Episode 178: A Canadian Business Owner Retirement Plan: Corporate Cash + RRSP Strategies for Financial Freedom Seekers

Listen here on our website:

Or jump to this episode on your favourite platform:

Watch Now!

Should you pull your corporate cash into your RRSP—or let it grow inside your company?

If you’ve sold your business or have a chunk of money trapped in a corporation, you’re probably wondering: what’s the smartest way to grow and eventually access that wealth? Should you protect it from taxes now, or maximize flexibility for future business moves and personal spending? This episode unpacks the tough choices entrepreneurs face when shifting from business owner to solopreneur.

• Understand when investing inside your corporation beats funneling funds into an RRSP—and when it doesn’t.

• Learn how to avoid locking up your wealth in ways that limit your future plans, whether it’s buying real estate, funding retirement, or starting a new venture.

• Get a clear, practical framework for deciding how to split your money between corporate investments and personal retirement savings.
  

Press play now to stop guessing and start building a tax-smart wealth plan that fits your next chapter.

Resources:

• Ready to take a deep dive and learn how to generate personal tax free cash flow from your corporation? Enroll in our FREE masterclass here. 
• Book a Discovery Call with Kyle to review your corporate (or personal) wealth strategy to help you overcome your current struggle and take the next step in your Canadian Wealth Building Journey!
• Discover which phase of wealth creation you are in. Take our quick assessment and you’ll receive a custom wealth-building pathway that matches your phase and learn our CRA compliant tax optimized strategies. Take that assessment here.
• Dig into our Ultimate Investment Book List
• Follow/Connect with us on social media for daily posts and conversations about business, finance, and investment on LinkedIn, Instagram, Facebook [Kyle’s Profile, Our Business Page], TikTok and TwitterX. 
  

Calling All Canadian Incorporated Business Owners & Investors:

Consider reaching out to Kyle if you’ve been…

• …taking a salary with a goal of stuffing RRSPs;
• …investing inside your corporation without a passive income tax minimization strategy;
• …letting a large sum of liquid assets sit in low interest earning savings accounts;
• …investing corporate dollars into GICs, dividend stocks/funds, or other investments attracting cordporate passive income taxes at greater than 50%; or,
• …wondering whether your current corporate wealth management strategy is optimal for your specific situation.

Building long-term wealth in Canada requires more than just saving—it demands a clear financial vision and smart strategies across your financial buckets. Whether you’re a Canadian entrepreneur navigating salary vs. dividends decisions, or a business owner seeking corporate wealth planning insights, balancing personal vs. corporate tax planning is key. With a focus on RRSP optimization, tax-efficient investing, and capital gains strategies, your financial plan should align with your goals for financial freedom in Canada and early retirement. From managing corporate wealth and optimizing RRSP room to creating diversification through real estate investing Canada and passive income planning, every move matters. Estate planning Canada and insurance strategies protect your legacy, while retirement planning tools and financial systems for entrepreneurs support your modest lifestyle wealth goals. By leveraging your corporate structure optimization, mastering wealth management, and making smart corporation investment strategies, you’ll build a Canadian wealth plan designed for financial independence and long-term success.

Transcript:

Kyle Pearce: Well, well, well, Canadian wealth secret seekers, we are getting ready to dig into a case study here from a recent call we had with a business owner, actually a former business owner who’s now off on their own acting as a sole proprietor. And we’ve got some questions for them. And their main strategy or main question for us was, what do I do with

the money that sort of stuck or trapped in my corporation after having sold the shares in a business with a partner and now wondering like, do I keep the company open? Do I keep the funds in there and invest inside this corporation or should I be taking these funds out and stuffing the RRSP and hey, they were smart all the way along taking the tax or sorry, taking the T for income. So They’ve got lots of room there and with lots of room comes lots of choices and lots of decisions.

Jon Orr: Yeah, so in this episode, what we’re gonna do is we’re gonna break down their case, but also look at those two scenarios. Are we better off, and we’re gonna answer this question today, is in this scenario, are we better off leaving the money inside the corporation and investing it, whether, no matter what the asset class is, investing it inside the corporate structure, or are we better off moving it outside into, let’s say, the RRSP structure?

that container and investing it through an RSP and or maybe some other other options and then going, hey, let’s fast forward through the future. And if we did one of those two moves, are we better off with keeping it in the RSP or keeping it in the corporate structure? And what better off means is, you know, how much more money do we keep in our in our personal

pockets, like how much more money did we put in our personal pockets, because we do have to get the money out of the corp. We do have to get the money out of the RSP. And so we’re going to kind of do a little fast forward the future in those two scenarios. And we’re going to talk about, you know, and also answer this question for you listening, because you’re not this person, you’re not this business owner, you’re not this solopreneur. Which means like, when is it a better time to

move the money into the RSP on the personal side or as much as you can over to the personal side on the RSP or or when and then when is it a better option to keep and invest the money on the corporate side because ultimately when it when we get down to it we all want this money in our personal hands down the road and so where do we how does that process work and where do we should we grow the money so that when we do get it into our personal hands we have more of it and so that’s

That’s the plan here that we’re going to be unpacking. Kyle, let’s begin. Let’s go through a couple details that set the stage here for this client, this scenario, because you said before, business owner, not a business owner, they sold the business or they’ve taken their shares or they’ve taken a payout of this corporate business, which means like there’s no more operating income coming in from that original business. And we’re going to be.

We’ve got a payout in a way. We’ve got a lump sum of money that we just now stuck in the corporation. Now this could, now in this scenario, this is this person, but it could be you going like, I’ve got retainer and sitting there, right? So it’s like, we’ve got money sitting in there. What are we gonna do with it? Any other details we should know about this client before we dive into the two scenarios?

Kyle Pearce: Yeah, well, you know, the one thing and this is where it’s still new for this particular individual, right? So they’re new in sort of going off on their own. So now they’re acting as a sole proprietor. They’re kind of wondering, like, should I be continuing to bill clients from the corporation or not? think the easy answer is, yes, you probably should.

We’ve talked a lot about, if you’re not earning a ton in income, I say a ton that that’s very, you know, open-ended what that might mean for some. But if you’re essentially utilizing all of your revenue for personal lifestyle, then opening a new corporation doesn’t really make a whole lot of sense. But if you already have a corporation, a corporation that has money in it, retained earnings or from the sale of a company like in this case,

probably billing from the company makes sense. Now, they’re not sure if they want to scale up their business or not. They’re not sure whether they want to, you know, maybe slow down. So there’s a lot of question marks here, but one of the big questions that they were wondering is I’ve got in it was almost $500,000 of retain of money in this corporation that’s retained and that is quote unquote trapped in there. If they want to take it out,

they’re gonna have to take it out of salary or dividend, or they could leave it in there and they can actually reinvest the money inside. Now, what makes this particular challenge or this particular scenario challenging is that they also have this wonderful amount. It’s almost $250,000 of our RSP contribution room sitting there waiting. And the big question was like,

Where should I invest this money? Like, I leave the $500,000 in the corporation, invest it there? Should I take out half of it, about $250,000, get taxed, know, up the wazoo on that $250,000, but get it all back by putting it into the RRSP? And really what that led to was a lot more questions, because when we go down this rabbit hole, which we’re gonna unpack here today,

talking about like, what is the difference in investing in the corporation versus say in the RRSP? And then also, we have to also zoom out and sort of talk about flexibility in terms of like, what might come next? Because right now there’s a lot of uncertainty as to what she’s planning to do with this business now that she’s fully independent, is she looking to scale something and get people working under her? Believe it was a she’s a physiotherapist. So

Does she want to open up her own office? Right now, she’s just kind of working out of the home and doing some hours at different clinics. And she’s liking the freedom. So these are questions that we really got to get a handle on, because it’s a big decision to what I call rip the band-aid off and pull a big sum of money out of the corporation in order to put it into another jail known as the RRSP, right?

Jon Orr: Sure. Yeah. And when, you know, at first blush here, you when you said like, we could, you could get the money out, put it in their RSP, get all the tax back on that RSP. So it’s like, we just moved it from one location to another. That seems attractive because it, cause in a way you’re saying like, well, all of my corporate money has to come out to me personally at some point anyway. Why not do it now?

And then put it over there. So like there’s there’s that part knowing that there’s some room in the RSP So they’re at first blush. It’s like, okay. Well, why wouldn’t I do that? We’re gonna we’re gonna be unpacking Kyle said unpacking that we’re gonna we’re gonna make some assumptions to like you’re saying like there’s a lot of like Well, if we were gonna do this or we’re gonna do this and that that’s gonna be pertaining to the individual So the assumptions we’re gonna be making here and when we unpack the options for this individual is one is is that we’re making the assumption that

The business is no longer going to continually earn money. She’s actually making the transition from almost an operating business or it was, think it was a holding company, but there’s no, the business is just in that. It’s going to be a holding company. It’s not all of a sudden the new business is going to start earning income and we’re going to continually add to it. So we’re going to make that assumption here. The assumption is that she’s moving into solopreneur and therefore earning income on the solo personal side.

and therefore most of this money is going to be residing personally other than this chunk of money. So we’re gonna make that assumption. We’re also gonna make the assumption that she doesn’t need this money to live. She doesn’t need say that chunk of money to live. this money is really like, and this is her main question. It’s like, I have a RSP, should I move it there? Which means to us, she doesn’t need that right away. She’s like, I could dump it as much as I can for my future, my retirement. This was maybe my retirement plan all along.

my business retainer earnings are gonna be my retirement plan. So we’re gonna make that assumption she doesn’t really need this money currently to live her life. So this money is now projected to the future. And so that’s why we’re saying, let’s fast, like when we go to look at this, let’s eventually look at the fast forward and go, well, what keeps more money in our pocket when this fiction is time when we retire or want to pull the money onto the personal side or want to pull it out of the RSP.

So we’re gonna be making this assumption that down the road, that’s gonna happen and we’re gonna pull that money out. And so those are some of the assumptions we’re making in this case and that might not pertain to you, but some of the ideas that we’re gonna unpack around the two different structures, corporate structure, RSP structure, where is it best to grow it? With the purpose, I eventually wanna get it out of those structures into my personal hands at some point, but not right now.

Kyle Pearce: Yeah, yeah. And you know, when we break things down, it’s really important to note like what happens when we invest in these different buckets. Okay, specifically, we’re talking today in a corporation and versus the RRSP and especially when money is being generated in the corporation. And we’re trying to figure out like, do we just want to keep it there? Or do we want to take it out, make the dollars worth less than they were worth in the corporation?

and then put them into the RSP to make them whole again. So really this idea is like, hey, I could take a dollar from the corporation invested there, then what happens? Or I could take the dollar out, it turns into less than a dollar, I put it in the RSP, and then all of a sudden it turns back into a full dollar essentially, right? So there is some nuance here that’s worth noting. One being that, hey, if I take a big chunk of this money out, and then I put it straight into the RSP,

essentially it’s like a one to one. It’s like I get to invest all of the dollars in either bucket. So on YouTube, if you’re hanging out with us, I’m gonna share the screen here for those who want to check it out. We’ll describe as we go so you don’t need it. But if you do want to go back there for reference, you should head out to Canadian wealth secrets on YouTube and definitely give it a peek. 

So as you can see here, we’ve got our two buckets. I’m going to use a million dollars just to make the numbers a little bit easier, a little bit more friendly. I know we’re dealing with millions nice, millions nice. So it’s about double what this particular client is working with here. However, when we look at these two buckets, we’re able to make a lot of the same investments. Right away, I do want to mention that there are some scenarios, types of investments.

that would make one bucket better than the other. So first off, we have to think about this and you sort of referenced this recently to me or the way you described the RSP is like, it’s almost like the purpose of the RSP is never really meant to be like a wealth reservoir. Like it’s not supposed to be a place that you can kind of go to and pull a good chunk of money at a time to like build your wealth or like buy other assets with. Like you’re kind of.

growing assets inside that bucket with the intent for it to act much like a pension would right like which I think most people are like, yeah, I guess that makes sense. But that’s really important here because if she’s thinking about maybe opening a business or buying a property or doing something where she needs this money to act like a corporate like a wealth reservoir, then the RSP may not be the best move. Now there are things we can do to

make the RRSP money available for, private lending or private placements. You can use trust like Olympia Trust. And there’s all kinds of ways that you can invest in more than just public markets inside of your RRSP. So there is that. But the nuance here is that it’s not a good bucket if you ever need to get a big chunk of it out all at once.

because you’re going to get taxed as ordinary income on the way out. So that’s not going to be good. And we’ll talk more about that in a moment. But on the other hand, the RSP is great for investments that are going to produce interest or dividends. So in the corporation, as we’ve described before, if we generate passive income in the corporation, we’re going to be taxed on those dollars at the highest rate.

However, if we’re investing in capital gains or growth assets where we’re looking at the actual value of the investment growing and then eventually selling that asset to crystallize a capital gain, the corporation actually can be a really great place to invest because capital gains are tax like regular income on the way out in the RRSP. So it’s really important that we understand

what we want these dollars to be available for, like when we want them to be available, and what we hope that we’re going to do with them. So first and foremost, when I look at this, like if I’m doing, for example, like a lot of buying and selling, even if it’s a capital gain, so for example, you’re buying the NASDAQ index.

but during different market cycles or maybe you’re using moving averages or maybe you’re using some sort of risk management system where you’re buying and selling and not just buying and holding, then you’re actually better to do that type of maneuver inside the RSP as long as it’s not deemed as being like active trading because the CRA doesn’t like that in registered funds. So a nuance there to note, but that’s that would be a better place to do that type of activity because

there would be no taxes triggered on the buying and the selling. Whereas over here in the corporation, buying and selling of assets, capital gain assets and crystallizing those gains will create taxable capital gains that we have to actually pay tax on. So if I’m doing a buy and hold, holding a building for a very long period of time, holding index funds and not selling them and going in and out of these different funds or different stocks, then a corporation can actually be a great way for those types of assets to grow.

Jon Orr: Now, right, so you’re thinking about right now, if I’m doing, if I’m being in a way slightly active in both of these and I’m trying to choose the container. let’s say I’m buying and selling, I bought and I sold and I have a capital gain, I sold this asset, there’s a capital gain on the corporate side because of the triggering of that sale, then

In a way, since I’m taxed at the end of the year, but imagine that you’re taxed right then, because you now have to account for that tax because you sold the asset and there’s a capital gain on that asset. in a way, let’s say it was that $1 as a capital gain. I have less than that dollar because I have to pay tax on that gain. So let’s just say I have less than the dollar.

Let’s not get into all the numbers. I know you’re drawing some stuff. so I have less than the dollar to reinvest. So this is an important distinction between the two, right? Just making sure it’s clear that I have less than a dollar to put back into the next investment on the corporate side, because I have to now account for that tax. Now you can put the dollar back in, because you’re going to pay tax at end of the year, but you have to imagine that you have to account for it. So you now have less than a dollar to put into your investment, your next investment.

But in the RRSP, because buying and selling inside the registered account isn’t a taxable event, when you sell that asset inside the RRSP container, and you still have that dollar, that gain is there to put into the next asset. I can grow. So when you think about doing this over the course of 20 years or 10 years or whatever, that the compounding,

you’re not really interrupting in a way the compounding that’s happening on the RSP side, but you are inside the corporate structure because of the taxes. So when you grow this year to year, and remember, she’s going to not touch this money for a while. So it’s like, this is gonna happen over near a year, which means down the road, her pot of money in the RSP should be bigger than the pot of money if she did it in the corporate side, strictly because of the capital gain. know, that happened when you sold those assets. Okay.

Kyle Pearce: 100%. And you know, the example I like to use is like, imagine it doesn’t really matter the timeline, but let’s pretend it’s a year like you’d said, John, it’s like, you know, you put a million dollars into a capital gain or a growth asset. And let’s say you were lucky enough that you know, you got a million dollar capital gain. So you’ve doubled your money here in a very short period of time. Again, the period of time doesn’t really matter on the short term. But what ends up happening is, as you mentioned,

We get the full crystallized capital gain here. So we’ve grown this $1 million to $2 million. So I’ve grown a million dollar capital gain, as you’ll see on the top here. And the way our capital gains taxes work inside the corporation and personally, of today anyway, as of last year, we were all worried that they were changing the rules around this and that never happened. But basically half of this money is actually going to be yours to keep. So you get to keep $500,000.

Jon Orr: So if you’re listening right now, Kyle’s drawn a box, that box was a million, then he drew a, the box grew. All of a sudden now we have a box that’s longer. And that’s where the extra capital gain has happened. We’re assuming that you doubled your money. You got the million dollar gain there. But 50 % of that is now taxable. So that 50 %…

you know, half of that gain, that 500,000, which is highlighted here, is now tax free in your money. And because of the capital dividend account inside the corporate structure, that actually passes to the shareholders completely tax free. So it can come out and it can go into your personal pockets tax free that gain. Now you could keep it in there. It’s still tax free. But there is the other 50 % is now taxable at your tax rate.

Kyle Pearce: Exactly, exactly. And as I’m drawing in here, you’ll see that basically how it’ll end up working out inside the corporation is you’re going to lose about a quarter of the entire gain. About so about 250,000 is going to go away to tax. However, 500,000 is going to come out to you tax free through the capital dividend account. So if you have a capital dividend account credit, because you’ve sold assets in the past, we always recommend like

those dollars probably make more sense to go into your personal pocket since there’s no tax implications. So rock and roll, take it out, don’t leave it in the corporation. But you’re gonna also have about $250,000 that are gonna be retained in the corporation. And that’s going to be quote unquote trapped in the corporation. But you’ve got about 75 % of that gain getting to either keep in your personal pocket or in the corporation. Whereas in the RRSP,

doing the same maneuver like John said, is that there’s actually no taxable event because you chose to keep that million dollar gain inside the RRSP bucket. So now those dollars are there and available to reinvest, which is great. However, things change if we want those dollars in our personal hands.

Jon Orr: Right, so before we go there, so like if you’re repeating this process, this is why, if you’re repeating this process, this is why the RSP is going to grow faster than doing it in the corporate structure because of that capital gain tax that we’re going to be paying on a repeated basis. Now, we also already in a way highlighted on the corporate side, if you want some of that money or that money to come out of the corporation, of that capital gain,

50 % of that was coming out into your personal side, like that came out because of the capital dividend account. You can’t get your money out of your RRSP without paying your personal income tax. It’s gonna come out as income, right? Remember that the RRSP account and the registered account right there is treated or is supposed and structured to treating like Kyle said, a pension. which is therefore it’s like any dollars you.

pull out are not capital gain dollars, because there isn’t any capital gain happening in the RRSP. They’re income dollars. You’re coming out as income on your personal side.

Kyle Pearce: Yeah, exactly. it’s like whether it was a capital gain interest dividends doesn’t matter what the how you earned income or how you earned money profit in the RSP. You don’t have to pay any tax until you want to take it out. So as John said, if you’re going to be repeating the buying selling buying selling of assets, then the RSP is probably going to be the winner if you have a long enough time horizon, right? Like you’re going to go, okay, it makes a lot of sense to do that. However,

You are saying no to being able to have more flexibility in taking some of that money in bigger chunks. So that this is worth noting. And this is why we always advocate for kind of having diversification across your buckets, right? So we’re not like all in on one and all out on the other. It really is dependent. Now let’s pretend for a second though. Now we talked about the buying selling type person. The average investor is not a buying selling investor.

right? Like the average investor is either handing their money off to an advisor that sometimes is buying and selling on their behalf, whether that’s good or bad, not here to judge, or they’re doing it themselves, which probably means they’re just buying and holding like I’m thinking about. I don’t want to say any client names, but there was there was one client that we actually did a testimonial on the website for

and they are like the buy and holder, like they don’t even look at their portfolio. They’re just like, listen, I know it’s indexes. I know that they come back. I’m not worried about it. I don’t need it now for that type of investor. Having some of that money in the corporation can make a lot of sense because you’re not buying and selling. So you’re not experiencing the taxes as long as the investments you’re making are not income producing, right? So they’re not dividend. They’re not, you know, interest bearing.

but it’s just capital gains or maybe corporate class funds that also reinvest dividends and such inside of a trust so that you’re not experiencing that gain. You could really benefit from investing inside the corporation compared to the RSP because now let’s pretend for a second that this isn’t a million dollars and a million dollar gain per year, but let’s pretend it was a million dollars and a million dollar capital gain.

over a long period of time that was just held and never bought and sold. It was just held. And now we hit this point where we want to sell. And let’s say like we needed all this money all at once. So we’re going to talk the extreme, right? Usually people don’t take a massive amount out of their RSP all at once, but there are scenarios where that does happen, right? Things happen in people’s lives and they need access to capital. So now over here, we look at it, we go, well, the corporation seems true, right?

Now we put in a million, it grew to two million. So we have a million dollar capital gain. Half of that gain, 500,000 is going to be tax free through the capital dividend account can come right out to shareholders. Amazing. 250,000 is going to be retained in the corporation. Still important, still good money, still. And we have strategies on how to deal with retained earnings using permanent insurance and such as strategies.

And then we have the other 250 going to tax and you’re like, I don’t like that. Well, in this particular scenario, you’re to like this a lot more than if you had to take out the full million dollars at a personal level from your RSP, because what ends up happening in the RSP, the government and the CRA, they don’t care whether it was a capital gain. They don’t care whether it was interest. They don’t care where this money came from. All they care about is the fact that, Hey,

we allowed you to grow this bucket without having paid any income tax on the cost basis, right? So basically all this money you had put in there is tax before tax dollars. Now, remember we’re talking about this money originally came from the corporation. So we had a dollar here, we took it out, we got taxed on it and then we put it in here and we got the money back. So the money is the same that we’ve invested but the government says, listen, we want to now tax you.

as income. if you take this full $1 million gain out of your RSP, and it doesn’t matter if it’s these dollars or the original dollars, the government doesn’t care whether it’s the profit or whether it was the cost basis. It doesn’t matter. We take that money out and they go, guess what? That million dollars is income tax on your personal income tax statement. So you’ve earned a million dollars of income, which means you are going to

be paying around 50 % on that million dollars and therefore you will end up with the same 500,000 like you’d get with the capital gain over here in the in the corporation through the CDA. But what you’re not going to get is the extra $250,000 of retained earnings in the corporation. You’ve now got 50 % of it or 250 or sorry, $500,000.

lost to tax that you will never see because of the choice to take that million dollars out all at once. Now I get it. A lot of people are going to be like, Kyle, I’m just not going to do that. And I’m like, as long as that’s the goal for your RSP bucket, that you’re not going to take very, very large chunks out all at once. It can still be a great, great strategy, but we like to just say, make sure that we don’t go all in or

all out on any one strategy so that you have more flexibility because I don’t know about you. I don’t know what 10 years from now is going to look like for me. I’d like it to look a certain way, but things happen and things change. And that’s why diversifying your buckets I think is a really important move.

Jon Orr: For sure, for sure. you know, and I think just to restate the, you know, that scenario is that Kai was saying that 50 % is in the RRSP is taxed because you’re in the highest tax bracket and you’re only going to be, you know, only 50 % of that money is going to come to you personally. So 500,000, what’s still, let’s say, for example, what’s still in your RRSP is the other million, right? So you’ve got like,

you got your million sitting over there, you put 500,000 in your pocket. Well, on the other side, just to be clear, because you sold that chunk or that asset in the corporation, that million was still there. The capital gain was 50 % tax. So it sounds like it’s the same. It sounds like it should be the same. 50 % tax here, 50%. But it’s what’s happened, right? It’s 50 % is tax free. And then the other the other portion is taxable.

at 50 % and that’s the difference there. So 50%, you get the 500,000 in your personal pocket, just like on the RRSP side. So the same money is actually sitting at the personal side. remember, in the RRSP, you only have a million in your RRSP, but over on the corporation side, you have a million plus the 250 that stayed there because we got 500,000 by the capital dividend account. So now you have more money in the corporation

and $500,000 in your pocket. And on the RRSP, have $500,000 in your pocket, not more than a million inside your RRSP. So you’re better off, like fast forward, like you said, Kyle, down the road, this one asset was sold this way. And these two scenarios say, if you’re going to have that type of scenario, I’m going to hold, then I’d rather do it in the corporation side because my net worth is higher.

on that side than it is on this side by making that choice. But I think you go back to your your position is that you don’t want to be in all or other because we would want to plan for RSP. And this is where this client ended up making some decisions around this. Like, let’s put some money over there from the business amount, because we do want to like it would be great for us to pull a regular income from the RSP. Right? Like, as long as that poll that you do on the regular basis, or even if you do it once in a while,

you’re pulling it out, which is an appropriate tax bracket that you’re in, you’re not you’re not maxing it out, all of a sudden lose 50%, pull it out to like, be an acceptable amount of tax that you could be paying so that you’re not just, you know, gifting it to the government. So having some money over there is is is the is the great because it’s like, like a pension, you’re padding a pension, but then having some money in the corporation and treated like your corporate wealth reservoir can be allow you to be flexible can allow you to

buy this or invest in a new business. she’s, in this case, this business owner, remember, is trying to still earn a living and down the road, while she doesn’t need it now, she’s going to also go, well, maybe I will invest in this and buy this piece of equipment. Or now you have a reservoir to access, because remember, she wants to be a solopreneur. She’s going to be a, so now it’s like, if I want to cash some of that in and get it out, I can now do that, but I’m going to have more money on that side to do it with. than I would if I did it all in RSP.

Kyle Pearce: 100%. And, you know, in this case, it doesn’t always happen this way. It very rarely happens this way, but she’s sort of in a nice spot because she actually can’t get all of the corporate dollars into the RSP. So it’s not like this, like decision to do all in or all out. She actually can only use half of it for the RSP, which is like kind of a nice place to be because it’s like, Hey, listen, if you take half and you put it in the RSP, you now have half in the corporation. You now have

half in the RRSP and now you have it diversified across two buckets. My only hesitation for her to say rip the bandaid off on half and throw it into the RRSP all at once is the uncertainty around what does next year look like or two years from now look like in terms of her business and the assets that she plans to hold and own. So I would say

A great start would be maybe picking a number that’s a good place to start. So maybe it’s 50,000. Maybe it’s 100,000. Whatever that number is to funnel into the RRSP so that she’s starting that bucket as well. It leaves extra. I always like having some extra RRSP room around because you just never know when you might need it, right? Like it’s like sometimes you’re just in a scenario and you’re like, shoot.

I wish I had room to like cut back on some of this income I had never expected to come at a certain time. So there is that aspect as well. And it also gives her the time to kind of work through her plan as to what is it that I’m hoping to do with my business and with the types of assets that I’m willing and wanting to hold. So that’s sort of the big takeaway I think from today. Overall, I would say if we look at our different stages in terms of

where we are and where this individual is in their lifestyle. They are working on their vision. So we talk about their vision for financial freedom. If we think about this, they have a vision started. They have work to do, right? And I think they’re clear on that as well. When you’re in a transition in life, it’s hard to know exactly what next steps look like. So.

We’re going to suggest that she thinks about those next three to five years and really what she’s looking to accomplish. She’s taking a course that is all about passive index investing. If she loves this course and she’s like, I think this is who I am as an investor, then, I would say continue to fill up that R.S.P. That might be a good move for you. However, keep in mind also.

that remember the RSP is actually more helpful for more active investors that are like buying and selling, creating gains, creating income, creating money that’s going to be taxable inside the corporation. If she chooses to do a buy and hold strategy in the corporation with index funds, maybe corporate class index funds, buying and holding in the corporation, as long as she’s not selling every month, every year, she is actually getting a great tax deferral strategy that way as well.

So in her case, thinking through in the vision is really, really important. John, how about the personal and the corporate wealth reservoir? How is she gonna be able to accomplish that given what she’s planning to do?

Jon Orr: Yeah. Well, yeah, exactly. The reservoir, we very much outline the reservoir, right? Like the corporate structure itself, if she’s needing the reservoir to make financial decisions and having her opportunity fund or her emergency fund, every financial, healthy financial system needs to have that, that structure. And so we talked about the corporation being the actual structure to allow that

that growth to happen, but allowing to be tax advantageous to being, you know, using that structure to access and stay liquid when we need to stay liquid and be able to maximize, say, the current structures around tax inside a corporate structure, which has to kind of bleeds, right, Kyle, into stage three, which is how she’s optimizing.

the, you her strategies. That’s what stage three is really all about is now look at your structures, look at your pieces and start to make moves and decisions based off your stage one, your vision and where you want to go using your corporate structures or your wealth reservoir structure so that you can optimize and strategize around where the best use of this money or where you want to help you your goals. So stage three is there. We didn’t get into, you know, stage four specifically with this client.

because they got a lot of moves here between stage one, two and three to start to move towards now keeping in mind that stage four is down the road, but also there’s some structures here that could be in play.

Kyle Pearce: Yeah. And I would say with stage four with this individual, we didn’t mention, but they are, they are single, they don’t have any dependence. So really when it comes to protecting your wealth, when we talk about insurance, legacy and estate planning, really most importantly right now is disability insurance for this particular individual. She’s the sole breadwinner in her household. So she wants to make sure that she has that taken care of. Now she also has maybe others in her mind that she wants to

make sure, you know, are sort of protected or get something in terms of legacy or estate planning that can introduce maybe term insurance. For example, if you know, she wants to help take care of nieces, nephews, maybe it’s a charity. Those are all things that I think we can worry about a little bit later. Of course, having a will in place is important to have for anyone, regardless of whether you have dependence or not. But in this case, disability insurance is going to be really key because if she’s disabled,

she doesn’t have any income coming in and she needs to make sure that she’s protected. So that’s the one here. We didn’t really talk much about leveraged insurance strategies because it’s not really on the radar at this point, right? That’s not something that she’s too concerned about at this stage, but it could become important at some point in the future. So it’s really important to think about who you are, where you are, but something in this plan that really kind of pops out at me, John, like when we talk about stages two and three,

getting stage one under control is gonna be critical before we can do anything with meaning and value in stages two and three. In the interim, we’re suggesting that she does some small investments using her knowledge from this course that she’s taking with index funds. So get investing, but don’t overdo any one thing yet. You can ease your way in.

creating yourself a small plan, having a small portion of those funds going into investment so you can kind of try it on, see what it feels like, and then as your vision comes together, you can then make the moves and the shifts and the pivots that are going to help match what you end up planning for stages two and three.

Jon Orr: Hmm. If you want to know the strength of the four stages, the four phases for yourself, your own healthy financial wealth system, then head on over to CanadianWealthSecrets.com forward slash pathways, CanadianWealthSecrets.com forward slash pathways. There is an assessment there to fill out and you will get emailed a custom report on the four stages, your health, your strength of the four stages and some next steps on how to make them even stronger.

Kyle Pearce: And my friends always remember this is not advice. It is for informational purposes only. It is not legal accounting, tax planning or investment advice. Please reach out to your advisors for any financial advice. And as a note, Kyle Pierce is a licensed life and accident and sickness insurance agent with Canadian wealth secrets incorporated. And we look forward to chatting with you.

Canadian Wealth Secrets is an informative podcast that digs into the intricacies of building a robust portfolio, maximizing dividend returns, the nuances of real estate investment, and the complexities of business finance, while offering expert advice on wealth management, navigating capital gains tax, and understanding the role of financial institutions in personal finance.

OPTIMIZE YOUR FINANCIAL FUTURE