The Best Tax Tip for High Income Clients

27th Jan 2017

Top Tax Tip for Your High Income Clients

Each January, as we review our high volume of conversations and plans from November and December, I ask our sales consultants for their top tips to pass on to Advisors for the year ahead.  This year they were unanimous:

STOP

TELL YOUR CLIENTS WHO THINK THEY WILL MAKE HIGH INCOME THIS YEAR, DO NOT CONTRIBUTE TO EXISTING SIMPLE OR SEP PLANS FOR 2017!

Given the uncertainty about potential tax law changes, you and your clients might be hesitant to make big moves early in the year.  But that doesn’t mean that they should keep funding their existing retirement plans.

BUSINESS OWNERS WHO MAKE ANY SEP-IRA OR SIMPLE CONTRIBUTIONS IN 2017 WILL NOT BE ALLOWED TO OPEN DEFINED BENEFIT OR CASH BALANCE PLANS IN THE SAME YEAR.

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Here are 2 scenarios that illustrate the impact the right retirement plan can make:

1

SEP-IRA vs. Defiined Benefit Plan

Client Profile
– Owner Only Business

In 2016, a self-employed consultant age 52 paid himself $300,000 in W-2 income from his S-corp. to maximize his tax and retirement savings.  He contributed $182,000 to a defined benefit plan which is 3 times the $59,000 that he could have contributed to a SEP.


Black business man

SEE THE NUMBERS

READ MORE ABOUT DEFINED BENEFIT PLANS

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CREATE PERSONALIZED ESTIMATE

Show your clients their maximum potential savings

CALCULATE SAVINGS

NOTE TO SELF

Identify clients with high self-employment  income and give them a call

CLIENT CALL SCRIPT

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2

SIMPLE vs. Cash Balance + 401(k) Plans

Client Profile- Small Business Owner

A small medical practice owned by Dr. Smith, age 62, with 4 additional employees, can establish a Cash Balance defined benefit plan along side a 401(k) plan.  Dr. Smith can contribute $300,350 for himself, more than 96% of the total contribution.  If Dr. Smith were to stay with his SIMPLE, his own contribution would be limited to $23,450.  


Physician Doctor

SEE THE NUMBERS

READ MORE ABOUT CASH BALANCE PLANS

Partnerships, S-Corps., and other business entities with strong consistent cash flow can establish a Cash Balance Plan plus a Safe Harbor 401(k) Profit Sharing Plan to make large, tax-saving contributions for the owners while limiting and controlling the cost of retirement benefits for employees.

MAXIMIZE CONTRIBUTIONS, CONTROL COSTS:

Download Cash Balance Program Overview

Request an Illustration
See the Sample Illustration

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