Retirement Planning for Business Owners in Calgary
If you’re like many business owners in Calgary, managing and growing your business takes up so much time that it can be difficult to find the time to do other things.
With family time and all the personal things that need your attention, how many hours are there left in the day?
That can mean that long-term strategies like retirement planning are shelved.
Before it is too late, it’s important not to realize too late that your financial security in retirement years won’t just happen even if you do have a successful business. You need to plan for it.
Give yourself time and make considered choices and you will see handsome benefits later. The steps you take right now will be the foundation that funds the retirement you hope for.
At Spectrum Family Law in Calgary, an experienced retirement planning lawyer can help you safeguard your family’s financial security without deflecting focus from running your business.
How can business owners start retirement planning?
For business owners, planning for a comfortable retirement is usually higher stakes and involves greater complexity than for employed individuals.
But anyone planning to retire must cover certain basics from the start. Everyone wants to achieve financial security for their families. We need to break this down a little by considering the following questions:
- What is your ideal lifestyle in retirement?
- How much money will you need to support this lifestyle?
- What is the value of your current assets (both personal and business)?
- Do you have any potential income streams for retirement- from investments, pension plans, or your business?
- What might you need to meet medical and long-term disability needs in the future?
- What would happen if a tragic event occurred and you were incapacitated or killed?
- What is the shortfall between what you have now and what you need for your ideal retirement and aged care requirements?
It can be difficult to gaze into the future and come up with answers on your own – especially regarding medical and aged care needs.
One of our retirement planning lawyers will sit down with you and take you through the main considerations, discuss your options for creating a retirement plan that will work for you, and consider how to avoid the main pitfalls and mistakes made by others.
Often, there are some tough choices to make. However, it is usually better to make those choices now rather than having them forced on you later or having to make compromises that you had never envisioned.
What are the “big ticket” items with retirement planning?
For business owners, it’s generally best to focus on the following areas when creating your retirement plan.
Income from savings and pension plans
Savings and pension plans can be an important income stream during retirement and, in combination with other income, can help fund the lifestyle you want.
This may include:
- A Registered Retirement Savings Plan (RRSP)
RRSPs have tax-deferral benefits and you can include your life insurance in the plan. It may be preferential to a standard Retirement Savings Plan (RSP).
- A Tax-Free Savings Account (TFSA)
You can make contributions to tax-free savings accounts with after-tax income. Any income you earn from this is then tax-free, even when you make withdrawals.
- An Individual Pension Plan (IPP)
With an IPP for your business, you can make contributions from you and the business as a deductible payment. Your contributions can be withdrawn in retirement.
Passive income from assets
In addition to savings and pension plans, funding your lifestyle will probably require other forms of passive income.
If you plan to exit the business, you may consider investing in rental properties, mutual funds, or other investments to generate the steady income you need.
To be effective, this should be considered and planned well in advance of retirement.
Lifetime CGT exemption for business sales
There are many tax implications involved with selling a business to fund your retirement and these must be considered in full before you make a decision.
Unexpected tax implications can scupper your plans. It is best to speak to one of our retirement planning lawyers to avoid unnecessary taxes.
If you do things the right way, you can enjoy lifetime capital gains (CGT) exemption as a business owner. However, that will require the following:
- At least 50 percent of the fair market value of the business to be in active business assets for two years before you sell it, and
- At least 90 percent of its fair market value in active business assets on the date you sell it
As you can see, a quick business sale is in nobody’s interests except the Canada Revenue Agency’s. It’s important to plan for a business exit well in advance.
Disability and life insurance planning
Consider the effect on your family, your business, and your employees if you were in an accident and suffered temporary or permanent disability.
It is important, therefore, to take out insurance policies that cover you, other shareholders or partners, and your family from a scenario that could be catastrophic for your business.
Life insurance will protect your family in the event of a tragic event and is another important part of a comprehensive retirement plan.
Retirement planning services for business owners in Calgary
If you are wondering how you can fund your retirement and protect your family or considering how to exit the business or pass it on to family members, Spectrum Family Law can assist with the following services:
- Succession planning and consultation
- Retirement planning and consultation
- Family trust planning and consultation
- Estate planning and consultation
- Inheritance advice and guidance
- Financial planning, analysis and reporting
- Business tax planning and consultation
- Personal tax planning and consultation
Business and tax legislation changes frequently and the decisions you make today may need tweaking as the laws change.
It pays to work with experienced lawyers who stay across the changes and can advise you both now and in the future, based upon your short-, medium-, and long-term financial goals.
It’s never too early to start retirement planning…
Comfortable retirements don’t just happen. Most people who enjoy financial security in their later years have taken considered steps years before to get there.
If you’re based in the Calgary area and want to start planning for retirement, start with a free consultation with a retirement planning lawyer at Spectrum Family Law or call us for a consultation at Call (780) 756-0076.