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What's a GRSP?

Andrew Goldman

Andrew Goldman has been writing for over 20 years and investing for the past 10 years. He currently writes about personal finance and investing for Wealthsimple. Andrew's past work has been published in The New York Times Magazine, Bloomberg Businessweek, New York Magazine and Wired. Television appearances include NBC's Today show as well as Fox News. Andrew holds a Bachelor of Arts (English) from the University of Texas. He and his wife Robin live in Westport, Connecticut with their two boys and a Bedlington terrier. In his spare time, he hosts “The Originals" podcast.

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. When you contribute to a GRSP that money can be invested in all manner of products, from savings accounts to mutual funds.

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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 your contributions. 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.

Last Updated May 18, 2018

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