Incorporated Professionals: Financial Advice

 

Financial advice for incorporated professionals is often two-sided- advice for the practice and personal financial advice.  A few things to keep in mind for professionals are:

  • Professionals are typically in the highest income tax bracket, therefore incorporating their practice can help manage and defer taxes at a lower corporate tax rate.
  • By incorporating- professionals can have access to dividends from their corporation, shareholder loans, corporately held life insurance and since money can be left inside a corporation- this money can be used in years where there are life changes such as pregnancy, buying a home or retirement.
  • Professionals should also ensure that they have access to health benefits.
  • Debt for a professional is not unusual, given the costs of education and equipment, therefore working with an advisor and accountant can help an incorporated professional find a way to balance their cash flow.
     

Why do you need Financial Advice?

  • Worry less about money and gain control.
  • Organize your finances.
  • Prioritize your goals.
  • Focus on the big picture.
  • Save money to reach your goals.
     

For an incorporated professional, personal and practice finances are connected. Therefore both sides should be addressed: Personal and your Practice.
 

What does Financial Advice for an Incorporated Professional include?

There are 2 main sides your practice’s financial plan should address: Growth and Preservation

Growth:

  • Cash Management- Managing Cash & Debt
  • Tax Advice- Finding tax efficiencies
  • Health Benefits
     

Preservation: 

  • Investment- either back into the business or outside of the business
  • Insurance Planning/Risk Management
  • Retirement Planning
     

What does Personal Financial Advice include?

There are 2 main sides your financial plan should address: Accumulation and Protection

Accumulation:

  • Cash Management – Savings and Debt
  • Tax Advice
  • Investments
     

Protection:

  • Insurance Planning
  • Health Insurance
  • Estate Planning

What’s the Financial Advice Process?

  • Establish and define the financial advisor-client relationship.
  • Gather information about current financial situation and goals including lifestyle goals.
  • Analyze and evaluate current financial status.
  • Develop and present strategies and solutions to achieve goals.
  • Implement recommendations.
  • Monitor and review recommendations. Adjust if necessary.
     

Next steps…

  • Talk to us about helping you get your finances in order so you can achieve your lifestyle and financial goals.
  • Feel confident in knowing you have a plan to get to your goals.

Incorporated Professionals: Retirement Planning

For incorporated professionals, preparing for retirement can go beyond finances, one of the biggest challenges is concern for the future of their clients or patients. Planning for retirement can take several advisors including a financial advisor, tax specialist and lawyer to help make the best decisions for their practice.

We’ve put together an infographic checklist that can help you get started on this. We know this can be a difficult conversation so we’re here to help and provide guidance to help you achieve your retirement dreams.

Income Needs

  • Determine how much you need in retirement.
  • Make sure you account for inflation in your calculations
     

Debts

  • If you have any debts, you should try to pay off your debts as soon as you can and preferably before you retire.
     

Insurance

  • As you age, your insurance needs change. Review your insurance needs, in particular your medical and dental insurance because a lot of plans do not provide health plans to retirees.
  • Review your life insurance coverage because you may not necessarily need as much life insurance as when you had dependents and a mortgage, but you may still need to review your estate and final expense needs.
  • Prepare for the unexpected such as a critical illness or long-term care.
     

Government Benefits

  • Check what benefits are available for you on retirement.
  • Canada Pension Plan- decide when would be the ideal time to apply and receive CPP payment. Incorporated professionals are in a unique position to control how much can be contributed to CPP by deciding to pay salary or dividends. (Dividends don’t trigger CPP contributions.)
  • Old Age Security- check pension amounts and see if there’s a possibility of clawback.
  • Guaranteed Income Supplement- if you client have a low income, you could apply for GIS.

 

Income

  • Are you a candidate for an individual pension plan (IPP)? IPPs can provide higher contributions than typically permitted to an RRSP and the ability to create a lifelong pension.
  • Make sure you are saving on a regular basis towards retirement- in an RRSP, TFSA, or non-registered. Since you can control how you get paid, salary or dividends, dividends are not considered eligible income to create RRSP room, therefore you should make sure you have the optimal mix of both to achieve your financial goals.
  • Ensure your investment mix makes sense for your situation.
  • Are you a candidate for setting up a trust? Trusts are useful tools for paying less taxes, transfer of wealth and to control and protect assets.
  • Don’t forget to check if there are any income sources.  (ex. rental income, side hustle income, etc.)
     

Assets

  • The sale of your practice can be part of your retirement nest egg. Therefore, you should make sure you know the valuation of your practice and your plan to sell the practice to your family, employees, partners or a third party. You should also know when you decide to sell your practice too. For medical professionals, understanding the value of your practice can be a little different since the valuation of patient lists and goodwill will differ from assets (such as medical equipment, fixtures and furniture.)Are you planning to use the sale of your home or other assets to fund their retirement?
  • Are you planning to use the sale of your home or other assets to fund their retirement?
  • Will you be receiving an inheritance?


One other consideration that’s not included in the checklist is divorce. This can be an uncomfortable question, however divorce amongst adults ages 50 and over is on the rise and this can be financially devastating for both parties.
 

Next steps…

Contact us about helping you get your retirement planning in order so you can gain peace of mind that your retirement dreams can be achieved.