CLIENT OF THE WEEK:
Financial Advisor Saves Now
Maximum contribution and tax deduction
Business Strategy Consultant age 52, set up an S-Corp for his solo practice. He wants to grow his retirement assets quickly and reduce his tax liabilities. He pays himself $300,000 in W-2 income.
OnePersonPlus Defined Benefit Plan for 10 years, combined with a OnePerson (k).
Defined Benefit Only:
2018 Business Contribution: $197,300
Tax Savings @ 37%: $73,000
Defined Benefit+ 401(k):
2018 Business Contribution: $238,300
Tax Savings @ 37%: $88,171
Projected Defined Benefit Only Accumulation: $2.67 Million in 10 years
Reduce total tax liability
Business School Professor, age 56, makes $180,000 in salary from the University and contributes the maximum to the University’s 403 (b) plan. She also has earned at least $150,000 in sole proprietor income for the past few years from consulting and giving speeches which put her in a higher tax bracket. She plans to continue her side work until she is 62, maybe longer.
OnePersonPlus Defined Benefit Plan for 6 years based on side income
2017 Contribution: $120,000
Tax Savings on side income @ 38%: $45,600
Lower tax bracket on total income
Projected Accumulation after 6 years: $866,800
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Reduce taxes, retain flexibility
Architect, age 48, has an S-Corp and pays himself $185,000 in W-2 income in 2016. He wants to save as much as possible this year but he wants flexibility as his income fluctuates.
OnePersonPlus Defined Benefit Plan and a OnePerson (k) that he funds only in high income years
2017 Defined Benefit only Contribution:$110,300
Tax Savings@ 38%: $41,900
2017 Defined Benefit + 401(k) Contribution:$139,400
Tax Savings@ 38%: $52,900
Projected Defined Benefit Accumulation at age 62: $2.24 Million
Invest spousal income for retirement
Married couple with high household income would like to save more for retirement. Husband, is a highly paid executive at a public company; wife, age 60, has been earning $100,000 (after self-employment taxes) for the past three years in her bookkeeping practice and plans to keep working for another five years. They don’t need her income for cash flow and want to invest it.
OnePersonPlus DB Plan starting in 2017
Contribution to DB: $80,000
Tax Savings@ 38%: $30,400
Projected Defined Benefit Accumulation in 5 years $463,800
Maximize retirement savings quickly
Husband & Wife Marketing Researchers, Adam age 60,
Eva age 58, pay themselves $270,000 each in W-2 income.
They both plan to retire in 5 years.
Defined Benefit Plan with 5 years funding, optional 401(k)
OnePersonPlus Defined Benefit only
2017 Contribution: $429,500
Defined Benefit + 401(k)
2017 Contribution: $509,900
Tax Savings@38%: $163,200 for DB; $193,700 for DB+401(k)
Projected Defined Benefit Accumulation after 5 years: $2.49 Million
Reduce current year taxes and delay Required Minimum Distributions (RMDs)
Retired executive, age 70, set up an S-corporation for his Board of Directors Fees. He pays himself $200,000 in W-2 income on about $400,000 in revenue. He needs to begin taking distributions from his other retirement plans this year, and wants to reduce his tax liability on the current year earnings.
Defined Benefit Plan for 5 years with a 3-year cliff vesting schedule. No RMDs are required from this plan until 2020.
2017 Defined Benefit Contribution: $143,500
2017 Tax Savings@ 38%: $54,600
Projected Defined Benefit Accumulation in 5 years: $843,300
Maximize owner contribution and tax savings while controlling cost of benefits for employees
Dentist, age 53 pays herself $265,000 from her successful Periodontal and Implant Surgery practice. She is willing to make contributions for her four employees but wants to receive the lion’s share for herself.
OwnersPlus Cash Balance Plan + Safe Harbor 401(k) Profit Sharing Plan
|Age||Compensation||401(k) Salary Deferral||Safe Harbor/Profit Sharing||Cash Balance Pay Credits||Total Contribution|
|Dr. Forrester||53||$270,000||$24,000||$ 1,000||$ 171,652||$196,652|
Total 2016 Contribution $210,872
Estimated 2016 tax savings $80,131*
Dr. Forrester will receive 93% of the OwnersPlus contribution toward her own retirement.
Allow different contributions for partners with different compensation and cash flow needs
Business partners at different stages of their lives want a plan that can be tailored to meet their individual preferences.
OwnersPlus Cash Balance Plan and because there are no other employees, each owner also could set up and contribute to an optional OnePerson (k) plan
|Name||Age||Compensation||Cash Balance Pay Credits||Notes|
|Dana||52||$270,000||$72,500||Wants to save 25% of her income.|
|Corey||58||$270,000||$170,000||Senior lawyer in the firm. Wants to put away $170,000.|
|Alan||51||$183,100||$105,000||Doesn’t need the cash flow – he can put away more than 50% of his income.|
|Carl||42||$270,000||$35,000||Youngest partner, has a new family, can only contribute $35,000.|
Total compensation: $993,100
Total Cash Balance pay credits: $382,500
Total 2017 tax savings @ 38%: $145,350
Save for retirement without annual obligation
Freelance photographer, age 40 with variable income, wants to contribute intermittently – in those years that his income is high.
OnePerson (k) to which he can contribute as much as $54,000 in good years, as little as zero when he doesn’t have the cash flow.
CLIENT OF THE WEEK:
Financial Advisor Saves Now
There are special considerations for board directors, who are generally paid in stock and cash, on opening defined benefit plans. Independent directors
Defined benefit plans allow high income self-employed doctors and owners of small medical practices to make the largest IRS approved tax-deductible contributions each year,
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