Investing 101 › GRSP < Investing 101

Group retirement savings plan

So, what is it exactly?

GRSP is a hard-to-pronounce acronym that stands for “group retirement savings plan.” Picture it like a pension plan or a registered retirement savings plan (RRSP), except that it’s administered by a business instead of a person. What happens is a company sets up a GRSP, and employees can take advantage of it by contributing as much as (in 2018) 18% of their income for a maximum of $26,230. That money can be invested in all manner of products, from savings accounts to mutual funds.

The money you put into a GRSP is pre-tax—which means, because you’re not supposed to touch it until you retire, you don’t have to pay income tax on that portion of your income until later. GRSPs are also portable, so you can take your account with you when you leave your job, or even cash it out if you can afford to pay the tax.

What are the pros?

There are lots of benefits here. First, as we mentioned above, you lighten your income tax burden: You don’t have to pay income tax on up to $24,930 each year. Second, employers often throw in a little bit of money, too, usually matching your contribution up to between 3 and 5% of your salary. That’s right, your company is giving you free money just because you’re saving for retirement! (And because the contributions are tax deductible for them.) And the interest, dividends, and capital gains you earn from your investments will also be tax-free.

Finally, since you’re contributing each week, you’ll get to take advantage of dollar-cost averaging, a fancy way of saying that you’ll make sure you’re not buying all your investments at their yearly peak in price.

Is there anything to be careful about?

A few things. For people who want control of their investments, participating in a GRSP could be frustrating. The employer sets up the plan and chooses the company that manages the accounts, so you’ll have limited choice when it comes to investments. Some plans also restrict employees from taking money out of the plan when they leave the company.

And of course, you’ll have to pay income tax on any amount you take out when you do withdraw your money.