Should I Contribute Toward My Group Savings Plan?

by Noah Bucholtz, B.Comm, LLQP

Contributing to a group savings plan is a decision influenced by various life stages, marital status, age demographics, and family dynamics. Let's explore how these factors shape the trends and considerations for participation in a group savings plan.

Single Individuals:

• Early Career (20s-30s): Many young professionals start contributing early to their group savings plans, especially if their employers offer matching contributions. The focus is often on building a financial foundation, and the long-term growth potential of investments is appealing.

• Financial Goals: Singles may be saving for personal milestones like travel, further education, or buying a home.

• Trends: High participation due to initial enthusiasm for saving and potential employer matches.

Married Individuals:

• Starting a Family (Late 20s-40s): Priorities may shift towards saving for a family and future education expenses. Group savings plans could take a backseat to immediate needs like childcare costs. With that being said, many group retirement plans offer registered education savings plans, allowing employees to have all investments under one roof.

• Dual Income: Married couples may have the advantage of two incomes, allowing more room for contributions.

• Trends: Participation might decrease temporarily as financial resources are redirected but could increase as family expenses stabilize.

Age Demographics:

• Mid-Career (40s-50s): Many individuals ramp up contributions during these years to catch up on retirement savings. The realization of the approaching retirement age becomes prominent.

• Empty Nesters (50s-60s): With children grown and potentially financially independent, contributions might increase further as discretionary income grows. A recent article published by the Wealth Professional reveals that “44% of Canadians aged 55-64 have less than $5,000 saved and one in five workers have nothing put by at all.” (Randall, 2023)

• Trends: Higher participation due to a heightened sense of urgency about retirement and reduced family financial responsibilities.

Individuals with Children:

• Education Planning (30s-50s): Parents may prioritize saving for their children's education alongside retirement planning. Balancing these goals can influence contribution levels.

• Trends: Fluctuating participation as parents navigate between retirement and education savings.

Trends and Why:

• Employer Matching: Remains a significant motivator across all life stages. Individuals see it as an attractive way to increase their savings without impacting their take-home pay.

• Financial Situation: Individuals facing financial constraints may pause or reduce contributions temporarily, highlighting the importance of addressing immediate needs first.

• Financial Goals: Life events and goals strongly influence participation. Long-term goals like retirement and short-term goals like buying a home compete for attention.

• Tax Benefits: Tax advantages, such as deductions or tax-free growth, encourage contributions, especially in countries with favourable tax treatment for retirement accounts.

• Investment Options: Availability of diverse investment options appeals to those seeking growth opportunities and those seeking stability, depending on their risk appetite.

• Flexibility and Accessibility: Plans that allow early withdrawals for specific needs (e.g., first-time home purchase) attract individuals who want to balance retirement savings with other financial goals.

• Contribution Amount: The flexibility to adjust contributions over time accommodates changing financial circumstances.

• Financial Advisor: More individuals turn to financial advisors, recognizing the need for professional guidance, particularly as financial situations become complex.

Participation in a group savings plan is deeply intertwined with life stages, marital status, age demographics, and family considerations. Employer matching remains a universal incentive, while financial situations, goals, and professional advice influence individual choices. The evolving nature of these factors contributes to the dynamic trends we observe in group savings plan participation.

References:

Randall, S. (2023) Retirement becoming an ‘elusive dream’ for aging Canadians, Wealth Professional. Available at: https://www.wealthprofessional.ca/news/industry-news/retirement-becoming-an-elusive-dream-for-aging-canadians/377004 (Accessed: 30 August 2023).

For further guidance or inquiries, feel free to reach out to me:

Noah Bucholtz, B.Comm, LLQP

Group Retirement Specialist

Peak Benefit Solutions

Phone: 705-868-6780 Email: noah@peakbenefitsolutions.com

Noah Bucholtz holds the position of Group Retirement Specialist at our Peterborough Peak office supporting new and existing clients in their retirement needs. Noah has recent experience as a Client, Banking, and Financial Advisor with a top three Canadian bank.

Born and raised in Peterborough, he received his Bachelor of Commerce at Ontario Tech University. Noah has a passion for working with clients to meet their retirement goals and is excited to provide this expertise to the Peak team. In his spare time, Noah takes advantage of the outdoor lifestyle Peterborough provides, supports the Peterborough Pete's coaching staff and spends time with family.

Peak Benefit Solutions Inc. was established in 2008 and have helped more than 400 clients from entrepreneurs, manufacturing, professional services and public organizations with their comprehensive benefits planning. Every step of the way, we are with you.