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How these Canadian entrepreneurs are saving for retirement

If you’re a Canadian entrepreneur feeling uncertain about retirement, you’re not alone. According to a recent poll, 42 per cent of small business owners say they’re “unsure about their retirement planning.”

And that’s understandable. You don’t have a company pension, but you do have the financial responsibility of growing a business. So what’s an entrepreneur to do?

There are various retirement savings decisions to make. These can include:

  • Selecting where and how to invest
  • Choosing non-registered or registered savings plans
  • Deciding whether to manage your own portfolio or work with a financial advisor
  • Learning how to balance retirement investments versus business investment

Russell Culver, the 27-year-old owner of Toronto-based Sequranet Inc., a medical data and technology firm, does it himself.

“I should spend some time to open an RRSP, however, I currently manage my own portfolio in an unregistered account,” Culver says.

Dr. Liza Egbogah, a health and wellness expert and owner of Dr. Liza Shoes is also based in the Toronto area. She has used a financial advisor for the last decade to save for retirement.

“As an entrepreneur, I don’t have a pension so planning for the future is especially important to ensure financial security in my later years,” says the 37-year-old.

Paul Kambietz is the president of IROC Personnel Inc., an Edmonton-based recruiting agency. At age 52, Kambietz says he’s enlisted all of the above in the past, but currently only has TFSA and RSP holdings.”

Retire early, late, or not at all?

One benefit of entrepreneurship is the freedom to choose how long to work. And that includes the option to retire fully at age 65, or not.

“People’s definitions of ‘retirement’ can vary,” says Culver, who’s owned his business for seven years. “I don’t ever see myself completely removed from any company I have an interest in, yet would like to step back from day-to-day responsibilities by [age] 45-50.”

Egbogah has been an entrepreneur for 11 years. She doesn’t expect to fully retire. “I plan to gradually reduce my clinic hours with the goal of practicing 10 hours per week at the age of 65 while still overseeing operations of my shoe line.”

Kambietz has owned several businesses in his 30 years as an entrepreneur, mostly in sales and distribution. “I’m 52 years old and plan to retire in 15 years,” he says, which would put him at 67, two years past typical retirement age.

Investing in retirement vs. business

One retirement planning concern all three entrepreneurs have is the difficulty of choosing between investing in their retirement accounts or their businesses.

“It’s always a challenge deciding how much money should be put back into the business and how much should be put away for savings,” says Egbogah. “My level of risk tolerance is also a challenge as based on my age, I should be able to tolerate higher risk but I also know that at any time, money may need to be injected into the business.”

Egboah chooses conservative investments although this means she “may not experience the growth to build a suitable retirement nest.”

Culver says investing in his business is a key part of his retirement plan.

“If you have confidence in the business and execute successfully, the return on equity should be much higher than even an RRSP which outperforms the market.”

Kambietz has faced tough decisions between balancing business growth and retirement savings.

“I’ve often chosen growth over savings, and that’s all well and good until something completely unexpected happens that catches you off-guard and unprepared,” he says.

"I made the biggest mistake of my life by also throwing my retirement savings into the business when my regular savings ran out.”

For Kambietz, the “unexpected” occurred in 2003. Bovine spongiform encephalopathy (mad cow disease) crippled the beef industry — including his successful meat business.

“I made a big mistake by throwing my regular savings into the business to try to keep it going, and then I made the biggest mistake of my life by also throwing my retirement savings into the business when my regular savings ran out,” he says.

Kambietz cautions business owners to keep retirement savings and general savings separate, and to avoid tapping into retirement savings to manage or meet business expenses. “I learned this lesson the hard way.”

Understanding your retirement planning options as a business owner can help you make wiser financial decisions. Whether planning on your own or with expert advice, learn which plan is best suited to your particular situation, and what to consider when it comes to investing in your business or your retirement.

 

About the author: Sarita Harbour is a business and personal finance writer who comes from a long line of business owners. When Sarita isn't writing, she's homeschooling her younger kids and encouraging her older children as they continue the entrepreneurial family tradition.