A succession plan will help assure business continuity.

If you’ve built a successful business, you know that having a plan is critical to making it work. By the same token, readying your business for your retirement, or to enable it to carry on if anything happens to you, is an important piece of the puzzle.
While there are no set rules about what to address in a succession plan, you may want to include such details as:

• The successor: family member, business partner or someone
  new who will buy out your share
• Timeframe/transition period
• Key personnel changes and skill retention
• Training and development of new leadership
• Legal considerations: buy-sell agreement, estate plan/will
• Risk management
• Communication strategy
• Financial considerations: retirement income, insurance,
  ​sale price, tax implications

Protecting your most valuable asset: You
Your exit strategy not only recognizes when you are planning to retire from the business, but it can also address any potential surprises that may impact your ability to remain in charge.

You may develop a major illness or injury that takes you away from day-to-day operations. Having insurance in place can ensure your company will continue to function in your absence, while also protecting your own earnings and family, particularly if you’re not able to return:

• Disability Insurance: All owners should have their own insurance that covers their monthly earnings in the case of an illness or injury that requires long-term healing. It may include a buy-out clause.
• Business Overhead Expense Insurance: This provides funding to the business of any overhead expenses (such as payroll or rent) if payment of these costs may be jeopardized by being away for an extended period.
• Critical Illness Insurance: This is generally a lump sum payment that helps you cover your bills if you have a serious illness.
• Key Person Life Insurance: A life insurance strategy may include a payout to the business for continuity, or to your estate to minimize any tax implications. Life insurance proceeds may also be used to equalize payments to heirs, as it’s possible that, if you have multiple children, only one will be interested in taking over the business.

If you plan to retire, you need a plan
If it’s time for you to hand over the reins, your succession plan should address the time horizon for your transition and how much involvement you will maintain. You may want to execute a buy-sell agreement with partners or co-owners. It outlines the circumstances of your leaving, as well as the price that will be paid for your share of the business. Insurance can be used to help minimize the tax impact of a small business sale as well as financing retirement income.

There are many tax-efficient ways to protect your business and help you transition to your retirement.

Contact us if you’d like to learn more about these business-owner strategies.

This article was prepared by AdvisorStream for Al Mcdonald and is legally licensed for use by AdvisorStream.

TORONTO – The National Institute on Ageing (NIA) and the FP Canada Research FoundationTM released Get the Most from the Canada & Quebec Pension Plans by Delaying Benefits, a research paper authored by Dr. Bonnie-Jeanne MacDonald, outlining the significant benefits of delaying pension benefits up to age 70.

“Delaying Canada and Quebec Pension Plans (CPP/QPP) benefits for as long as possible is the safest and most inexpensive approach to get more secure, worry-free pension income that lasts for life and keeps up with inflation,” said Dr. MacDonald, director of financial security research at the NIA. “But less than one per cent of Canadians choose to delay benefits to age 70, with most taking their benefits as soon as they are eligible at age 60.”

The average Canadian receiving median CPP/QPP income can expect to lose over
$100,000 of secure lifetime income, in today's dollars, over the course of their
retirement by choosing to take benefits at age 60 rather than 70 – just from the age-
adjustments alone.

Even delaying benefits by a single year from age 60 to 61, can make a significant difference in retirement. A $1,000 monthly benefit at age 60 increases to $1,112.50 if the individual waits until age 61, and goes up to $2,218.75 at age 70 - for life and with inflation protection.

The research indicates that more than half of Canadians could have delayed taking their benefits by at least a year, and over a quarter could have delayed for more than 10 years by using only their RRSP/RRIF savings to bridge the income gap. However, current practices, often anchored in outdated assumptions about retirement, encourage Canadians to take their benefits early.

“Retiring with dignity means having peace of mind knowing you have a reliable income as you age,” says Tina Tehranchian, Senior Wealth Advisor with Assante Capital Management Ltd. “Putting a financial plan in place will help create a roadmap to manage money earned and invested so that when it’s time to retire, there’s a steady income stream. As a result, people are more financially independent and can delay collecting government sponsored pension plans.”

Retirement has changed, and industry practices should adapt to the current environment – one in which Canadians are facing longer periods of time in retirement, scarcer sources of secure pension income, low interest rates, and fewer adult children available to provide care to ageing parents as their health declines.

The goal of this research paper, funded by the FP Canada Research Foundation, is to help retiring Canadians make more informed decisions about when to start their CPP/QPP benefits. Full findings of this paper are available at: https://bit.ly/3a3hszx. The National Institute on Ageing is a Ryerson University think tank focused on the realities of Canada’s ageing population. The Foundation is committed to technical research that examines and challenges current practices in financial planning, behavioural research that examines the impact of human behaviour on effective financial planning and societal research that examines the benefits of financial planning on society as a whole.

To get the most out of your RRSP, it’s important to understand how it works. An RRSP on its own doesn’t constitute a retirement plan. Think of an RRSP as a special type of savings account that offers tax advantages to help you save for retirement.
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Any money you put into an RRSP reduces your taxable income for that year. This is why many Canadians who contribute to their RRSP look forward to receiving a tax refund in the spring. The tax you would have paid on that income gets deferred until you retire. RRSPs are particularly useful when you’re in your peak earning years and anticipate being in a higher tax bracket today than when you’re retired and no longer working.

While you may see the immediate refund on your tax bill, that’s not the only tax benefit an RRSP offers. Your RRSP also provides a tax-free way to grow your savings until you need to withdraw the money and convert it to a Registered Retirement Income Fund (RRIF) by age 71. As mentioned earlier, your RRSP is simply an account; it’s how you decide to invest within that account that matters. RRSPs can hold a variety of investment vehicles, including stocks, bonds, mutual funds, exchange-traded funds and GICs. How you invest will depend on your goals and risk tolerance. Any investments you hold in your RRSP can grow and take advantage of the potential for tax-free compounding.

Maintaining a well-diversified portfolio can help you mitigate risk and volatility, and ultimately help you achieve your retirement goals. The mix of investments that make the most sense for you will depend on a variety of factors, such as your ability to save, your risk tolerance and your goals. Depending on those factors, two people of similar ages and incomes could have very different portfolios. An Investment Advisor can help you decide on the right asset mix and develop strategies to help you save for retirement and your other goals.

Key features of RRSPs

1. Generally used for retirement savings.
2. Annual contribution limit of 18% of your previous year’s income to a maximum of $26,500 for the 2019 tax
   year, minus applicable pension adjustments, plus any unused contribution room from previous years.
3. Contributions are deductible from income.
4. Investments grow tax-deferred (tax is paid when the funds are withdrawn).
   RRSPs work well when they’re used for their intended purpose – retirement. With a few notable exceptions, making early withdrawals from your RRSP can result in a hefty tax bill. If you need to save for shorter-term priorities like a kitchen renovation or a new car, consider alternative savings vehicles that don’t impact your retirement nest egg, such as a Tax-Free Savings Account (TFSA).
   
   

Typically, one in four Canadians contributes to their RRSP each year, making a median contribution of $3,030.1 Even small amounts can help. Setting up a regular contribution and investment plan will take the stress off the tax deadline and set you on the path to a comfortable retirement.

This article was prepared by AdvisorStream for Al Mcdonald and is legally licensed for use by AdvisorStream. This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances.

So, you’ve landed your first “real” job!
Now’s the perfect time to create your first investment plan.

First, let us congratulate you on getting through school and starting your first “real” job. You’ve worked hard to get here, and we're sure there are many things you’ll want to spend your new paycheque on – an apartment of your own, some decent takeout (not from a student cafeteria), maybe a little travelling.
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You should do those things, as long as they fit into your budget. You’ve earned a little breathing room. But now that you have some stability, you should also start thinking about investing for your future. Here are three ways to get started...

1. Pay down debt
As a student, you may have accumulated a mix of debt, from student loans to credit cards. Create a debt-repayment plan that focuses on paying off your high-interest debt, like credit cards, first. Student loans often carry lower interest rates – and in Canada, the interest you pay on many student loans is tax deductible – so these loans might not be your top priority. At the same time, many student loans require you to make a minimum monthly payment shortly after you graduate, and you only have so much time to repay the entire loan. So, you need a loan-repayment plan to make sure you don’t default on these loans.

2. Build your emergency fund
Post-graduate life isn’t all sunshine and rainbows. Sometimes your air conditioner breaks down in the middle of a heat wave or your car dies on the way to a meeting. I suggest putting 10% of your paycheque into an emergency fund to cover unexpected expenses. The goal is to eventually have enough money in your emergency fund to cover three to six months’ worth of expenses, but it can take a while to get there.

Your emergency fund should be low risk and easy to access. You can use a regular savings account, but there are tax benefits to using a Tax-Free Savings Account (TFSA). The investment income you earn within your TFSA isn’t taxed, and neither are your withdrawals.

3. Think about retirement
This is the best time to take advantage of the power of compounding. If you start putting just $200 a month into your Registered Retirement Savings Plan (RRSP) at age 25, and let it grow over the next 40 years at a 4% rate of return, you’ll have about $237,000 in your RRSP when you turn 65.

Wait another 10 years to start investing the same amount at the same rate of return, and you’ll reach age 65 with about $140,000 in your RRSP. That’s a big difference.
There are many ways to save for retirement, but RRSPs offer the most significant tax advantages. You can deduct your contributions from your income taxes, and you won’t pay taxes on any investment income you earn within the plan until you start making withdrawals.

If you’re ready to start investing, contact us today about creating your first investment plan.

This article was prepared by AdvisorStream for Al Mcdonald and is legally licensed for use by AdvisorStream. This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances.