Special to the Financial Independence Hub
Always show up for a free lunch!
That’s the tongue-in-cheek advice I give all “soon to retire” folks but, frankly, taking advantage of free lunches is key for every investor.
I use the term “free lunches” for all manner of benefits and it’s alarming to me how many people pass them by. Many employers offer employees matching contributions to Retirement Savings accounts that require the employees to pull out their own wallet too.
One major corporation I worked with gave all employees a contribution of 6% of their salary to the Defined Contribution Pension Plan. The employer would contribute a further 4%, contingent upon the employee also contributing 4%. That’s a great free lunch! A shocking number of employees felt they couldn’t afford to participate: they said they couldn’t meet all their other financial obligations without that 4% of salary. Actually, by making the 4% RRSP contribution they also earned a tax deduction, so the after-tax, out-of-pocket expense was even less.
Don’t overlook the daily Special
Many companies offer employees the convenience of group savings programs, even where there are no company-funded contributions. That too has value; the investment choices available in these plans often have significantly below market rate MERs (management expense ratios) and no account fees or cost to buy or sell. One company with which I am familiar has a savings plan offering a solid range of investment funds with MERs ranging from a low of 0.10% to a high of 0.58%.
Only a knowledgeable investor, capable of building a low cost ETF (exchange traded fund) portfolio, could match this low-cost option. If the contributions are made to a group RRSP, the employer can also add the convenience of reducing the tax paid at source. Since the contributions and investments are made regularly, often monthly, we can add the benefit of dollar cost averaging to the mix.
What other free lunches are often overlooked?