Individual Pension Plans
If you are business executive over age 40 with an income over $122,000 you should explore the advantages of a personal pension plan.
More and more business owners and incorporated professionals are discovering the substantial advantages of establishing an individual pension plan. There are many reasons an individual pension might be a great option for you, I will list a few here.
Liquidity means you have investments outside the business that can provide you and your family a reasonable lifestyle, regardless of when and on what terms you ultimately sell the business. Liquidity planning allows you the luxury of working because you want to work not because you have to work.
Diversification is a sound practice to reduce risk. It means you do not have all your eggs in one basket. When you first start out you may not have a choice but as time goes by and your net worth increases it is simply prudent to move some assets into separate pools, protected from the risks of daily business life.
Creditor protection is guaranteed under pension law, if you, or some one you work with zigs when they should be zagging your (funded) pension will be safe.
Increased tax sheltered savings limits; under pension rules you can put as much as 65% more into an individual pension plan than in an RRSP. These added tax deductable contributions can make a significant difference to your lifestyle in the future. (In a recent example a 55 year old man who would have had $687,000 in an RRSP at age 65 chose an IPP where his retirement funding would be $1,008,000)
Stock market risk is moved from you personally to the company (employer). Individual pension plans contemplate a rate of return of 7.5%. If that rate is not achieved then the company must contribute to make up the shortfall. The risk in our volatile markets becomes the responsibility of the employer and your personal financial planning becomes a lot more reliable.
Individual pension plans are an affordable smart alternative to an RRSP. Call my office to book a no cost, no obligation review to see what difference an IPP would make to you.
Financial tools discussed on this website are for Canadian clients based on Canadian and in some cases specifically Ontario laws. There are often parallel products in other jurisdictions and we would be happy to steer you to an authority in the jurisdiction in which you live.