Those of us who are self-employed create the reality we want, at our own pace and don’t have the luxury of having an employer set up and administer pension and benefit plans on our behalf; which means we have to do it ourselves.
This is not a daunting or impossible task, however too many of us procrastinate on taking the necessary steps to protect the 2 families that we love and are responsible for- your family at home and your business itself.
To protect both families, every self-employed individual should at a minimum own these financial products:
Life Insurance – This is not only for the purpose of providing a tax free death benefit, life insurance can be used to buy out the shares of a business partner who passes away, to extract taxable funds from a corporation tax free, and can also be used as a vehicle to grow your retirement savings tax deferred.
Critical Illness Protection – Pays a tax free lump sum in the event you are diagnosed with a life threatening illness so that your focus will be only on recovery, not worrying about how the bills will be paid or depleting your savings. It gives you options to seek treatment overseas and avoid wait times. Having a lump sum of money gives you power and options.
Disability Income Replacement – Pays a monthly benefit in the event sickness or injury renders you disabled and unable to work. It would also be wise to ensure that your policy is structured in such a manner that you can’t get cut off by the insurer until age 65, if you just can’t go back to work.
Tax Free Health Spending Account – This is pretty much a tax free savings account for medical expenses. Individual health & dental plans can be expensive and you may even end up paying for services you will never use. A Health Spending Account (HSA) allows you to decide how much you want to spend each year and on the medical services you want. You can write off these expenses from your taxes and you can pay for many medical expenses normally excluded by traditional health plans.
Guaranteed Income for life – If given the choice, most people would opt for a pension over an RRSP. A pension is simply guaranteed income for life. You have no workplace pension but you can transform your savings (RRSP, TFSA, non-registered savings) into a guaranteed pension for life via product offered by a few insurance companies called a Guaranteed Monthly Withdrawal Benefit (GWMB);’ which takes away the anxiety associated with worrying about markets going up and down. You can know today what your guaranteed income for life will be when you are ready to retire, your money is protected from creditors, and you have access to your principal during the accumulation period.
There is an old adage, he who fails to plan, plans to fail – Plan your success with some smart decisions today.