CLIENT OF THE WEEK:
From Commercial Development to Secure Retirement
Read More
Nine Typical Client Situations
OWNER-ONLY BUSINESS
Client Objective
Maximum contribution and tax deduction
Profile
Business strategy consultant age 53, 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 $330,000 in W-2 income.
Solution
OnePersonPlus Defined Benefit plan for 10 years, combined with a OnePerson (k).
Defined Benefit Only:
2023 Business Contribution: $248,200
Tax Savings @ 37%*: $91,835
Defined Benefit + 401(k):
2023 Business Contribution: $298,000
Tax Savings @ 37%*: $110,260
Projected Defined Benefit Only Accumulation: $2.89 million in 10 years
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
EMPLOYED WITH SIDE-INCOME
Client Objective
Reduce total tax liability
Profile
Business school professor, age 57, 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.
Solution
OnePersonPlus Defined Benefit plan for six years based on side income
2023 Contribution: $144,100
Tax Savings on side income @ 37%*: $53,320
Potentially lower tax bracket on total income
Projected Accumulation after six years: $809,180
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
OWNER-ONLY, HIGH FLUCTUATING INCOME
Objective
Reduce taxes, retain flexibility
Profile
Architect, age 48, has an S-Corp and pays himself $185,000 in W-2 income in 2023. He wants to save as much as possible this year, but he wants flexibility as his income fluctuates.
Solution
OnePersonPlus Defined Benefit plan and a OnePerson(k) that he funds only in high income years
2023 Defined Benefit only Contribution: $145,000
Tax Savings@ 37%*: $53,650
2023 Defined Benefit + 401(k) Contribution: $178,600
Tax Savings@ 37%*: $66,080
Projected Defined Benefit Accumulation at age 62: $2.24 million
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
SELF-EMPLOYED SPOUSE
Objective
Invest spousal income for retirement
Profile
Married couple with high household income would like to save more for retirement. One is a highly paid executive at a public company; the other, age 61, 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.
Solution
OnePersonPlus Defined Benefit plan starting in 2023
Contribution to DB: $96,700
Tax Savings@ 37%*: $35,780
Projected Defined Benefit Accumulation in five years: $538,065
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
MARRIED BUSINESS PARTNERS, NO EMPLOYEES
Objective
Maximize retirement savings quickly
Profile
Husband and wife marketing researchers, Adam age 61,
Eva age 59, pay themselves $330,000 each in W-2 income.
They both plan to retire in five years.
Solution
OnePersonPlus Defined Benefit plan with five years funding, optional 401(k)
OnePersonPlus Defined Benefit only
2023 Contribution: $557,700
Defined Benefit + 401(k)
2023 Contribution: $657,300
Tax Savings@ 37%*: $206,350 for DB; $243,200 for DB+401(k)
Projected Defined Benefit Accumulation after five years: $2.31 million
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
FORMER EXECUTIVE, EARNING BOARD FEES
Objective
Reduce current year taxes and delay Required Minimum Distributions (RMDs)
Profile
Former corporate executive, age 72, 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.
Solution
OnePersonPlus Defined Benefit plan for five years with a 3-year cliff vesting schedule. No RMDs are required from this plan until 2025.
2023 Defined Benefit Contribution: $140,200
2023 Tax Savings@ 37%*: $51,875
Projected Defined Benefit Accumulation in five years: $769,640
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
PROFITABLE BUSINESS WITH FOUR EMPLOYEES
Objective
Maximize owner contribution and tax savings while controlling cost of benefits for employees
Profile
Dentist, age 53 pays herself $330,000 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.
Solution
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 | $330,000 | $30,000 | $1,000 | $218,300 | $249,300 |
| Yolanda | 29 | $35,000 | $1,750 | $700 | $4,570 | |
| Stephanie | 36 | $45,000 | $3,870 | $700 | $4,570 | |
| George | 40 | $45,000 | $2,250 | $700 | $2,950 | |
| Maria | 43 | $45,000 | $2,250 | $700 | $2,950 |
Total 2023 Contribution $262,220
Estimated 2023 tax savings $97,020*
Dr. Forrester will receive 94% of the OwnersPlus contribution toward her own retirement.
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
LAW PARTNERS WANT FLEXIBILITY
Objective
Allow different contributions for partners with different compensation and cash flow needs
Profile
Business partners at different stages of their lives want a plan that can be tailored to meet their individual preferences.
Solution
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 | $330,000 | $72,500 | Wants to save 25% of her income. |
| Corey | 58 | $330,000 | $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 | $330,000 | $35,000 | Youngest partner, has a new family, can only contribute $35,000. |
Total compensation: $1,173,100
Total Cash Balance pay credits: $382,500
Total 2023 tax savings @ 37%*: $141,520
* Assumes estimated 31% federal and 6% state tax rates. This example is based on specific assumptions and is used for illustrative purposes only.
Owner-only with Fluctuating Income
Objective
Save for retirement without annual obligation
Profile
Freelance photographer, age 40 with variable income, wants to contribute intermittently – in those years that his income is high.
Solution
OnePerson(k) to which he can contribute as much as $61,000 in good years, as little as zero when he doesn’t have the cash flow.
Learn More about ONEPERSON (k)
Eligibility Checklist
Here’s a quick test to find out if OnePersonPlus is right for you.:
- Client is 35+ years of age
- Client typically earns at least $100,000 annually in one of these ways:
- Is a sole practitioner or owns business with family
- Is self-employed as primary means of earning a living
- Has a second occupation in which client works for himself or herself
- Is considered an independent contractor rather than an employee
- Client wants to contribute more than $66,000 annually to their retirement or a higher percent of income than allowed in a 401(k) or SEP
- Client expects to be able to make that contribution for at least three years
Typical Occupations
Other Typical Occupations
Architect• Attorney• Consultant• Contractor• Entrepreneur• Financial Planner• Graphic Designer• Independent Corporate Director• Independent Insurance Agent• Manufacturer’s Rep• Mortgage Broker• Real Estate Agent• Software Developer• Writers•