OCEANFRONT BLOG
Maximize Your Retirement Savings: The Power of Individual Pension Plans (IPPs)
For business owners and incorporated professionals, securing a financially stable retirement requires more than the typical savings options. Individual Pension Plans (IPPs) offer a strategic solution to significantly enhance your retirement income while leveraging tax advantages.
What Is an IPP?
An Individual Pension Plan (IPP) is a registered defined benefit pension plan tailored for incorporated professionals and business owners. Unlike Registered Retirement Savings Plans (RRSPs), an IPP allows for higher contributions, especially for individuals aged 40 and above, enabling greater accumulation of tax-deferred retirement savings.
Why Consider an IPP?
- Higher Contribution Limits
IPP contribution limits surpass those of RRSPs, particularly for individuals over 40. Contributions increase with age, allowing participants to maximize retirement savings during their peak earning years.
- Tax Advantages
- Tax-Deductible Contributions: Contributions made to the IPP by your corporation are tax-deductible.
- Tax-Deferred Growth: Investments within the IPP grow on a tax-deferred basis, enhancing long-term savings potential.
- Deductible Expenses: IPP setup and maintenance costs are tax-deductible for the corporation.
- Creditor Protection
IPP assets are held in a trust, offering creditor-proof protection—a crucial benefit for business owners seeking to safeguard their financial independence.
- Pension Income Splitting
At retirement, up to 50% of IPP income can be split with a spouse, potentially reducing your family’s overall tax burden.
- Funding Flexibility
IPPs allow for additional contributions to compensate for investment or funding shortfalls, and significant top-up contributions can be made post-retirement.
Who Should Consider an IPP?
IPPs are ideal for:
- Business owners or incorporated professionals aged 40 and older.
- Individuals earning over $100,000 annually in T4 income.
- Professionals with sufficient corporate cash flow to fund contributions.
- Those seeking to grow retirement savings beyond what RRSPs allow.
RRSP and IPP Comparison
Real-Life Impact: A Case Study
Consider a 45-year-old incorporated professional earning $200,000 annually with 15 years of past service. By transferring RRSP assets to an IPP and making maximum contributions, they could substantially increase their retirement savings by over 1.78MM by age 71.
If you’re a business owner or incorporated professional ready to take your retirement planning to the next level, an IPP might be the solution you’ve been looking for. Connect with one of our wealth advisors to explore how an IPP can fit into your financial plan and secure your financial independence.
Invest in your future today—because you deserve a retirement as successful as your career.
At OceanFront[1], we’re here to help! Contact us today for more information on retirement planning.
