Raskin Planning Group

Leverage Small Business with an Effective Retirement Plan: Defer Tax

{2:25 minutes to read}

During a recent conversation at our office, a business-owner client expressed concern that he was paying too much personal income tax and wasn't able to save enough for retirement with his current retirement plan.

We helped him establish the existing plan about seven years ago when the small business was just a start-up. At the time, there wasn't a lot of extra cash-flow, but he wanted something simple and inexpensive.

He and his partner are now in their 50's and their two employees are early 30's and late 20's.

The partners are interested in deferring taxable income (saving for retirement) and the employees are more concerned about current income (saving for retirement isn't important to them at this time). The current plan was working OK, but the owners want to contribute more to their retirement plan than the current plan allows.

The partners wanted to contribute more to the retirement plan for two reasons:

  • Tax deferral; and
  • Save more for retirement.

The owners also wanted to minimize their retirement contributions to the employees who don't currently appreciate or value this benefit.

The owners want flexibility. Business is good right now, but this can always change and they didn't want to be forced to make ongoing contributions to a retirement plan if cash flow became tight in the future.

This recent conversation with our business owner client is not unusual. Highly-compensated small business owners typically have multiple objectives:

  • They want to maximize after-tax compensation;
  • Attract and retain good employees; and
  • Save for their personal retirement.

They are often frustrated by the complicated qualified plan rules that mandate certain benefits to employees and limit benefits for owners. The administrative costs and liabilities of a qualified plan can seem burdensome as well.

The situation required a customized solution to their business and personal planning problem.

Stay tuned for our next article which shares the solution for this client.

For over 30 years, the Raskin Planning Group has been helping small business owners reduce their taxable income and save for retirement. Creative and customized retirement plan design is often necessary to help our clients meet their objectives and goals. Peter Raskin is a registered representative of Lincoln Financial Advisors. Securities and advisory services offered through Lincoln Financial Advisors Corp., a broker/dealer (Member SIPC) and registered investment advisor. Insurance offered through Lincoln affiliates and other fine companies. Raskin Planning Group is not an affiliate of Lincoln Financial Advisors. CRN-1399388-012116

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