Retirement Planning

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Introduction

Being your own boss is empowering, but it also means you're fully responsible for planning your retirement. Without access to employer pensions or group benefits, self-employed Canadians must take the lead in securing their financial future.

The good news? You have flexible, tax-efficient tools at your disposal. Let’s walk through the essential steps to create a solid retirement plan as a self-employed professional in Canada.

🎯 Step 1: Define Your Retirement Vision

Start by asking yourself:

• When do I want to retire?
• What lifestyle do I want—travel, hobbies, part-time work?
• Where will I live in retirement?

Knowing your goals helps you estimate how much you'll need and the best way to get there.

🧾 Step 2: Understand What You’re Missing

Unlike salaried employees, self-employed Canadians don’t automatically receive:

• Employer pension contributions
• Payroll-deducted CPP/QPP payments
• Group health or disability coverage

👉 That means you must plan and contribute for yourself.

💰 Step 3: Make Your CPP Contributions

If you earn more than $3,500 annually, you're required to contribute to the Canada Pension Plan (CPP)—both the employee and employer portions, totalling 11.9% of your net income (up to the yearly max).

Why it matters:

• Builds retirement income
• Offers disability and survivor benefits
• Provides a predictable income stream in retirement

✅ Tip: Save throughout the year to cover your CPP when filing taxes.

🏦 Step 4: Maximize RRSPs and TFSAs

These are your primary personal retirement tools:

RRSP (Registered Retirement Savings Plan)

• Contributions reduce your taxable income
• Funds grow tax-deferred
• Best for higher-income years

Pros

• Ideal for reducing taxes in high-income years, especially since self-employed individuals have no workplace pension, reducing their RRSP contribution room.
• Flexible investment options (stocks, bonds, segregated and mutual funds, etc.)

Cons

• Funds are generally locked until retirement (exceptions include the Home Buyers’ Plan or Lifelong Learning Plan).
• Withdrawals are taxed, potentially at a high rate if your retirement income is significant.

TFSA (Tax-Free Savings Account)

• No tax deduction on contributions
• Growth and withdrawals are tax-free
• Flexible and ideal for both short- and long-term      goals

Pros

• Flexibility to withdraw funds anytime without penalty, making it ideal for emergencies or early retirement.
• Tax-free growth is powerful for long-term compounding

Cons

· No immediate tax deduction, unlike RRSPs.

· Lower annual contribution limit compared to RRSPs.

✅ Set up auto-deposits to stay consistent—even $100/month adds up!

Use TFSAs for tax-free income in retirement or as a backup fund for irregular cash flow during working years.

🧺 Step 5: Diversify Your Retirement Income

Your income in retirement can come from a variety of sources:

• RRSPs, TFSAs, and CPP
• Non-registered investments (stocks, ETFs,      segregated funds & mutual funds)
• Real estate (rental properties or downsizing)
• Sale of your business

🎯 The key: Build a mix that balances growth, stability, and tax efficiency.

🛡️ Step 6: Protect Your Income with Insurance

Without employer benefits, protect yourself with:

• Health & dental insurance
• Disability and critical illness insurance
• Life insurance (especially if you have dependents)

💡 These ensure your savings aren’t wiped out by a health crisis.

🔁 Step 7: Review and Adjust Annually

As your income and life change, so should your plan.

• Update savings goals and contributions
• Check investment performance
• Review insurance needs
• Reassess your retirement timeline

📅 Set a yearly calendar reminder to stay on top of it.

Conclusion

Self-employment offers freedom, but it also means taking full control of your retirement. By using the right tools—CPP, RRSPs, TFSAs, and strategic investments—you can build a future that reflects your values, goals and hard work.

🔎 Contact Us If You Need Help Creating a Personalized Plan.