"Author Merrick sees potential in obscure wealth creation tool...
Business owners may want to rethink their retirement investment plans after reading a new book by certified financial planner and columnist Peter Merrick.
According to Merrick, the little known individual pension plan (IPP) is the wave of the future for entrepreneurs. "I really just fell upon the IPP", said Merrick. "When I really looked...
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To purchase "The Essential Individual Pension Plan Handbook", click the link below:
INDIVIDUAL PENSION PLANS
An Individual Pension Plan (IPP) is a defined benefit pension plan. It provides senior executives
and business owners with the opportunity to achieve maximum tax relief combined with maximum retirement pension. The Individual
Pension Plan is a sound business decision for both entrepreneurs and executives who have the income to support a more aggressive
tax deferral arrangement.
Contributions made into an IPP are fully deductible by the corporation/ IPP sponsors and are a non-taxable benefit for the plan
beneficiaries until money is withdrawn from the plan (like a RRSP).
The Individual Pension Plan allows companies to contribute for the pension plan member for years of service prior to the set-up
of the plan going back to 1991. In the first year of the set-up of an IPP, past service and current service funding for 2009
could be as high as $433,000, compared to the maximum 2009 contribution RRSP of $21,000.
IPP contributions versus RRSP contributions
For example: a 45 year old owner/executive who has worked for the same company since 1991 and has averaged a T4 income of over
$100,000 per year who plans to max-out their IPP contribution room (using a yearly rate of return of 7.5%) will accumulate
$4,800,101 in registered retirement assets. Opting for this tax solution, this individual would have a registered retirement yearly
benefit at age 71 of $362,819 fully indexed to the Consumer Price Index (CPI).
In Comparison, an owner/executive who only utilizes his/her RRSP option from 45 years old to age 71, would only accumulate $3,310,822
in registered retirement tax sheltered assets (using the same 7.5% compounded interest rate). This amount of RRSP assets on an annual
basis would generate from age 71 and beyond $250,251 of retirement income.
The decision is clear; this particular owner/executive who implements both the IPP and RRSP tax solutions (as part of their retirement plan
would have an additional $1,489,279 of tax-sheltered assets in their registered retirement plan and have an additional $112,568 in annual
retirement income.
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