Business owners: Why you should consider Individual Pension Plans.

Today I would like to share an excellent article written by my good friend, Benoit Poliquin, CFA, and Portefolio Manager at Pallas Athena Investment Counsel located in Ottawa.

Why you should consider Individual Pension Plans

•You have faced many challenges of running a successful business or practice.
•Your ultimate challenge as an owner/manager will be to continue your business success into retirement.
•Individual Pension Plans, can become your very own defined pension plan - thus having more financial certainty.


IPPs for Business Owners
In a sentence...the answer is more retirement capital.

Are you thinking about retirement? If so, you are probably thinking about what you'll be doing in retirement. You are probably asking yourself (at least you should be!) how you will fund this retirement.

For successful business owners and professionals alike, the sale of your business may not be sufficient to fund your retirement. This is even especially the case if you are selling to family members, children or partners, where you could be asked to finance a considerable amount (all of?) purchase price.

Maybe your business won't be worth as much with you out of the picture? Have you considered this reality?

Perhaps you've made some great personal and financial sacrifices to ensure your venture' success. Take advantage of Individual Pension Plans and make up for "lost time".

So plan ahead! Have your current business set aside a retirement nest egg....just as if you worked for a large employer. Benefit from the same legislation, the same group of professionals like actuaries, investment managers and custodians to help you manage your future next egg.

What is an Individual Pension Plan?An individual pension plan (or IPP) is a defined benefit plan for owners of successful businesses.

What do we mean by defined benefit plans?
•The IPP is designed to ensure the beneficiary has a defined amount of capital at retirement.
How do I accumulate this retirement capital?
As in any pension plan, the capital accumulated comes from two sources: Investment Returns and Contributions.

The contributions are made by the sponsor of the IPP (the employer) and the returns are the fruit of the investments selected in the plan. Much like a conventional RRSP, you can invest in stocks, bonds and mutual funds.

There are three components of the Contributions . Past Service Contributions, Current Service Contributions and Future Service Contributions.

Contributions are based an actuarial calculations that takes into account your age, your years of service, investment returns of the plan assets and your salary. When you create an IPP, the employer/sponsor, can in many cases, make past service contributions (which is tax deductible for the employer!) into your IPP. Ongoing contributions are also tax deductible for the employer.

How do I know I should consider an IPP?

An IPP is a defined benefit plan for owners of successful businesses.

Here are the questions you should ask yourself. If you answer yes to ALL of these questions, then you should consider creating an Individual Pension Plan.

Questions:

1. Do you own, control (and in some cases manage) a profitable business?

2. Have you been employed by your current employer for at least five (5) years?

3. Are you over the age of 45?

4. Do you have taxable annual employment earnings(excluding dividends) of over $100,000?

for more information, click here