Retirement Strategy for Incorporated Business Owners

Are you relying on the future sale of your business to fund your retirement? A better strategy would be to secure money in an Individualized Pension Plan (IPP). Then, when the time comes to sell your company, your future will already be secured. The IPP is one of the best wealth strategies available for incorporated business owners.

Here’s why.

By the time you reach retirement, your company could be dramatically devalued in today’s wildly fluctuating market. We’ve seen it happen, for example, with taxi li-censes––when Uber penetrated the market––and in the restaurant industry during the pandemic. Such a situation could put your future plans in peril.

An IPP is a registered, defined-benefit pension plan, provided by your corporation. Setting up a pension for yourself, inside your own business, is a smarter, more secure strategy; and you can include shareholders and key executives as well. It offers bene-fits both for you, as the future retiree, and for your company.

It’s like a supercharged RRSP, allowing for the accumulation of more assets—up to 65% more—with so many advantages. Such as tax-deferred compounding until you retire. And it is creditor protected under Canadian pension laws. It allows for tax de-ductions when transferring RRSP assets into the plan. Also, because it is a defined benefit, it provides the security of knowing how much your retirement pension will be, unlike a RRSP.

Eligible employer contributions, plus all investment and administrative fees, are tax deductible for corporate tax purposes. Which is a great advantage for your business. One attractive feature is the ability to top up the plan throughout the life of the IPP. You can bonus yourself money to reduce your taxes, if your income becomes too high; for example, putting an extra $50,000-$100,000 into your plan. You have the flexibility to contribute the maximum eligible amount when your business is doing well and, in leaner years, as little as 1%. Unused portions can be accumulated toward a future year’s contribution. And the terminal funding option, along with additional top up opportunities, means you can further enhance your retirement by transferring more money.

Retire smarter! To set up your IPP, you can work with me. I will in turn work with an actuary to set it all up. There are far more benefits than what has been discussed here, so set up a call to explore all the ways an IPP can help you secure your wealth.