The Canada Pension Plan (CPP) can be an important part of any Canadian’s retirement plan. The personal earnings required to maximize this benefit go up yearly and is currently in excess of $55,000. This is important to small business owners because (unlike employees) they control how profits are received from their business. Dividend payments may result in paying less tax, however, do not contribute to CPP.
Canadians that contribute to the Canada Pension Plan can receive a monthly payment when they retire that continues until death. The maximum monthly payment increases every year and is currently more than $1100/month, however, the average Canadian currently receives just over half the maximum amount. This is a result of not maximizing their CPP contributions.
It is very important for small business owners to consider their retirement plans and maximizing their contribution to CPP is a very good start.
