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    Planning and saving for retirement as a small business owner

    Thinking about the future and retirement planning can be overwhelming for anyone. This can even be more daunting as a small business owner. Without a pension plan or matching program from an employer, it’s up to you to fully fund your future. The good news? Not everything is as scary as it sounds.

    When it comes to your retirement, there are a few simple steps you can take to set yourself up for success and ease the worries of not having enough saved by the time you reach the end of your career.


    Step #1: Determine when you plan to retire

    The first step in retirement planning is to figure out what age you think you’d like to retire from working. Typically, the retirement age in Canada is 65 years old. But it’s up to you to decide what makes the most sense for your lifestyle. Just remember, the longer you work, the more time you have to save up for a comfortable retirement fund. This will allow you to take care of yourself and your loved ones into your old age.

    As soon as you know how many years you have left to retire, it'll be easier to determine how much you may need to invest to achieve that financial goal.


    Step #2: Estimate what your life may look like in retirement

    Once you know your timeline, the next step is to write down a list of things you hope to accomplish in retirement or a list of things you’ll have to pay for once you reach the end of your working life.

    Here are some things to consider about your lifestyle in retirement:

    • Do you plan to travel regularly?
    • What hobbies will you prioritize in retirement?
    • How many dependents will you have to support in your retirement?
    • Where do you want to live once you retire?
    • Will you have any remaining debt to repay?

    Answering each of these questions can help you understand how much your cost of living may be once you retire. For example, if you plan to take a couple of trips every year, you might want to ensure you have enough money to cover flights and accommodations on top of your remaining bills.


    Step #3: Calculate how much money you might need in retirement

    Unlike many Canadians, if you are a small business owner, you may not qualify for Old Age Security (OAS), the Canada Pension Plan (CPP) or the Quebec Pension Plan (QPP). For that reason, you must save a bit extra for your retirement.

    With your age and lifestyle in mind, perhaps the most critical step is to figure out how much money you’ll need in retirement. If you can come up with an estimated monthly cost of living based on your lifestyle decisions, you’ll be off to a great start. 

    If you are looking for a good retirement calculator, try the Government of Canada one to see whether you’ll have enough based on what you’re currently investing in for your future. This calculator will also account for the estimated annual inflation rate of 2% each year, taking a lot of the more complex math out of the equation.


    Step #4: Choose your investment plan

    Now that you know how much money you need to invest for your retirement, the next step is to figure out how much you should be putting away each month to reach that goal and where to put your money. Given that you may not have a group retirement plan, your best options for investment tools are a Registered Retirement Savings Plan (RRSP) and a Tax-Free Savings Account (TFSA). Both of these accounts have tax benefits and allow you to invest in many assets, from stocks to bonds to mutual funds. You can open one of these tools and invest in them through any major financial institution or robo-advisor, such as Wealthsimple or Questrade.

    If you aren’t comfortable investing or aren’t sure where to start, it’s always a good idea to consult a financial professional who will have your best interests in mind.


    Step #5: Don’t forget to plan for the future of your business

    Lastly, a significant part of your retirement planning should be setting up a succession plan or estate plan for your business as a business owner. You love your business, and you deserve to protect each part of your business in the same way you protect your financial future by preparing for retirement. Determine whether you’d like to sell, shut down or pass down your business to someone else in the event of your passing. If you’re unsure where to start, a financial planner can also assist you and advise you on what options exist and how to prepare as you move closer to the end of your career.

    Once you’ve done your due diligence to start to plan for retirement, there is nothing wrong with going the extra mile and reviewing this retirement checklist from the Financial Consumer Agency of Canada. Saving for retirement is especially important. Taking the time to do the math and look at all of your numbers should be a priority — and the fact that you’re here reading about this right now says you know exactly how important it is. Good luck!


    At True North Accounting, we help small business owners set up a foundation for success and thrive. Book a meeting with one of our knowledgeable CPAs so we can help you look at the numbers, give you the low-down on how your business is doing, and create a plan for growth.

    Find more Strategic Advisory topics relevant to you and your small business. 

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