Never Leave RRSP Matching Money Behind

How a $500 monthly RRSP contribution can still increase take-home pay

Last week, I met John at a party. We were having a casual conversation when he mentioned something interesting. His company offers a 5% RRSP matching program, but he does not use it.

I asked him why.

John said his annual salary is $120,000. His company allows him to contribute up to 5% of his income to the RRSP, and they will match it. That works out to $6,000 a year, or about $500 a month.

He explained his situation: His net monthly income is about $7,278 after taxes, CPP, and EI deductions. His monthly expenses are almost the same, so there is no extra money left at the end of each month to participate in the RRSP program.

It felt like John was leaving $500 of free money on the table. I kept thinking there must be a way to fix it.

Running the Numbers

When I thought over the issue, the following possible solutions emerged:

1. Ask his family or friends to help cover the $500 monthly RRSP contribution, and pay them back later.

2. Take a $500 monthly loan from a bank, and slowly repay it over time. This could be done when he gets a raise, or if he reduces his expenses.

However, both of these ideas did not feel practical.

At this point, I wanted to understand the situation better, so I decided to run the numbers using a tax calculator.

At a $120,000 gross income in 2026 in Ontario, the taxes and deductions look like this:

Next, I added the RRSP contribution scenario.

I assumed John contributes $6,000 per year to the RRSP program, and his company matches it with another $6,000. This brings total RRSP contributions to $12,000. Because the company’s match counts as a taxable benefit, his total gross income effectively increases to $126,000.

When I ran these numbers through the tax calculator, the result surprised me.

Even after contributing $500 per month to his RRSP, his net monthly take-home income increased by $194. In other words, by participating in the RRSP matching program, John is not only investing $12,000 per year into his RRSP, but also increasing his take-home pay. On top of that, his RRSP continues to grow tax-deferred for decades.

To test this further, I also ran the same scenario at an $80,000 gross income with 5% RRSP matching ($4,000). Even in this case, the net take-home difference after RRSP contributions was only about $75 lower than without contributing.

Conclusion

Even though John contributes $500 per month, his take-home pay can still go up because of the employer match and tax impact.

So, in some cases, not participating may actually cost more than participating.

Disclaimer: This article is for educational purposes only and is not financial or tax advice. Please consult a qualified tax or financial professional before making any decisions.