No Need to Wuk ‘till yuh Dead, Boss – Financing Your Retirement

Author: Nicole Chaitan-Kissoon


If you plan the future of your finances, your business can pay your pension when you don’t want to work in it anymore. This is an important piece of the puzzle for small business owners. Failing to properly finance your retirement could have consequences you’re not gonna like.

Consequence #1: You don’t get to retire
If your business is your only revenue and there’s no money coming in without you, then your leaving means the business folds. Your retirement seat could be a folding chair in the office when you’re tired and grey. 👴🏽😔

Consequence #2: You become a drain to the business you built 🏚️ 
Even if you train second-generation managers to take the baton when you hit 60+, if you don’t plan properly, paying your pension will be a drain on business revenue when you’re no longer contributing to it.

So, how do you fund your retirement without working till you drop or draining the business?

The Answer:
You pay yourself a pension through a registered annuity. An annuity is an investment fund, usually from an insurance company, used to generate a pension.  The insurance company invests your contributions (called premiums) in low risk instruments. Your money grows with compound interest every year. 💰💰💰🌱

A registered annuity is one that gets you a tax deduction on your contributions. That’s a big tip – save your pension where you get a tax break and an interest rate higher than inflation. If prices are going up faster than you’re earning interest, your retirement savings won’t support the lifestyle you want. Here’s an analogy to explain.

Bonus tip for CEOs:
If you’ve registered your business as a company, the government will help pay for retirement. 😮 How, you ask? Use a Corporate Annuity. That’s just a registered annuity that is owned by your company. It’s a big deal because it makes your pension savings a legit business expense that you can then deduct from your taxable profits. 

Here’s the math:
If, for instance, the tax rate on profits where you live is 35%, then for every $1000 bucks you put into your corporate annuity, you’ll owe the government $350 less in taxes out of your business profits.  

Being your own boss is tough, but if you take on the responsibility for planning your finances into the future, rather than just earning a salary today, it is possible to have the best of both worlds. Boss, you are now responsible for saving smart for your future.

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