Introduction
A contractor who has built and wound down a successful construction business — or sold it — arrives at retirement with a set of assets that may include a personal holdco, RRSP/RRIF, CPP entitlement, personal real estate, and equipment that was either sold or transferred. Managing these sources of income in retirement is the culmination of decades of corporate accumulation.
The Asset Inventory at Retirement
A typical incorporated contractor retiring after twenty-five years of operation may have:
A holding company with $1.5–$3 million in retained earnings, invested in a diversified portfolio. The holdco may have a capital dividend account balance from years of realised investment gains and corporate life insurance.
RRSP/RRIF: If the contractor paid themselves salary consistently throughout the business years, the RRSP may have $400,000–$700,000 accumulated. If salary was minimised in favour of dividends (a common contractor approach to avoid CPP cost), the RRSP may be smaller.
CPP: Contractors who incorporated and paid minimal salary may have lower CPP entitlement than contractors who paid salary consistently. The CPP gap in retirement is real and permanent — it cannot be made up after the fact.
Personal real estate: Many contractors own commercial real estate personally or through a separate holding entity, generating rental income in retirement.
The CPP Gap and What to Do About It
Unlike physicians, dentists, and lawyers who often draw salary specifically to generate RRSP room, some contractors have historically minimised salary to avoid the combined CPP cost (employee + employer, both borne by the owner — approximately $7,735 combined in 2026). Over twenty years of minimal CPP contributions, the CPP retirement benefit may be $3,000–$5,000 per year instead of the maximum of approximately $16,375.
In retirement, this gap cannot be filled. The contractor who maximised retained earnings inside the corporation but never paid CPP-generating salary will draw entirely from the holdco and RRSP — with no CPP income floor.
This is not a crisis — the holdco has significant capital. But it does mean that the OAS clawback management is more important, because there is no CPP income to absorb as a baseline.
The Holdco Drawdown for the Contractor
The drawdown sequence from a contractor holdco follows the same framework as any holdco retirement drawdown (Articles 119 and 135):
Capital dividends from the CDA balance first — tax-free.
Return of paid-up capital — tax-free.
Eligible dividends where GRIP balance exists (income above the SBD limit taxed at the general rate).
Non-eligible dividends phased over the retirement years to manage the OAS clawback threshold.
For a contractor holdco with significant real estate rental income generating eligible dividends (rental income from commercial property held inside the corporation may generate GRIP and eligible dividends), the eligible dividend rate (~39.34% in Ontario) is significantly better than the non-eligible rate (~47.74%).
The Real Estate Rental Income Stream
Where the contractor holds commercial real estate inside the holdco or a separate rental corporation, the rental income continues in retirement — providing a predictable, if taxable, cash flow. The real estate's capital gain (on eventual sale or deemed disposition) flows into the CDA of the holding entity — available for future tax-free distribution.
When to Speak With a CPA
For a contractor approaching retirement within three to five years, the planning conversation should begin now — while decisions about final salary levels, RRSP contributions, and holdco investment allocation can still be made. The CPP gap, if it exists, cannot be addressed retroactively.