Small biz owners: grow your personal portfolio, in addition to your business
- TD Canada Trust provides tips on retirement investment strategies for small
business owners -
TORONTO, Oct. 16, 2012 /CNW/ - Cash flow, payroll, overhead - managing the
financials of a successful small business is no small feat. Crunching the
numbers, some entrepreneurs may be tempted to defer their personal savings and
investments in favour of relying on the equity in their business to fund their
A poll by TD found that while the majority of Canadian small business owners
polled who plan to sell their business (66%) will use the proceeds to fund
part of their retirement, 14% admit they are counting on the sale of their
business to fund their entire retirement.
John Tracy, a senior vice president at TD Canada Trust, cautions small
business owners against putting all of their retirement nest eggs in one
basket. He says relying on the equity of a small business to fund 100% of a
retirement strategy may be too risky.
"While the equity in your business could potentially be a significant source
of retirement income, it's equally important to make regular contributions to
build your personal investment portfolio, both as a safety net and to maximize
retirement income," he says. "Entrepreneurs should consider balancing the high
risk investment strategy of a small business with other investment products,
like mutual funds or GICs."
Tracy offers his tips on how to plan for a comfortable retirement and grow a
small business simultaneously:
1. Open an RSP and automate your savings
Without a guaranteed pension, an RSP is one of the best saving and investment
vehicles available today for small business owners, so you should take
advantage of the benefits of tax-deferred and compound growth that an RSP
offers. The majority of small business owners identify cash flow as the most
significant barrier to the success of their business, so it can be daunting to
find a chunk of money to contribute to your retirement savings each year.
Start small and set up a pre-authorized transfer that automatically transfers
a set amount at regular intervals into your RSP.
2. Use income-splitting strategies to boost your family's retirement savings
Consider income-splitting strategies and invest your tax savings into your
RSP. For example, if you hire your spouse, you can effectively split income
among family members. This strategy allows you to shift income to family
members in a lower tax bracket, reducing your family's overall tax bill.
Alternatively, consider having a lower-income family member make the RSP
contribution. Choose a family member whose taxable income is low, but is
expected to increase in the future. Then, defer deducting it until the income
increases, netting a larger tax benefit.
3. Consider issuing dividends to fund your RSP contribution
Unlike money paid as salary, bonus or commissions, dividends are often paid at
a lower tax rate, allowing for a greater year-end RSP contribution. Any tax
refund realized as a result of the RSP contribution can be funneled back into
4. Consider a Tax-Free Savings Account (TFSA)
Small business owners who draw little income from the business should consider
a TFSA. There's no tax payable on any investment income or growth. It's
also flexible! Depending on the type of investment, funds can be withdrawn
5. Get expert guidance
Entrepreneurs sometimes have trouble outsourcing, but many successful small
business owners surround themselves with experts to navigate through the
challenges of owning a business. A small business advisor at your bank can
help you develop a financial plan to build a thriving business today and your
financial advisor can help you develop an investment plan for a comfortable
retirement in the years ahead. TD Canada Trust has advisors in branches across
Canada, many of which are open evenings and weekends, to help small business
owners make the most of their time.
About TD Canada Trust
TD Canada Trust offers personal and business banking to more than 11.5 million
customers. We provide a wide range of products and services from chequing and
savings accounts, to credit cards, mortgages and business banking, to credit
protection and travel medical insurance, as well as advice on managing
everyday finances. TD Canada Trust makes banking comfortable with
award-winning service and convenience through 24/7 mobile, internet, telephone
and ATM banking, as well as in over 1,100 branches, with convenient hours to
serve customers better. For more information, please visit:
www.tdcanadatrust.com. TD Canada Trust is the Canadian retail bank of TD Bank
Group, the sixth largest bank in North America.
*From October 3 - 6, 2011, an online survey was conducted among a sample of
609 Canadian small-business owners who are Angus Reid Forum panel members. The
margin of error on the full base — which measures sampling variability —
is +/- 3.91%. Discrepancies in or between totals are due to rounding.
Steve Presant / Liz Christiansen Paradigm Public Relations 416-413-5194 /
416-413-5188 firstname.lastname@example.org /email@example.com
Sandra DeCarvalho TD Bank Group (416) 944-7095 Sandra.firstname.lastname@example.org
SOURCE: TD Canada Trust
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CO: TD Bank Group
NI: FIN FIN ECOSURV
-0- Oct/16/2012 12:30 GMT
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