Business employee retirement planning

Employee Retirement Plans incorporate the following:

• Analysis of available investment vehicles and associated yields
• Investment tracking and reinvestment alternatives
• Individual financial and investment consulting
• Establishment and management of individual registered and non-registered retirement savings plans such as:

• Self-directed RRSPs, group RRSPs, & RESPs with the following investment alternatives: investment funds, segregated funds, and labour-sponsored funds.

Group Retirement Options

When your employees retire or are approaching retirement, they will need help through this period of change. Professionals are available to educate your employees about all available retirement income vehicles.  We offer the expertise and services to ease the transition to retirement for your retirees:

• Retirement consulting
• Retirement income projections
• Establishment of retirement income vehicles such as RRSPs, RRIFs, LIRAs, LIFs, annuities

Individual Group Investment Products

Whether you are making investment contributions to save for future expenses or retirement, the Group Investment Program allows you to take control of your personal portfolio and achieve your financial goals with peace of mind.

• Lower investment management fees
• No front- or back-end sales charges
• No deferred sales charges
• No minimum investment
• Self-directed RRSPs
• No annual administration fees
• Consolidated statements

Is your RRSP ready for you to retire?

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The Canadian government regulates the Registered Retirement Savings Plan (RRSP) program, allowing it to have unique tax benefits as you save for your retirement. Annual RRSP contributions can reduce the amount of income tax you pay in the year of your contribution. These monies invested annually grow on a tax-deferred basis, and tax is only paid at the time of withdrawal. RRSP Planning is a very integral part of your investment planning.

Have a look at the graph below to see how RRSP money accumulates over time based on a maximum annual investment.

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Your investments grow tax-free Your RRSP investments accumulate within the plan tax-free, as do any addition to your contributions, including capital gains, interest, dividends, and any other growth via dividends or distributions paid out on an investment fund. The longer your money stays sheltered from the taxman, the greater the tax-free accumulative earning power of your investment. However, taxation occurs once income is withdrawn from your RRSP.

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Planning Together – Spousal RRSPs and Tax

A spousal RRSP allows a couple to place assets in the lower-earning spouse’s registered account. The benefit of this manoeuvre enables the account owner to withdraw more in retirement at a lower tax bracket while retaining spousal RRSP ownership, controlling the choice of the RRSP investment vehicles. The owner also governs when withdrawals are made and pays the income taxes upon withdrawal (if the funds have been in the account for three years).

What happens when the RRSP account holder dies?

For estate planning purposes, upon the decease of the account holder, the RRSP is paid out to the beneficiary designated for that account.

How Much can you contribute to your RRSP?

Your Contribution Limit To find out your allowable  RRSP contributions you are allowed to deduct for your income taxes, check Last Year’s Deduction Limit Statement on your latest Notice of Assessment or Notice of Reassessment. Canada Revenue Agency (CRA) establishes guidelines for the minimum and maximum overall yearly amount a person is eligible to contribute to their RRSP. The basic formula used to determine a taxpayer’s eligible contribution is as follows: 18% of earned income minus any Pension Adjustment = the eligible contribution amount.

Who can contribute to an RRSP? All Canadian taxpayers with “earned income” in the previous tax year, or those having unused contributions carried forward from previous years can contribute to their RRSP. A person is eligible to make contributions to their RRSP until December 31 in the year they reach age 71, provided that they have contribution room.

Two methods of contributing to your RRSP You may invest by purchasing a lump sum investment prior to the deadline. The alternative is to invest on a monthly basis using dollar-cost averaging. You can always top up your RRSP contribution (up to the allowable limit), just prior to the deadline year by year.

The RRSP limit Table

Source: CRA

Revised: January 2021

What is taxable in my final tax return?

Taxation in your final return.

In the year of death, the deceased’s executor must submit a final tax return (also known as the terminal return) to the Canada Revenue Agency (CRA).

All income that dates from your last tax return to the day of your death must be reported, such as:

• Gains on Capital Property Where your property has increased in value above what you paid for it, that gain needs to be reported. In the year of death, one-half of the combined capital gains or losses from capital properties is a net taxable capital gain or a net capital loss. A net capital gain is taxed in the year of death. A net capital loss can be applied against the taxable capital gains of the three immediately preceding years. The balance of the net capital loss can then be applied to reduce any other income in the year of death and/or the immediately preceding year.

• RRSPs and RRIFs If you intended to pass all the remaining value in RRSP/RRIF holdings to your heirs, think again. The entire amount left in your RRSP or RRIF will be classified as fully taxable income. If your spouse or common-law partner survives you, the money will be rolled over to him/her and later taxed as it is withdrawn or after his or her death. Contributions made prior to death are deductible in the year of death. An executor can contribute to an RRSP of the surviving spouse within the allowable limits and within 60 days of the calendar year-end, and get a deduction against the income of the deceased in the terminal tax return.

• Registered Pension Plans (RPPs) A death benefit of an RPP is fully taxable as income of the recipient estate or beneficiary, subject to rollovers to plans for the deceased’s spouse, common-law partner, or dependent children under the age of 18.

• Regular Income All taxable income from employment, a business, or investments must be included in the terminal return. This will include any accrued income not received prior to death, such as holiday pay from an employer.

• Investment Income This will include interest on term deposits, interest due on money you have out on loan, interest on bonds, and the taxable portion of annuity income accrued to the date of death.

What tax advantage does life insurance offer to my estate? 

 There are certain life insurance policies offered with interesting tax-planning advantages. Legal tax exempt rights are allowed in our tax legislation in relation to life insurers, which allows the possibility to accomplish the following:

• Premiums over and above the associated costs of insurance, can be invested and accumulate tax-deferred within certain plans.

• Tax-deferral of the investments continues until such time that withdrawals are taken from the policy.

• Tax is avoided on both the face amount of the insurance, plus any ongoing cash accumulation in the policy, when paid out to the beneficiaries on the death of the insured. Thus, tax is permanently avoided.

Note: Talk to your advisor about historic or current legislation that may or may not affect your province.