notes that one of the most significant trends is that more and more people want to work in retirement, plan to work in retirement and/or are being pulled into work in retirement.

“There are more opportunities than ever to work in retirement.  In fact the new terminology that is not so new anymore is the idea of planning a PHASED RETIREMENT or a TRANSITIONAL RETIREMENT. Personally, I think it’s great and I think a lot of people are finding success with this idea,” he comments.

Retired actuary Anna Rappaport identifies the same trend in an opinion piece Moving To The Next Step: Reboot, Rewire, Or Retire? for Forbes. She suggests that while many people may seek to continue working at traditional jobs into their 70s or 80s, others may wish to leave their career positions to build new career paths. People who held senior roles during their careers often find rewarding a period of professional activity with less responsibility, before totally leaving the labor force. Some seek memberships on corporate and/or nonprofit boards. Other people seek volunteer or not-for-profit roles, working in areas that are meaningful to them.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.