Hi Folks! Well summer is here and, as we enjoy the beaches and barbeques, we can also stay on top of our financial plans for retirement.
I decided to throw together a comparison, half of which may go against conventional wisdom and I’ve run the numbers so I can give you a comparison of two different strategies for retirement planning. Your choice may depend on your confidence in your abilities.
RRSP CONTRIBUTIONS VERSUS SMALL BUSINESS AS A RETIREMENT PLAN
Example I: Our person, an employee, contributes to an RRSP faithfully every month from age 20 to age 65 in gradually increasing amounts which average $314/month for a full 45 years which grows at an average of 5.50% per annum compounded annually. This would roughly equal $2200/month in retirement income
Example II: Our person, a sole proprietor, runs 1 small business and two side-money generating side projects. He makes some short term investments when available which provide incredible ROI’s which help him position himself and his business, but, aside from about $75,000 in cash, he/she doesn’t have a standard retirement plan. When this person is ready to retire, they’ll have their adult child or grand child take over the business, maintaining 15% ownership to be available as a consultant which will translate into about $4000/month in the form of loan repayment until the new owner had paid off the other 85% of the cost of buying the business and all it’s assets which will take about 20 years to complete
Your choice may depend on your personal skills or, if still undecided, you may choose to grow both options simultaneously to varying degrees as a backup plan.
Cheers,
DGB
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