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:
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:
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.
Delaying Canada and Quebec Pension Plan Benefits Can be the Most Cost- Effective Approach to Securing Retirement Income for Life
Many Canadians are giving up substantial lifetime pension income by claiming pension benefits before age 65
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-
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.
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
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.