Working with us to create your financial plan helps you identify your long and short term life goals. When you have a plan, it’s easier to make decisions that align with your goals. We outline 8 key areas of financial planning:
- Income: learn to manage your income effectively through planning
- Cash Flow: monitoring your cash flow, will help you keep more of your cash
- Understanding: understanding provides you an effective way to make financial decisions that align with your goals
- Family Security: having proper coverage will provide peace of mind for your family
- Investment: proper planning guides you in choosing the investments that fit your goals
- Assets: learn the true value of your assets. (Assets – Liabilities)
- Savings: life happens, it’s important to have access to an emergency fund
- Review: reviewing on a regular basis is important to make sure your plan continues to meet your goal
Retirement planning can be a complex process for us all, but if you are the owner of a small business it may can get even more complicated, due to the various factors and circumstances that you have to take into consideration. A common mistake made by small business owners is reinvesting extra money to grow their business, at the expense of putting it aside to save for their retirement.
Although there is no magic formula for getting started on a retirement strategy for your business, there are some general principles which might help you to get a handle on the steps that you need to take. One of the key ideas is the consideration of both your business and your personal finances and how to structure and integrate the two in order to create a robust retirement financial strategy.
Here are some tips on how to get started on a retirement plan.
- Set aside time to plan for the future – It’s important to make retirement planning a priority, or you run the risk of never getting around to it. A professional financial planner can help you to assess your personal circumstances and create a personalized plan that suits you and your business, with the right balance between saving and reinvestment to help your business to grow.
- Think about your future retirement income – Here are the main sources of retirement income that small business owners usually rely on:
- Equity held in your business – If your business is successful, you are likely to benefit from equity from it in your retirement. Selling your company is an option, particularly attractive to some as, in some cases, you could benefit from the lifetime capital gains exemption on the sale. Of course, finding the right person to run your business in the future is easier said than done. A clear succession plan, created in advance of your retirement, can help you to ensure that business continuity will be affected as little as possible and will give you peace of mind as you approach your retirement. You may also want to consider using the expertise of an accountant or mergers and acquisitions specialist to help you to value your business correctly and also look after your interests when liaising with potential purchasers.
- Alternatively, you may choose for your children to inherit your business, or you may decide to retain ownership of dividend-paying preferred shares in order to maintain an ongoing source of income.
- Registered plans – A Registered Retirement Savings Plan (RRSP) can offer personal tax deductions on your contributions, plus your savings will grow as tax-deferred whilst in the plan. In addition, tax-free savings accounts (TFSAs) can be a useful way to save tax-free in particular circumstances.
- Consider offering a retirement savings plan to your employees – Paying your statutory contribution of the Canada Pension Plan is just the minimum – many small businesses choose to offer their employees enhanced pension contributions as an incentive or employee benefit. For example, you could match their RRSP contributions to a set limit, to help their retirement nest grow more quickly. Alternatively, you could offer a benefit plan with an investment contribution package from an insurance company, which can be a more straightforward and cost-effective choice.
- Be sure to diversify – As a small business owner, you should avoid putting all of your eggs in one basket, financially speaking, as this could leave you vulnerable to changes in the market. Try to diversify your investments and spread your funds in order to protect yourself and engage the help of a professional where necessary to help you to do so.
In summary, it’s important to remember that retirement planning is a process which is unique and personal to your own and your business’ circumstances and there is no uniform approach which works across the board. Take time to take stock of your current situation, as well as your goals for the future and this will help you to create a retirement plan that is right for your needs, both current and future.
Shared Ownership Critical Illness offers business owners and incorporated business professionals a way to access the retained earnings in their corporation or provide benefits to a key employee.
Talk to us to see how we can help you.
- Financial Planning for Business OwnersNovember 1, 2019 - 2:00 pm
- Insured Retirement ProgramOctober 2, 2019 - 11:36 am
- Succession Planning for Business OwnersSeptember 1, 2019 - 2:00 pm
- When and Why You Should Conduct an Insurance AuditAugust 1, 2019 - 1:00 pm
- The Difference between Segregated Funds and Mutual FundsJuly 1, 2019 - 1:00 pm
ACA Financial is an independent financial advisory firm founded on the principle of client-focused advice. Our approach, listening and understanding our clients' unique needs. The result, a clear and mutual understanding and the foundation for all planning considerations. We are committed to demonstrating value by delivering on each client's need for growth, safety, liquidity and cash flow.
LIFE AND HEALTH INSURANCE PRODUCTS ARE PROVIDED BY ACA FINANCIAL. LIFE AND HEALTH INSURANCE PRODUCTS AND SERVICES ARE NOT AVAILABLE THROUGH DESJARDINS FINANCIAL SECURITY INVESTMENTS INC. (DFS INVESTMENTS) NOR ARE THE INSURANCE PLANS OR SERVICES AVAILABLE AND/OR OFFERED SUPERVISED OR REVIEWED BY DFS INVESTMENTS. DFS INVESTMENTS IS THE MUTUAL FUND DEALER THROUGH WHICH MUTUAL FUND PRODUCTS AND SERVICES ARE PROVIDED.