Retirement for Business Owners | iAssure

Mindset: Retirement as Multi-Decade Wealth Transfer

For incorporated owners, retirement isn't a single event: it's a multi-decade process of transitioning wealth from your corporation to your personal accounts, and eventually to the next generation. This requires thinking beyond traditional pension planning to coordinate corporate cash, personal investments, and insurance structures.

The "dynasty-first" approach means asking: How do we structure withdrawals to minimize lifetime tax? How do we maintain corporate wealth for estate strategies while funding personal lifestyle? How do we pass the business and accumulated wealth to the next generation efficiently?

Mechanics: How Retirement Works for Incorporated Owners

Corporate Cash and Investments

Your corporation may have accumulated cash and investments over decades. During retirement, you'll need to decide:

• When to withdraw: Timing matters for tax. Dividends, salary, and capital gains are taxed differently.
• How much to withdraw: Balance current lifestyle needs with future tax optimization and estate strategies goals.
• What to keep in the corporation: Some wealth may stay corporate for estate strategies, business succession, or future opportunities.

Personal Retirement Accounts

Personal accounts (RRSPs, TFSAs, non-registered) work alongside corporate wealth:

• RRSP withdrawals: Coordinate RRSP withdrawals with corporate dividends to optimize tax brackets
• TFSA flexibility: Tax-free withdrawals can supplement corporate dividends without increasing taxable income
• Non-registered accounts: Capital gains treatment may be more tax-efficient than dividend income in some situations

Insurance as Retirement Asset

Corporate-owned or personally-owned permanent life insurance can serve multiple retirement purposes:

• Tax-sheltered cash value accumulation
• Estate liquidity to pay taxes on corporate assets
• Tax-free death benefit for beneficiaries
• Potential source of tax-advantaged retirement income (policy loans)

How to Apply: Owner Playbook

Here's a practical approach to retirement strategies for incorporated owners:

1. Define your retirement goals: What lifestyle do you want to maintain? What legacy do you want to leave? How long do you expect to live (plan conservatively)?
2. Inventory your wealth: List corporate cash and investments, personal accounts (RRSP, TFSA, non-registered), insurance policies, and any other assets. Estimate current values and projected growth.
3. Work with your CPA: Your accountant can help model different withdrawal strategies and their tax implications. This is critical: the wrong approach can cost hundreds of thousands in unnecessary tax.
4. Design a withdrawal sequence: Generally, you'll want to:
   • Use TFSA withdrawals first (tax-free)
   • Coordinate RRSP withdrawals with corporate dividends to stay in optimal tax brackets
   • Time corporate withdrawals strategically (consider RDTOH, CDA, and capital gains treatment)
   • Preserve some corporate wealth for estate strategies if that's a goal
5. Consider estate strategies: How will remaining corporate wealth pass to the next generation? Estate freezes, trusts, and insurance structures may be relevant. Coordinate with your notary and lawyer.
6. Review and adjust: Retirement strategies should be reviewed regularly as tax rules change, your situation evolves, and you get closer to actual retirement.

Worked Example

Consider an incorporated owner, age 55, planning to retire at 65:

• Corporate investments: $2,000,000 (growing at 5% annually)
• RRSP: $500,000
• TFSA: $100,000
• Target retirement income: $150,000 per year (after tax)

Scenario A (Ad-hoc approach): Withdraws $200,000 annually from corporation as dividends. Pays approximately $60,000 in tax, leaving $140,000 after-tax. Depletes corporate wealth faster, may face higher tax in later years.

Scenario B (Coordinated approach): Withdraws $50,000 from TFSA (tax-free), $50,000 from RRSP (taxed at lower bracket), and $100,000 from corporation (optimized timing). Pays approximately $35,000 in tax, leaving $165,000 after-tax. Preserves corporate wealth longer, maintains flexibility for estate strategies.

Over 20 years of retirement, the coordinated approach could save $500,000+ in lifetime tax while providing more flexibility and better estate strategies outcomes.

Decision Checklist

Consider retirement strategy coordination if:

• You're within 10-15 years of retirement and haven't designed a withdrawal strategy
• You have significant corporate cash and investments but aren't sure how to access them tax-efficiently
• Your personal retirement accounts (RRSP, TFSA) aren't coordinated with your corporate wealth
• You want to maintain some corporate wealth for estate strategies or business succession
• You're concerned about tax efficiency during retirement years
• You want to ensure your retirement strategy works across multiple decades, not just the first few years

Important Notes

Mutual funds are offered through WhiteHaven Securities Inc. Investment products and related services are provided through WhiteHaven Securities Inc. Insurance products and certain other services are provided through iAssure Inc., an independent firm in the insurance of persons and in the group insurance of persons. These activities are neither the business nor the responsibility of WhiteHaven Securities Inc.

This is educational content only. Retirement planning requires professional advice. Strategies involving tax, investments, and insurance must be coordinated with your CPA, lawyer, and qualified advisors. Always review your plan as rules and circumstances change.

Fact-Check & Sources

• CRA: Eligible Dividends
• CRA: Other Types of Dividends
• CRA: RRSP and Related Plans
• CRA: Tax-Free Savings Account