If you’re an owner of a professional corporation, you’re more aware than anyone of the responsibilities you have to make your own savings plan. For you, there’s no such thing as a company pension, and beyond your registered investment accounts, your savings vehicles are limited. You’re also more aware that in the Canadian 2024 federal budget, the capital gain inclusion rate has gone up to 66.6%[1] in its slow but inevitable march towards 100%.

With the average Canadian family household already paying 46.1% of their annual income in total taxes, and 57.3% if you’re in the top docile of income earners[2], the increase in the capital gains inclusion rate has burdened you further for reinvesting in your business. This is despite professionals working longer hours than the average Canadian worker. Physicians work 45.9 hours per week[3], accountants 40 – 50 hours[4], and lawyers 50 – 60 hours[5]. Compared to the average Canadian employee who works 35.7 hours per week[6].

On top of being disproportionately taxed and overworked, owners of professional corporations are left to fend for themselves in terms of creating, implementing, and funding a retirement plan. While many employees have the option to contribute to a company-owned tax efficient pension plan, you do not.

At this point, if you’re a professional, I’m preaching to the choir. So, what can you do? The fact is that one of the last tax advantaged products left in Canada is Life Insurance. The cash value of whole life and universal life policies grow untaxed within the policy. Combined with a proper financial plan, you can have access to this accumulated wealth over time. Look at it as your own pension or retirement fund, only involving life insurance.

You don’t have time to be a professional in your finances as well as your business. We have accountants, lawyers, and actuaries, all with decades experience to do that for you. The 2024 federal budget might be making it that much more impractical to reinvest into your business, but that doesn’t mean your retirement has to be. Let us help you invest in your retirement.

 

Sources:

  1. Government of Canada. Budget 2024.
    https://budget.canada.ca/2024/report-rapport/tm-mf-en.pdf. Accessed 21 June 2024
  2. Palacios, Milagros, et al. “Canadians Celebrate Tax Freedom Day on June 19 2023.” FRASER RESEARCH BULLETIN, Fraser Institute, 19 June 2023.
    www.fraserinstitute.org/sites/default/files/tax-freedom-day-2023-15363.pdf 
  3. Kralj, Boris, et al. “Long-term trends in the work hours of physicians in Canada.” CMAJ, 25 Mar. 2024.
  4. “Do Lawyers Work on Weekends in Canada – What’s the Truth .” Edited by Toplegaldirectory.com Toplegaldirectory.com, Top Legal Directory, 15 Dec. 2023.
    https://toplegaldirectory.com/blog/do-lawyers-work-on-weekends-in-canada/
  5. Accountants (CPA) – A Guide for Newcomers to British …, Vancouver Public Library, 28 Oct. 2022.
    www.vpl.ca/sites/default/files/EG-Accountants-CPA.pdf
  6. “Usual Hours Worked by Occupation, Annual, Inactive.” 6 Jan. 2023, Accessed 21 June 2024.
    https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410029901