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cover art for True Cost of CPP with Aravind Sithamparapillai | E116

Financial Planning For Canadian Business Owners

True Cost of CPP with Aravind Sithamparapillai | E116

Ep. 116
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Jason talks to Aravind Sithamparapillai, an associate at Ironwood Wealth Management Group. Aravind is known for his unique and novel research on the cost of the Canada Pension Plan, and they will talk about the intricacies of Canada Pension Plan and its often-underestimated value for business owners. During the conversation, Aravind and Jason delve into the comprehensive out-of-pocket expenses for employees, taking into account tax credits and deductions. The dialogue explores the fluctuation in costs depending on income levels and the potential for tax savings.


Disclaimers


-“investment shop”

*Investment services are provided through Ironwood Securities, an approved trade name of Aligned Capital Partners Inc. (“ACPI”). ACPI is a full-service investment dealer and a member of the Canadian Investor Protection Fund (“CIPF”) and the Canadian Investment Regulatory Organization (“CIRO”). Only investment-related products and services are offered through ACPI/Ironwood Securities and covered by the CIPF.


-“I do full scale planning”

*Aravind Sithamparapillai is an Associate at Ironwood Wealth Management Group. Ironwood Wealth Management Group offers financial planning and insurance services. Ironwood Wealth Management Group is an independent company separate and distinct from ACPI/Ironwood Securities.



Episode Highlights:

  • 03:20: Aravind acknowledges Jason's content on corporate topics and integration, highlighting the confusion around CPP savings and the realization that the after-tax impact needs closer examination.
  • 09:26: Introducing a chart to visually represent net costs for employers, the conversation explores hypothetical examples across various income levels. Emphasis is placed on the significance of taking the entire tax scenario into consideration.
  • 14:15: Aravind introduces the concept of the Canada Child Benefit and other income-tested benefits that can be impacted by the choice between salary and dividends. He emphasizes the importance of considering all factors in optimizing total wealth.
  • 21:43: Aravind discusses the "light bulb" moment regarding CPP calculations. He explains that when an individual takes CPP, a bonus is calculated on top of the actual CPP rate for that specific year.
  • 22:26: The emphasis is on the assertion that the expansion of CPP extends beyond inflation; it encompasses real income growth attributed to the additional growth linked to the average industrial wage.
  • 25:21: Jason discusses the importance of considering Old Age Security (OAS) and CPP in retirement planning. He also addresses the common belief that everyone thinks they will live to 100, pointing out the statistical likelihood of living longer as one ages.


Key Points:

  1. Jason and Aravind discuss the worst-case scenario related to CPP contributions and how the tax savings play a crucial role, reducing the total contribution amount by over a third.
  2. The conversation delves into the considerations for business owners deciding between salary and dividends.
  3. The discussion emphasizes the importance of benefits of the Canada Pension Plan, including survivor benefits and disability portions in situations where private disability insurance may not be practical.


Resources Mentioned:

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