RETIREMENT PLANNING FOR THE SELF-EMPLOYED PROFESSIONAL OR BUSINESS OWNER

1. RETIREMENT PLANNING FOR THE SELF-EMPLOYED PROFESSIONAL OR BUSINESS OWNER

2. Understanding the Market

3. Hidden Cost of Business • Business owners have sacrificed the steady income they could have received as an employee. • They have missed the opportunity of a retirement company pension which they might have enjoyed as an employee. • They have exposed all their personal holdings to the invasion of business creditors if things go wrong. • They have assumed the risk, worry, and mental strain of making and keeping a business successful. • They have spent money, time, and energy to create their business. • Even today this business needs their continuous attention to produce a profit.

4. THEY ARE THE BUSINESS

5. Self-Employed Professional The self-employed professional has spent his career building up his practice, staying abreast of new and innovative procedures and theories. The success in increasing and keeping his clients is based on his knowledge, skills and client rapport. At retirement his business has an uncertain sale value. As professionals they do in most cases have support from their professional association in terms of benefits. Only recently and varying from province to province have they had the ability to incorporate.

6. Reality Check – What has Changed Today • Business Owner • Professional • Consultant

7. Breaking The Ice 5 Questions • What is important about money to you and your family? • What is it about (key word from question) that makes it so important? • What are the best and worst financial decisions you ever made? What made them best and worst? • What worry could keep you awake at night? • How has your outlook changed over the past yrs?

8. 3 out of 4 Canadian small business owners have not taken adequate steps to protect their personal assets.

9. 10 Tips for the Business Owners 1- Consider incorporating. 2- Not all debt is created equal. 3- Ensure sufficient personal liability coverage. 4- Ensure spouse is outside reach of creditors. 5- Make use of spousal RRSPs. 6- Consider moving personal assets to spouses name. 7- Have adequate life insurance to preserve the business value, held personally with a family class beneficiary. 8- Place your retirement savings into an insurance product with family class beneficiary. 9- Get professional tax and legal advice. 10- Make a plan now.

10. PRODUCTS • DISCLAIMER: The following information is being presented on the understanding that it is intended for seminar information only. The presenter is not recommending a specific company nor engaged for the purpose of providing legal, accounting, nor taxation advice.

11. Individual Pension PlanIPP

12. What is an IPP • Registered Defined Benefit Pension Plan • Subject to the provisions of the Income Tax Act • Sponsored by and funded by the employer • Comprised of 1 plan member however spouse may be added

13. The IPP Candidate • Individual business owner • Professional of a professional corporation • Executive of a private corporation • Over age 40 • Already able to maximize RRSPs • Earnings reported on a T4

14. Features of the IPP • Higher deductible contribution limits • Contributions increase with age • Creditor protection • Contributions and fees deductible by employer • Opportunity to fund for pre 2004 employment years to 1991

15. 2004 Contributions IPP vs RRSP

16. IPP Contributions – Next 5 years.

17. At Retirement • Life Income Fund (LIF) • Locked-in Retirement Income Fund (LRIF) • Annuitization • Direct Payment of Pension

18. On Death • All assets of IPP available for transfer to spouse, another beneficiary, or estate of plan member

19. On Termination Prior to Age 69 • LIRA

20. Investment Options • RRSP eligible investments

21. Administration • Mandatory funding • Administration costs • Accuarial costs including valuation every 3 years

22. THE EXECUTIVE RETIREMENT ACCOUNT

23. The Market • Who can take advantage of the ERA concept? • Business owner-managers • Key employees • Professionals of Prof Corp

24. Executive Retirement Account (ERA) Share the benefits, not the ownership! • Simple • Effective • Funded

25. ERA • Arrangement under which the costs and benefits of permanent life insurance policy are shared • Employee is the only owner • Employer is irrevocable beneficiary of the face amount

26. ERA - The Concept Agreement Employer Employee Fund C.O.I.

27. Structure • Owner-Manager buys UL policy and makes annual deposits to the fund • Names company irrevocable beneficiary of face amount. • Company pays COI • Fund value grows tax deferred-available for retirement • Face amount tax free to company at death

28. ERA - The Concept Agreement Employee Employer Fund Value Tax-deferred Savings. C.O.I. Funds for Employer/CDA Funds for Retirement

29. Taxation Issues • During Employment: Are there taxable benefits for the employee? • At Retirement:Employer agrees to the beneficiary change • Tax issue for employer • Potential taxable benefit to the employee • Terms of Agreement

30. Retirement Income • How will you access money: - Policy loans – tax free to ACB - Policy withdrawals – pro-rated - Bank loan – tax free cash flow • Legal Issues – Must have employer/employee agreement

31. Professional & Small Business Owners – Recent Survey • 3 out of 4 of Canada’s small business owners have not taken adequate steps to protect personal assets from creditors. • 79% of small business owners said they would be interested in an investment product which protected their mutual funds from creditors. • 66% of this same group had never heard of segregated funds.

32. Segregated FundsWho Can Benefit • Business owners of any size • Professionals from all fields • Consultants and contractors

33. Seg funds con’t • More choice, flexibility and security - for you and your clients. • The growth potential of leading funds, plus • The security of insurance

34. All segregated funds offer: • Death benefit and maturity guarantees • The ability to bypass probate • Potential creditor protection

35. Which Clients Can Benefit? • Clients planning their estate • Investors wary of market risk • Professionals, entrepreneurs and business owners • Clients wanting to leverage

36. 80% Did not know 79% Agreed A Clear Solution for Entrepreneurs I am self-employed or have my own business and I am interested in an investment product that would protect my mutual funds from creditors. I know that there’s an insurance product that could protect my personal assets. You can meet their need – with potential creditor protection. You can meet their need – with investment guarantees

37. Are we as Financial Advisors being responsible by not offering these products? Is it not to our advantage to have the basic understanding and application of as many solutions as there are retirement and estate questions.

38. Summary Whether or not you actually offer any of the 3 products introduced is not necessarily the goal of this presentation. This was strictly an introduction to the less conventional options available to the self employed and where they could be used effectively with specific individuals in retirement and estate planning. Thank-you