Professional Athlete

Client:

Kevin is a 24-year-old professional hockey player who signed a lucrative contract last year to play for a team in Western Canada. While playing on an entry level deal he accumulated modest savings in his RRSP and TFSA but is anticipating a significant increase in his savings rate under his new deal. Kevin’s new contract pays him over $4M USD per season and he is very concerned with taxes. Despite the significant pay raise, Kevin wasn’t satisfied with his savings levels during the first months under the new deal. Kevin knows he is paying into a pension plan but isn’t sure how it works.  

Issues to address: 

  • Kevin wants to explore tax minimization strategies. 

  • A long career in the NHL means retiring in your 30s. While his new salary is significant, Kevin knows he needs to accumulate a significant amount of assets to be able to retire and bridge him until his pension kicks in. 

  • Kevin is not investing money on a regular schedule but doing so in lump sums when he feels it’s “a good time” due to stock market pullbacks.

Our recommended path ahead:

  • Kevin can pay substantially less income tax by setting up a Retirement Compensation Agreement (RCA) Trust. Setting up an RCA Trust allows Kevin to set aside earnings on a tax deferred basis, like an RRSP. Kevin would direct a percentage of each paycheque into the RCA Trust where it can be invested. Kevin can then withdraw funds from the trust when he is older in either a lower tax bracket or potentially a more tax friendly jurisdiction outside of Canada.

  • Set up a monthly automated investment plan in addition to the RCA Trust. Kevin’s players pension does not kick in until age 62. If Kevin plays eight more years, he will retire with a 30-year gap until his pension income starts. We worked with Kevin to set up a budget and find an appropriate regular monthly payment to his investment accounts to help him accumulate the assets he needs to fund a long period with no income. By creating a monthly automated investment, we also eliminated some behavioural risks that are associated with trying to time the markets.    

  
After reviewing the clients outside account statements, tax returns and insurance policies we were able to create a new wealth plan to quantify the impact of our recommended strategies.