February 2, 2015 – Own a Business or a Professional Corporation? You May Not Want to Contribute to An RRSP


This article was prepared solely by Larry Short who is a registered representative of HollisWealth®, a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC).The views and opinions, including any recommendations, expressed in this article are those of Larry Short alone and not those of HollisWealth®

It’s that time of year again – radio, newspaper, and television ads are actively promoting the RRSP as the ‘be-all retirement tool’ that you should definitely take advantage of.

If you are a business owner or have a professional corporation, that is not the case – and you should consult your accountant or investment advisor before taking any action. This topic has been covered in many previous articles, however its importance bears repeating.

You see… an RRSP is a great tool for employees to save for retirement, especially those who anticipate being in a lower tax bracket than during their working years. For business owners and professional corporations, the math is not as straightforward and they may be further ahead NOT contributing to an RRSP.While this statement opposes the media hype of RRSP season, when you crunch the numbers the results clearly illustrate that if you have to withdraw funds from the company or Private Corporation to make the RRSP contribution, it is not worth doing. If you expect in retirement that you will pay the same tax rate that you are paying now, then the RRSP contribution is not your best option.

For individuals in this situation, we recommend utilizing a holding company for the funds you would otherwise use (and lose to taxes) to accumulate savings for your retirement.

A word of caution … this strategy is not for everyone. Your specific circumstances will dictate suitability, and that’s where we come in. For years, we’ve helped business owners and corporations examine and determine their optimum financial solution.

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