Saving for retirement is often a conundrum for the business owner. Your accountant weaves their magic to make your income look small, maybe using dividends or other devices to make sure you pay as little tax as possible. The result is very little new Registered Retirement Savings Plan (RRSP) contribution room each year and maxed out Tax Free Savings Accounts (TFSA). So what can a self-employed person do?
Maximize your TFSA the right way
All too often, TFSA funds end up stuck in options that make miserable returns that don’t even keep up with inflation, and/or the funds are locked into an investment that isn’t liquid enough for a business owner’s needs. Don’t forget, the funds in your TFSA should be fairly easy to access because – especially when you are self-employed – “stuff happens” and you want to be able to roll with the punches.
As of 2017, you can have up to $52,000 of original investment in an individual TFSA (and the same in your spouse’s) so make sure you optimize this great savings opportunity by investing it to your greatest advantage.
Optimize your retirement savings
Contributing to your RRSP is still a good idea, and the best place may be a Personal Pension Plan (PPP) through your financial advisor. Offering similar benefits to an Individual Pension Plan, a well-structured PPP simplifies the process and will save you money.
Structure it right
Another way to find the funds for retirement would be to either sell your business, or find a way to pull out capital. Of course, some business structures are better for this than others, and the best time to think about all this is well before you plan on retiring.
When you own a business, there are ways to use business assets to build a retirement nest egg while you are still working. A TFSA is not the only tax shelter available to you, and a dual licensed Financial Advisor can work closely with you to insure you have more than one source of income in retirement, and that they are structured as tax efficient to keep as much of your nest egg as possible in your pocket, and not the CRA’s.
Darlene Garat and the team at Garat Financial Group work with their clients to create real security. Contact them at 250.287.2310, or visit www.garatfinancial.com for more information.