Nobody Helps You Plan for This…

Here’s the problem business owners and their families face
While everyone helps you plan for how to save, very few firms help you plan to use those assets when it’s time. The bigger problem is that your tax rates can be dramatically higher than they should be, and you end up using retirement assets to fund the country, rather than fund your lifestyle.

Here’s how to approach it

The starting point is to evaluate your assets. Every asset should be measured in the following ways:

  • Growth rates and the tax implications
  • How it is turned into income and the tax implications
  • How it is transferred and the tax implications

By assessing them this way, you get to plan on which assets you’ll draw on and in what order, to allow you to have the best use of each of your assets. For example, in most cases registered assets and non-registered investment accounts should be spent over a specific 15-20-year period, depending on income needs and marginal tax rates. The idea is to spend your registered portfolio while you are alive to eliminate a 53.53% tax hit on your final tax return. You can defer taxable income, but deferral is not always the best scenario when you take into account the final estate tax hit.

If you’ve been thinking about using funds out of your corporation for retirement income, you’re going to want to be doubly careful. While current tax legislation on accessing corporate funds is already excessive, there is a double tax scenario on future corporate wealth – you and your family will face two layers of tax. The first tax is a capital gain on the shares of the corporation you own. The second tax is the dividend tax that beneficiaries will pay to access these funds.

Planning how you’ll generate income during retirement is critical. Without it, you risk two things: having less to fund your retirement and having wasted years of effort to fund retirement poorly.

Here’s what’s important

A tax efficient investment growth plan, followed by a tax efficient retirement spending plan, followed by a tax efficient estate plan is the only way to get the full value of a lifetime of effort.

Retirement income planning can help you do just that.

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