Lower-income workers should join workplace pension plans: report
Economists frequently assume that employees “pay for” employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages.
Wages and fringe benefits are generally perfect substitutes, so that an additional dollar of wages should substitute for an additional dollar of fringe benefits and vice versa.
But that's not necessarily true, says tax analyst Eric Toder in a recent brief.
While higher-income workers clearly benefit from such programs -- they face higher tax rates than low earners during their working years, so the tax deferral is more valuable, and are more likely to drop into a lower tax bracket at retirement than low earners who are already there. That doesn't mean lower-income workers shouldn't sneer at such plans, however.
Because low-income employees receive little tax benefit from saving in employer-provided retirement plans and may prefer cash in hand to additional retirement savings, they could actually end up short changing themselves, he says.
Employer contributions may actually increase their total compensation and they would be better off signing up when there's a matching program in place.
If there's a plan at your work, do you participate? Does your employer match? Did your wage level affect your decision to join in any way?
By Gordon Powers, MSN Money
Posted by: Long Ago | Jan 25, 2022 7:15:58 AM
Difficult to contribute during low income years if you need 100% of the income to just survive.
Posted by: John B | Jan 25, 2022 8:18:04 AM
The above comment posted by Long Ago says it all. We cannot save because No. 1 we don't get paid enough and No.2 we pay to much tax on what we do make. Bye-Bye middle class - we have only rich and the struggling class in today's society.
Posted by: True | Jan 25, 2022 11:31:57 AM
LOW INCOME SHOULD NOT BE TAXED, PAY CHEQUE JUST ENOUGH FOR THEIR BASIC NEEDS. GOVT SHOULD NOT TAKE ANY MORE. GET MORE MONEY FROM THE RICH !!
Posted by: Shawn | Jan 25, 2022 12:37:06 PM
I disagree all people that are a part of Canadian society need to help and I do agree that they should pay something. If we did not would that make us any better than the rich who pay very little right now?
Posted by: sissycuck | Jan 25, 2022 1:36:30 PM
Most people who get thier comments/Thoughts publizised(like this author) have NEVER had to Live on these low wages! They might have worked part time in school for some extra pocket money but that's about it!
They ALLWAYS seem to say(directly or indirectly) that WE the lower income folks are at fault for being poor in our old age because we don't save enough!
They allso thow in that They pay more taxes!
However--the folks with higher incomes can easily afford all the tax dodges& they end up in Real terms paying a lower %age of taxes than the rest of us & you NEVER(except for Waren Buffet) hear them say they should pay the same %age in taxes to make things fair!
I really defy these people to try& live on a low income for a yr or two& then tell us to take even lower wages in loo of benifits!
If your going to give advice--Make it more realistic!
Posted by: True | Jan 25, 2022 3:12:22 PM
LOW INCOME... DON'T READ THIS... JUST GARBAGE!
Posted by: Toughto save | Jan 25, 2022 4:12:43 PM
It's obviously tough to save money on a small salary but the point he makes is that you should take advantage of any employer contribution towards pensions savings, no matter how small. It's money which you wouldn't have otherwise. Where else can you get a guaranteed doubling of your money?
Posted by: Gordoh | Jan 25, 2022 4:18:36 PM
5 to 6 percent of take home pay put into any pension plan will pay off over the long haul. Having it deducted from your pay makes it easier and if the employer kicks in his share it's even better... been there done that... it works!
Posted by: me | Jan 25, 2022 5:40:19 PM
from 1999 to 2004 i worked in a nova scotia factory as a maintenance electrician, when i was hired, my salary was $10.50 per hour, when i left it was $16.50 per hour. they would match contributions up to $400.00 per year, that is one hell of a nice pension plan for a tradesman (bullet to the head retirement). i now work in alberta, and fly home. i make more money than i have ever made in nova scotia, i am treated much better than i ever was in nova scotia, who wants to work for a boss that pays you peanuts and makes you feel like he is doing you a favor, belittles you and your work, who expects you to be on call every weekend without pay and complains when he can't reach you(for $10.50 per hour, my cell phone is off, i can't afford to waste minutes). thank you alberta for the hope that you give me.
Posted by: Walter | Jan 25, 2022 11:13:12 PM
Isn't the term "workplace pension plans" just code for: "yet another way to allow incompetent/ corrupt administrators to free you of your savings."
Firstly, there will be no retirement for anyone 45 or under (accept this fact & life becomes easier).
Secondly: Any large pool of money will a) just be used or taken by anyone in government when times get tough (and they will) and b) Quickly evaporate when the government printing presses start churning out the money to inflate away gov't debts.
Does any sane person think our Gov't will have anything left when the Babyboom generation goes through their alzheimers years?
Take care of your health and your family folks, that is your only true hope of a secure retirement
Posted by: Canuckguy | Jan 26, 2022 12:59:11 PM
It is sad and frightening to say your pessimistic outlook is too real a possibility.
Posted by: getting stupid here | Jan 26, 2022 6:48:19 PM
OH...for crying out loud...only the rich get into those nursing homes...let me add, with decent care. (Whether you get diagnosed with alzheimer's or something else while your rich family is trying to use the family doctor to pawn you off on someone else to take care of. ie. nurses/nursing homes.) For the rest of us you MUST keep your health up and rely on your family. So don't p*** them off! Quit trying to rely on the gov't. Rely on yourself and those you love and vice versa.
Posted by: Northern Ontario | Jan 29, 2022 11:29:31 AM
I have contemplated proceeding with this pension plan option for my employees. As a small business with less than 50 employees, I currently do not have a plan for them. Instead, I simply upped their wage accordingly and they can use that money and decide where to allocate those funds. My job is not to force them to save for retirement. If they decide not to contribute to a savings plan, they get penalized by not getting anything from me. This way, they get the money no matter what. Of course, they will be taxed on it should they not allocate it to a RRSP.
Our tax system is not fair. The well to do will say they already pay more of their share. If someone makes $200K and pays $75K in taxes while someone who makes $40K and pays $11K in taxes; the rich will say they already pay for most of the social benefits like our healthcare. While they might be correct, having $125K left to live on vs. the $29K is a no brainer. Those of us who make more money can easily pay a couple thousand more per year. Who cares if you worked hard and sacrificed to get there, have a little more compassion.
Posted by: neondon | Jan 31, 2022 11:31:00 AM
For those who say they can't afford anything, I simply say: That is your choice. I have seen so many people who say they can't afford due to low income, yet they always have Tim Hortons coffee, and eat out constantly. I ask you: If you had to take a pay cut of $100 per month, would you become homeless? How about $200 per month? You would likely make some changes in your lifestyle such as giving up eating out, or perhaps living with roommates, or some other choice that is different than you are making today. This also means that you can make those choices today anyways, and put the $100 per month into some type of savings plan. There are always choices that can be made. Stop putting the blame on the rich, or the government, or whoever you are trying to blame. Your life is your responsibility and nobody else's. If you have low income then do something about it. Get an education, take night courses to improve your skills, work extra hard at work to become the top performer which will hopefully result in a pay increase and/or promotion. If necessary, go find another job. I always tell people I work with that they don't need another 1% pay raise on their $30,000 income (or $300 per year). What they need to do is work hard and become skillful so they can receive a promotion and a pay raise of $5,000 per year! I found it easy to receive numerous promotions in my career because I always did more, worked more effectively, improved my skills, and educated myself more than the other people I was working with in the same position. As a result, I was promoted, and others were not, despite their many more years of experience than I had. They complained about it, but they were not doing what was required earn anything more than what they were earning. Stop complaining about your income and actually do something about it!! You should not be relying on the government or anyone else for your income or retirement. It is up to you to take care of yourself. Stop complaining, turn off the TV, and do something to improve your life!
Posted by: a question | Feb 1, 2022 10:51:29 AM
Northern Ontario, WHY should the rich have a "little compassion" towards the poor when they struggled to make their $$. Why can't the poor pull up their socks and get a better job??