Business Solutions

Many high-earners want to create more wealth within the limits of their paycheque. There are several ways to accomplish that goal. Consider your contributions to various retirement savings accounts while being mindful of your family’s cash flow needs. A proper strategy can allow you to build your retirement savings and potentially lower your tax bill. There will be opportunities to have tax deductions on several investment solutions.

Action: If your retirement account contributions have been on “autopilot” for more than 12-18 months, now is the time to revisit your choices.

Your taxes in retirement will look very different from what they are today. As you plan for your eventual retirement, you have an opportunity today to arrange for different income sources and a strategically designed order of withdrawals in an effort to lower your tax burden.

For example, some individuals may choose to fund their retirement with a sequence of draw-downs that represent tax-free return of capital. That may allow them to defer drawing down the growth portion of their accounts until later years.

Pension income splitting between spouses could be a tax-saving option, as well.

Action: Research tax rules as they apply to different income sources in retirement, so that you can direct your savings to appropriate accounts today. Consider combining “return of capital” strategy with a Tax Free Savings Account (TFSA), as one could receive return of capital and never have “deemed disposition” held in TFSA.

Unlike their more “traditional” counterparts (stocks, bonds, mutual funds, term deposits), alternative investments have only been available to a select group of institutional and accredited investors until recently. However, with financial innovation, legislation changes, and the introduction of less expensive versions of alternative investments that are available in fund versions from various companies, this asset class has now become accessible to families like yours.

If you haven’t thought about adding alternative investments to your financial plan, now is the time to reconsider. Alternative investments can significantly increase your portfolio’s return, increase diversification during times of economic volatility, and get you access to some of the most skilled, sophisticated investment managers available.

Action: Some of the alternative investments to consider include REITs, Infrastructure, Mortgages, ETFs, Private Debt & Equity. Work with your advisor to choose the right investment mix for you, as each class of investments has unique risks and benefits.

As your business continues to grow, having a strong corporate investment plan can assist with a variety of areas. The conversations around having a good investment plan can involve reviewing the current structure of your business, usages of any holding companies, and how assets are being invested. Further conversations will explore the expected growth of the company, time horizons, needs & goals, and financial planning concepts [creditor protection, retirement savings, IPPs, and RCAs], tax planning conversations [lifetime capital gains exemption, small business deduction, corporate owned life insurance, and charitable contributions]. Generally having a well written investment plan will help increase your growth, lower overall tax exposure, and assist in achieving targeted goals.

Action: Now would be a great time to review how much your corporation is holding in your business bank accounts, and reviewing what the rate of growth is for any assets not being utilized or spent in the next 12 months. This will allow for development of a strategy on where to hold or invest these assets, and any recommended improvements to structure within your company

Between federal, provincial, and territorial taxes, it’s important to know how close you are to the edges of your current bracket each year. For those on the edge of their current tax bracket, a small amount of additional taxable income could potentially create a higher tax liability.

However, that doesn’t mean you must forgo additional cash flow. Talk to your financial advisor about creating a stream of non-taxable income for you and your family by using the risk-management side of financial planning. Families that have a high-earning spouse and a low-earning (or a stay at home) spouse may consider distributing additional income between the spouses to potentially lower the overall tax bill.

Action: Monitor your income levels in relation to your overall tax bracket each year, so that you can make smart choices that balance your family’s cash flow needs and your tax bill.

An employer-sponsored defined benefit plan can transfer wealth to your family while also earning beneficial tax treatment on the company side, earning you and the company a “double tax advantage”. Therefore, an Individual Pension Plan (IPP) can make a significant difference for business owners, executives, and incorporated professionals. Upon retirement, an IPP could be converted to an annuity, a Life Income Fund, or a pension.

Action: If you own your business, earn more than $125,000 in salary, are over 38 years old, and have stable earnings, talk to your advisor about using IPP. Remember that IPP and Registered Retirement Savings Plan (RRSP) contributions must be coordinated carefully each year to avoid penalties for overcontribution.

There are a lot of areas of their business that owners need to be watching when growing. No matter what size of business you are, one of the areas that we can’t look past is the importance of a great team of people. Forging a vision of where the direction of the company goes, falls on an owner’s sense of creativity. The success of this vision correlates to the strength of the people working in the company. Three areas are significantly effected by the culture of your team; Recruiting, Retention and Productivity. Having a robust and attractive employee benefits plan, and retirement/pension plan can increase the ability to attract key people, improve company culture, and keep your team together longer. Fifty four percent of millennials consider benefits first before choosing where they want to work. Companies with better teams, aren’t just happier – they are more profitable. Companies with significantly engaged & positive team are 22% more profitable than teams with poor engagement.

Action: Improving the area of benefits and retirement plans for employees can be a big boost to attracting and keeping key employees. Consider doing an audit of your current plan [we can help] if you already have one, or start looking into how improvements in this area could help grow your company. Starting or maintaining an employee benefits plan may be easier than you may think, and are multiple options from traditional plans, to hybrid and extremely flexible options.