Incorporating your medical practice can help you accelerate your savings.
It does this by cutting the current taxes you pay by as much as 75% on up to $500,000 of your practice income.
The key is to leave money in your corporation. And because you pay a low tax rate on practice income, you now have more money to invest.
Unfortunately, corporate tax rates on investment income are not the same as the tax rate on your practice income.
In fact, your investment income may even reduce your access to low tax rates on your practice income.
So to make the most of your head start, you have to manage your corporate investments carefully.
Of course, there are often other components to your portfolio.
In fact, the recent rule changes for private corporations mean that diversifying your strategies—and not just relying on corporate investments—is even more important.
So, we know that lower tax rates help speed up retirement savings. But knowing how to make other strategies part of your financial plan can boost your corporation’s value.
It’s about putting the right investments in the right tax-sheltered and non-tax-sheltered accounts so you can maximize your results.
It’s about understanding how best to distribute your investments among your corporation and things like a registered retirement savings plan, a tax-free savings account, insurance, or an individual pension plan.
…especially if those other strategies bring their own benefits. A spousal RRSP, for example, can be used to increase your assets or help with income splitting.
How should you invest?
There are as many different answers as there are physicians, but MD Financial Management can help set you up for your eventual retirement.
An MD Advisor can help you figure out your overall strategy, and then show you how best to invest in all your individual accounts.
If you have any questions, please contact an MD Advisor.
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