HOW LONG DO YOU WANT TO WORK?

If you are a baby boomer entrepreneur, you have no doubt lost money in your retirement plan, in your investments, and quite possibly in the value of your company. This may put you in the position of postponing retirement until your assets can recover.
In the past, many entrepreneurs have used retirement plans as tax devices based on the amount of profit in their business at the end of the year. Many are re-thinking that strategy and are now interested in using retirement plans as, well, a strategy for retiring.
Let’s take Mary, age 60. She owns a PR firm and has 7 employees. She earns $245,000 and employees average $50,000.
Mary has worked with her financial planner to determine now much money she needs to save over the next several years in order to begin thinking about retiring. One of the ways her accountant suggested was to consider putting in a Cash Balance Defined Benefit Plan. The contribution to this plan would be a budget item for her PR firm. The lion share of the monies would go for Mary’s benefit, although there would be a substantial increase in contributions for her staff, i.e., between the Profit Sharing/401(k) Plan and the Cash Balance Plan, Mary would receive $210,000 (87%) and the cost to cover the staff would be approximately $30,000 (13%). Mary was thrilled with how much of her savings could be accomplished with tax deductible contributions and she liked the idea of helping her employees save for their retirements.
Mary’s accountant and financial planner referred us in to develop this program and to help her monitor this on a yearly basis as a team effort among Mary, the accountant, financial planner and ACI. We welcome your thoughts or questions on how this may apply to your client.