The Three Question Fact Find for Business Owners

Part 3 of 3

Welcome to the final installment of my series on the three question, fact finding process.  If you’re just joining us take a few minutes to catch up by going back and looking at the first five instalments and accompanying videos here:

Question One – Do you have any Debt?  Blog and video.

Question Two – Do you have a plan to sustainably protect and grow your assets?  Blog and video

Question Three – Where do you want your money to go after you die?  Blog and video

Question One for Business Owners – What would happen to you, your business and the people you care about if you didn’t show up to work tomorrow?  Blog and video

Question Two for Business Owners – Do you have a plan to protect and reward your most loyal employees?  Blog and video

Now the final question, where we start to think about life after business.


Question Three – Do you have a plan to one day exit the business?


Retirement for a business owner looks a lot different than it does for most regularly employed individuals.  Most small business owners don’t have any kind of employer sponsored RRSP or pension plan, their assets tend to be tied up in the business itself and their accountants, for the most part,  have done everything they can to reduce reported income on a yearly basis to avoid income taxes.  The result, as an individual approaches retirement, is that they are looking at a lower CPP entitlement and significant illiquidity making it challenging to fund a retirement income.

As a business grows you may not be thinking about your exit plan.  Many business owners joke that they will never retire, either because they love the work too much or they recognize that these issues will hold them back.  Regardless there will come a day when you simply can’t go to work anymore.  A good exit plan will provide you with some choice as to when that day comes and prevent you, or your family from having to sell the business quickly, at a huge discount, just to survive.

Two things to consider when developing your exit plan.

First, make sure you have a fully funded partnership buy/sell agreement containing Life, Disability and Critical Illness Insurance.  This will prevent the need to quickly sell assets at a time that may not bring the best price in order to fund an unplanned retirement, due to illness, injury or death.  If you are a sole proprietor or single shareholder corporation the need for these insurance products is by no means reduced.  Business owned insurance products could be the difference between a long and happy retirement and bankruptcy, it’s that simple.

Second, consider setting up an Individual Pension Plan (IPP).  This is a supercharged RRSP program, owned by the business for the benefit of a key executive or owner.  Many business owners have an income that is too high for the RRSP limits and relying solely on RRSP investments to fund retirement is unrealistic.  By setting up an IPP you can keep a lot of the money inside the company and pay it out over time as a pension without maxing out on RRSP contribution and RRIF income in the same way.  When you sell the business the IPP may either stay within the company, as in a case where a second generation takes over, or it may be exported into a personally owned retirement income plan/ annuity, that pays you a regular (tax advantaged) income for the rest of your life.

Regardless of how you approach retirement one thing is certain, whether you want to or not, you will stop running the business one day.  Either as a result of a formal plan to sell or transfer to family or as a result of a health emergency, or death.  Without a plan of how to manage this transition the cost, in taxes and legal fees could quickly erode the value of your life’s work and leave you and your family with only a fraction of the value you’ve put into it.

For more information or help with your financial plan contact: or simply leave a comment below.

Quick Tip #5 – The Value of Advice

A financial security advisor will help you build a financial portfolio that’s right for you. According to Morningstar – an investment resource that specializes in investment planning – intelligent planning decisions made with the help of an advisor result in 29 per cent more retirement income. [Aug, 2013]

Calling all Boomers

boomersIn less than three years, the number of retirees in Canada will grow to 5.7 million people!

By 2036 nearly 1 out of 4 Canadians will be seniors, thereby outnumbering children for the first time in history.

The Risk of running out of money

Forty years ago Canadians retiring at age 65 could expect to spend about 13 years in retirement. Today, Canadians are living longer and can expect to live as many as 20 to 30 years in retirement, according to the Canadian Institute of Actuaries. This begs the question: “Will today’s retirees have enough?”

Retirement income solution

While statistics clearly demonstrate the pressing need for retirement readiness, according to LIMRA (the Life Insurance Market Research Association) only 11 per cent of pre-retirees within one to four years of retirement have a formal written plan for managing their finances. Having a relationship with a licensed Financial Security Advisor plays a strong role in helping you make the connection between a solid plan and achieving the retirement lifestyle you envision.

The investable assets held by Canadians aged 55 to 74 are currently over one trillion dollars. This is in reference to the amount of money held for the purpose of accumulating and preserving wealth and that number, according to the federal government, is expected to increase significantly and almost double by 2022. Think about your own portfolio and what this means to you – especially when it comes to retirement planning.

Have you talked to your financial advisor about:

  1. Your vision for retirement? How you plan to spend your time?

  2. How much guaranteed income you expect (old age security, Canada Plan/ Quebec Pension Plan, traditional employer pensions, etc) and how much you will need to cover essential expenses along with allowing you to live the life you have planned?

  3. The strategies you can include in your income plan to provide some growth potential so you can maintain your buying power in retirement?

These are all questions a good Financial Advisor can help you answer. At the Meekonomics Project part of our mission is to help people get out of debt, build wealth and leave a legacy. We deal with these and many other questions regarding retirement income planning every day. For more information how you can optimize your investments to achieve the retirement you desire write to –