Should the shareholder of an incorporated business save for retirement through corporate investments or through an RRSP? The answer is complex, and depends on factors such as: personal cash flow requirements, wishes respecting future CPP disability, retirement, death and survivor benefits, applicable corporate and personal income tax rates, and available income-splitting opportunities.
Funding retirement savings for an entrepreneur through corporate savings may be advantageous if: Active business income is taxed preferentially and, when retained in the corporation, personal tax is deferred, use of corporate class investments is tax efficient or if dividend income in retirement is tax efficient compared to RRIF withdrawals.
» Click to view a comparison of savings growth: RRSP vs. Corporation (B.C.) based on one year of corporate retained earnings after payment of dividend to entrepreneur.
Due to our commitment to client confidentiality, we couldn’t provide a real-life example. Each client is unique. This illustrative case study is based on typical financial situations we manage. Contact us to learn more about what your financial recommendations might be, or to hear what real DLD clients have to say, read our testimonials.