One of the most common and potentially serious problems for new business is under-capitalization. In the first few years, there probably won’t be much excess cash and the owner may not be able to take much income out of the business. Family budgeting should allow for cash reserves, if possible, to help weather any financial storms.
Once you’ve taken steps to protect your family and your business, you can focus on building the business and reaping the rewards that lie ahead. Professional advice can help you move in the right direction.
You can design a group plan
GROUP BENEFITS ARE no longer the sole preserve of large companies. Various cost-sharing arrangements and benefit options allow even small companies to tailor a group insurance and retirement plan to fit both your employees’ needs and your company’s budget.
Group insurance plans can provide benefits for your employees and reduce management costs. For example, some group plans exclude certain medical and dental benefits. Others impose a maximum on annual payments or charge deductibles. Features like these help lower the cost of insurance for the entire group.
Some flexible benefit plans give each employee the options of choosing only those life, disability, health, travel, or dental insurance benefits that he or she values. Some plans are voluntary, with no mandatory benefits and no minimum participation requirements. Employers can choose which benefits they want to fund.
How to Secure your RRSP Investments
Your Registered Retirement Savings Plan (RRSP) is likely to be one of your most valuable retirement assets outside your business. However, business owners face special risks, such as loan obligations or business reversals that could expose personal retirement assets to creditors.
Protection from Creditors
Segregated funds allow you to keep your RRSP assets secure from creditors. However, certain conditions apply. Creditor protection is available only when the designated
beneficiary is a spouse, parent, child, or grandchild of the person insured. In Quebec, the beneficiary must be related to the policyholder.
Segregated funds can pass directly to your heirs without the need for probate and are generally protected from creditors.
If you were in financial trouble while you purchased the contract, it could lose its protected status. If you hold one of these investment vehicles in a self-directed RRSP, the beneficiary may have to be the trustee, which may remove the creditor protection.
Protect your capital
By law, at least 75% of the capital invested in a segregated fund will be guaranteed at maturity – usually 10 years – or death. In return for the guarantee, you will pay a slightly higher annual management fee.
For a strong RRSP portfolio
With our professional guidance, you can build a fully diversified RRSP that features guaranteed capital and built-in protection from creditors.
Prepare for a Longer Retirement
Thanks to healthier lifestyles and medical advances, people now live longer and are more active than their predecessors. They are also more likely to retire at a younger age. Whereas previous generations could expect to spend 15 to 20 years in retirement, retirees now require savings that will last for upward of 30 years.
Health care costs are rising. In recent years, provincial health care budgets have been growing faster than government revenues. Individuals and employers now foot 30% of the country’s total health care bill. You can expect to pay still more as provincial health care plans trim coverage and governments impose or increase related taxes.
Housing costs are rising. Recent years have seen a strong trend among retirees toward condominium living. Condos offer convenience and security, but they also have monthly maintenance fees. And while homeowners can defer repairs and shop for bargains, condominiums typically have work done on a scheduled basis, including costly refurbishing, regardless of what individual owners might want. If there’s a condo in your vision, remember to factor in these costs.
The Consultant’s Insurance Consultants
#1206 - 90 Burnhamthorpe Road West
(905) 276-5505 1 (800) 604-0040
Fax (905) 270-1177