The Wealth Building Toolkit: Corporate Income
Chris Worby and Jeremiah Worby are Trusted Regina financial advisors and Wealth Management services providers. With over 20 years of experience, Worby Wealth Management has been committed to providing a high standard of financial and wealth management services to individuals, families and business owners in Regina and area. Worby Wealth Management listens and provides a personalized financial plan. In our latest Worby Wealth Blog Post we share details about corporate income.
by Chris Worby - Jan 13, 2023
Here you are, ready to retire, and you’re getting all your ducks in a row: assessing your RRSP to RRIF options, seeing how you can maintain OAS through the household, and you have spent your career building wealth in a corporation so that’s a major tool in your kit. The first and most interesting thing is that, by definition, assets built in your corporate investment account are going to be retained earnings which means you’ll be paying yourself dividends. The upside of dividends is that you also get a dividend tax credit. The benefit of dividends is this: let’s say you were targeting this $95,000/yr of net income. From my last blog, we know you’d need to take approximately $130,000 of gross income to provide that net of taxes. A non-eligible dividend to make the same $95,000 net income needs to only be $120,000 - dividends allow for more tax-advantaged income for sure and the saving of $10,000 in this case.*
Another option is to use a life insurance policy. If a corporation were to own a policy with the shareholder as life insured, there could be a cash value built up in the policy against which a loan could be set up to be settled upon the passing of the shareholder. As the insurance policy is not required to declare gains for tax purposes year over year, this tax deferral can lead to larger amounts within the policy and more money available for a loan. You’ve noticed I keep referencing ‘tools’ throughout this series. That’s because you can’t screw a screw with a hammer, and you can’t drive a nail with a saw. I mean, I suppose you could do those things but let’s attempt a little efficiency here! I think of retirement planning as exactly this, pulling out the right tool for the job. And in this example of having a high level of corporate assets, insurance is a great tool to help build that wealth to do the job of providing security of income in retirement. In the next blog, we’re going to talk about insurance in corporations again but from more of an estate planning perspective - no surprise but insurance is very helpful in dealing with taxes in an estate.
*all personal tax calculations are estimates based on taxtips.ca tax calculator. If you have questions about wealth building, contact Worby Wealth Management to get your questions answered and start investing in an RRSP, TFSA or other investment accounts today.
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The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This Blog was written, designed and produced by Jeremiah Worby and Chris Worby for the benefit of Jeremiah Worby and Chris Worby who are Financial Advisors at Worby Wealth Management, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds, approved exempt market products and/or exchange traded funds are offered through Investia Financial Services Inc.