1. “
A little-known retirement plan
for mature entrepreneurs
It’s not the money that keeps Kevin
Watson from dwelling too hard on
retirement. Watson and his wife,
Cathy, own and operate a vineyard
in Niagara-on-the-Lake. It’s from
their grapes that big Ontario brands
such as Inniskillin and
Jackson-Triggs make their tasty
offerings of Merlot, Cabernet Franc
and Pinot Gris.
The couple, both in their mid-40s,
has worked hard over the past 15
years to build the small business to
where it is today. They’re enjoying
much success, but are still a long,
long way from wanting to cash it all
in. “This is what we like to do. I
don’t think of it as a job,” Watson
said. It’s a sentiment that rings true
for a lot of small-business owners,
most of whom are too busy running
the day-to-day operations to give
much thought to the future. For
many, the sole retirement strategy
rests on income generated from the
sale of the business when the
owner is good and ready to give it
up. Great for those sitting on a
business that’s in demand, but far
from a safe bet.
A roadmap for the everyday
entrepreneur
There are other options out there
that a mature entrepreneur might
want to consider as a means to
better feather the nest in old age.
A holding company, for example,
may be just the ticket.
“A holding company can be used as
a tax-deferral investment vehicle
during the working years,
excess of $50,000, Shelestowsky
says a holding company is a better
option than investing in RSPs.
Among the benefits, Shelestowsky
said a holding company gives
business owners more control over
the flow of income in retirement – a
bonus for individuals who want to
keep working past 65 years, as well
as, those who want to dispose of
their main operating company and
tap into their savings.
While RSPs are taxed at the
owner’s marginal tax rate, a holding
company can allow individuals to
take taxable dividends, which are
more tax efficient or capital
dividends, which are tax free.
Victor Godinho, a financial advisor
with VTAG Financial Group in
Toronto, says he recommends
certain clients set up a holding
company right off the batMr. Godinho’s father started taking his son to real estate investment seminars at a young age. “My dad believes when you invest in something tangible, you have security in your investments. With a portfolio of stocks, your money is at risk. He always stressed how important real estate is.”
and an income source during
retirement years,” says Paul Shele-
stowsky, senior wealth advisor with
Meridian, Ontario’s largest credit
union.
Indeed, for individuals, often in their
40s or 50s, who’ve grown their
business beyond the infancy stage
and have retained earnings in
“if they think they’ve got a homerun of a
business.” Yes, a holding company can be far
more efficient than RSPs in retirement. In
addition, Godinho notes, it can also allow for
easier estate planning. If the business owner
dies, for instance, investments in a holding
company are taxed as capital gains. If the funds
were in an RSP, they could be taxed as
ordinary income.
Holding companies aren’t for everyone
“For many business owners, it is something that
is out of their comfort zone. It takes time and
work. It is a commitment,” says Shelestowsky.
But, he says, for the right people, “the pros so
far outweigh the cons.” For Kevin and Cathy
Watson,
the idea of setting up a holding company only
recently made sense, both from an immediate
and long-term perspective.
After talking with their accountant, the couple
began to actively pursue the option as a
compliment to their existing RSPs.
As a businessman, Kevin Watson agreed it’s
not always easy to stay focused on complex
financial matters, especially if they relate to
retirement. He’s got his eye on more land he’d
like to buy as he continues to grow the
business, and he’s nowhere near finished. “It’s
a lot more fun to make money than invest it,” he
says. That said, Watson doesn’t deny that the
holding company has opened up a whole realm
of possibilities for the company and family, now
and in the future. “The more familiar I get with it,
I just see so many more opportunities. It makes
it better and better,” he said.
Special to Yahoo Finance By Darah Hansen
Mon, 12 Jan, 2015
“For many business owners, it is
something that is out of their
comfort zone. It takes time and
work. It is a commitment,”
Client Care: 1-855-415-4075 | Office: (416) 915-4165 | Fax: (416) 915-3177Website: www.pangeafinancialplanning.com
In January 2015, PANGEA Global
Wealth Group Corporation acquired
VTAG Financial Group Inc. Mr.
Victor Godinho is now President
and Sr. Financial Planner at
PANGEA Personal Financial
Planning Inc. PANGEA Global Wealth Group
Corporation is a Canadian Controlled Private Corporation.