Meet Rob and Julia
Rob and Julia own and run a successful dental clinic. Rob, 60 and Julia, 58, love what they do and want to continue running their business for another ten years.
As parents to three children, a big goal of theirs is to leave behind a legacy with their hard-earned money. However, Rob and Julia didn’t feel they were making the most of the wealth they accumulated from their business.
They came to us looking for ways to tackle their biggest challenges:
- Keep more of their hard-earned money in their pockets, not the government’s
- Organize their finances to feel less overwhelmed and more in control
- Transition seamlessly into retirement and live their dream life
How Ocean 6 Solved Rob & Julia’s Tax Problem
On paper, Rob and Julia’s financial situation was the epitome of success. They paid themselves a salary of $132,000 and $90,000, respectively, and an additional $100,000 each annually in dividends. But they were paying themselves way more than they needed to live, resulting in unnecessary taxes. They’ve also built up significant savings in their RRSPs, but the downside of this is a high tax bill today and in retirement.
The first step on their financial journey was to clarify how much money they need to pay themselves by building a behavioural cash flow plan.
The behavioural cash flow plan gave us an excellent idea of how much money they need to live their desired lifestyle while still allocating money towards their goals. With this, we got to strategizing and made these pivotal changes to the couple’s finances:
- Adjusted income sources: By paying themselves dividends and ceasing salary payments, Rob and Julia save $7,000 each year inside their corporation because they do not have to pay into their Canada Pension Plan (CCP).
- Tapped into their RRSPs: Instead of withdrawing too much funds from their corporation, it’s more tax-efficient long-term to supplement their income with money they’ve built up in their RRSP. This allows Rob and Julia to use up the money in their RRSP, which the government has control over, and keep the money they have control over in their corporation. The strategy would reduce potential tax burdens if both of them were to pass away early.
The Impact
Before coming to us, Rob and Julia paid themselves more than they needed without taking advantage of the tax-saving potential of their corporation. Their retirement plan, which was once in the hands of the government, is now under their control with a more tax-efficient distribution of their wealth.
By refining how they paid themselves, Rob and Julia save $75,000 per year in taxes and an additional $14,000 a year from not paying into CPP.
This newfound clarity in their finances means more time to do what they love, like growing their business and travelling. Rob and Julia are on track to achieve their goal of running their business for another decade while preparing for a comfortable retirement and building a legacy.
A bonus? Rob and Julia teach their children how to get organized for their business and finances, setting them up for success early on.
