The Money Scope Ep 14: CPP & EI for Self-Employed Business Owners

Business owners often have reservations about paying into the Canada Pension Plan (CPP). Many think they’re getting a bad deal by paying both the employer and the employee portion of the contribution. Employment Insurance (EI) may also seem a waste for self-employed business owners if they don’t understand the actual cost and benefits of their situation.

The decision to avoid CPP and EI may also be driven by advice from their tax specialists, looking at a single or few years of tax and investments. However, what does the return on investment look like over the long run? Particularly, if you are using an optimal compensation strategy, coupled with a comprehensive financial plan. In fact, ignoring that context is often what leads to potentially suboptimal or misleading advice about whether to use dividends-only to avoid CPP. Or whether to opt-in to employment insurance.

This episode takes a deep dive into the nuances of CPP and EI as investments of your money. It also includes original research and modeling to compare using these programmes vs avoiding them. I actually changed my mind on a few things once you consider the details and how they fit into a long-term plan. Listen and consider how it applies to your situation when you discuss this with your advisors. If you are an advisor, this may also expand how you evaluate the utility of CPP and EI for self-employed business owners.


“Like longevity risk, inflation risk is extremely difficult for any individual investor to try to hedge with their investments, but CPP is in a much better position to deal with that.”

@LoonieDoctor

“When you consider CPP as an asset, it’s about as close to a risk-free asset as you can get in terms of risk-adjusted real returns.”

@benjaminwfelix

“An incorporated business owner who saves a lot in their corporation by making much more than what they spend [is] going to have an even larger benefit from opting into EI.”

@LoonieDoctor

“Not having access to the regular benefits makes EI seem somewhat less appealing for self-employed individuals, and it leads to the common advice to simply not opt-in – but there are multiple special benefits that self-employed people – are able to access.”

@benjaminwfelix

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