Small Business Owners
Retirement Planning for Small Business Owners
a small business owner what their business plans are for the next two
to five years and they will be able to articulate their projected growth
in sales, and new markets they are hoping to expand into, etc. The
response is often different if you ask about their retirement plans.
of the best ways to start a retirement plan is to make regular RRSP
contributions that allow your retirement savings to grow in a
Many small business owners choose to
receive their remuneration in the form of dividends because of the lower
tax rate on dividends, but we caution that you shouldn't forego a
salary in favour of dividends just for the tax savings; instead,
determine the optimal salary/dividend mix that will minimize both
corporate and personal income tax, and maximize RRSP and CPP/QPP
An Individual Pension Plan (IPP) is an attractive
alternative to an RRSP for owner-managers 45 years of age or older. An
IPP is a defined benefit pension plan for owner-managers and their
spouses. The corporation makes tax-deductible contributions to the IPP
based on actuarial valuations and, in return, the member receives a
guaranteed lifetime pension at retirement.
An IPP is not
inexpensive to set up and maintain; however, it allows a small business
owner to make larger contributions than through an RRSP and thus
increase retirement assets. As well, the assets within the IPP are
While it's not unusual to expect income from the
future sale of a business, small business owners must consider the
potential for fluctuations in value over time. What is considered a
growth industry today might not be so in 20 years.
too hard to leave your financial future to chance. Make your retirement
plan a top priority. Talk to your BMO Nesbitt Burns Investment Advisor
about developing your plan.