The majority of Canadian small business owners plan to sell their business (66 per cent) to fund part of their retirement and 14 per cent admit they are counting on the sale of their business to fund their entire retirement, says a poll by TD. However, 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 per cent 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.” He suggests they open an RSP and automate their savings; use income-splitting strategies to boost family retirement savings; consider issuing dividends to fund the RSP contribution; and open a Tax-Free Savings Account (TFSA). These can all help to plan for a comfortable retirement while growing a small business.
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