If you’re a business owner, the Personal Pension Plan (PPP) is a great way to save for retirement and reduce your taxes. With higher contribution limits than an RRSP or TFSA, and the power of compounding interest, a Pension Plan can help you build a significant nest egg for your golden years.
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What is PPP?
The Personal Pension Plan (PPP) is a wealth accumulation and tax savings solution specifically designed for business owners to accumulate significantly more in retirement savings and pay less tax than most Canadians.
The PPP allows business owners to make annual contributions of up to $27,000 per year (or $1.5 million over the lifetime of the plan), and provides them with a tax deduction on their contributions. The money in the plan grows tax-free until it is withdrawn, at which point it is taxed as income.
With the PPP, business owners can significantly increase their retirement savings, while enjoying substantial tax savings. For example, a business owner in the highest marginal tax bracket who contributes $27,000 to a PPP can save over $9,000 in taxes.
How can CPA4IT Help?
The PPP is an attractive option for business owners who are looking to maximize their retirement savings and minimize their tax liability. If you are a small business owner, our team of experts can analyze your situation to advise whether PPP is the right choice for you.
Contributions to a Pension Plan are tax-deductible, so you can reduce your taxable income and save even more on your taxes. And if you’re self-employed, the Pension Plan offers an additional deduction for retirement savings. The Personal Pension Plan is a registered retirement savings plan (RRSP) that is available to Canadian residents aged 18 and over.
Why should you opt for PPP?
The PPP offers many benefits, including:
· Tax-deferred growth of your investment
· Potential for significant tax savings
· Ability to contribute up to $50,000 per year (or up to $1 million in a lifetime)
· All withdrawals are fully taxable as income
There are many other benefits to having a pension plan, especially when it comes to saving for retirement. With a pension plan, you can contribute more towards your retirement than what’s allowed with an RRSP/TFSA or an existing IPP. Coupled with the power of compounding, this accumulates to larger savings when you retire.
A pension plan can also provide you with a steady income stream during retirement, which can be a great help in covering your costs of living. And if you have a defined benefit pension plan, your payments are guaranteed for life – no matter how long you live.
How can CPA4IT help?
At CPA4IT, we work closely with the creator of the Personal Pension Plan in Canada. Wealth transformation is not a one-size-fits-all process. Our process considers many factors, including your age, investment goals and risk tolerance. We will work with you to create a personalized plan that meets your unique needs. Contact us today by booking a FREE consultation with our experts to learn more about how we can help you transform your wealth into a lasting legacy.