As the Canadian dollar continues to weaken, gas and oil process drop and home prices sky rocket, the Canadian economy continues to remain in a precarious position. The multi-sector decline of the Canadian economy is especially concerning to baby boomers and small business owners, who want to retire but are worried about the financial consequences of not working.
There are an estimated 2.4 million small businesses operating in Canada, a large number of those business are owned by innovative baby boomers who struck out on their own years ago. As they collectively reach the age of retirement, they worry if the economy they helped to bolster over the years will be able to support them during their golden years.
A study released last year by the
Bank of Montreal (BMO) found that, “60 percent of Canadian business owners are concerned with being able to retire from their business, as well as manage cash flow in profitable and challenging times.”
Chris Buttigieg, Senior Manager Wealth Planning Strategy at BMO Financial Group wrote, "Most entrepreneurs are so focused on the day-to-day management of their businesses that they often overlook the importance of effectively managing hard-earned profits and taking into consideration critical medium- and long-term priorities such as retirement and succession planning.”
Buttigieg urges small business owners to develop a comprehensive and personalized wealth plan, which includes a business succession planning component. Thinking about the future as early as possible is the best way to ensure you enjoy the fruits of your labours.
The easiest way to start saving for retirement is to create a retirement savings plan. However, one mere account is not enough to ensure your future is protected.
Retirement experts recommend considering multiple sources of retirement income, special tax considerations, and succession issues when building a retirement plan.
The best way to tackle retirement is to take a multi-faceted approach. This means considering both your personal finances and your business finances, and how the two can work together to help you reach your retirement goals.
Secondly, the decision to sell or stay on as a shareholder of your business has to be made. In the case of selling, making sure you are apprised of all regulations can reduces stress and even help you find extra capital. For instance, there are special tax exemptions that applies to Canadian qualified small business corporations. You may be eligible for an
$800,000 capital gains exemption on the sale.
Dr. Ross Chiaramonte practices
dentistry in his own
private clinic in Owen Sound, Ontario. He’s an example of a
small business owner who is concerned about whether his retirement goals are truly attainable. “I want to live comfortably,” mentions Dr. Ross Chiaramonte. “I was always taught that if you work hard, it will pay off. But, now I know it takes planning and strategy, along with hard work, to secure the future you want.”
Dr. Ross Chiaramonte is among a growing number of small business owners and professionals who are focused on building a strong and robust retirement plan. “I used to think that selling my business would produce enough income for my retirement,” Dr. Ross Chiaramonte adds. “But, my financial planner insisted I diversify with an RRSP and other investments, which is making me feel better about retirement.”
Financial planners suggest creating a realistic pre and post retirement budget with your financial planner. It is also important to review and update the budgets when needed. With strategic planning and well-implemented preparedness, retirement doesn’t need to be a scary thing - after all it is the beginning of one’s golden years.