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The Power of Plan Design
AS AN ADVISOR, you know that many business owners face a dilemma as they prepare for retirement. As their days of running the business wane and with recent performance of the global equity markets, business owners need to contribute more to their tax-qualified retirement plan to meet future needs. However, the cost of contributions to cover other eligible employees can make traditional retirement plans seem unaffordable to some businesses, especially in this difficult economic environment.
Fortunately businesses can customize tax-qualified retirement plans to maximize contributions and benefits for owners while controlling the cost of covering other eligible employees through the Power of Plan Design. In one example, a business can increase the contribution to an owner’s retirement plan from $42,000 to over $150,000 per year while decreasing the contribution for staff by more than 50 percent. This strategy can be accomplished for other businesses as well if they consider adopting a defined benefit pension plan in addition to the 401(k) profit sharing plan, also known a DB/DC combo plan. The allowable contributions under this combination of plans can be significantly higher than the allowable contributions under the 401(k) profit sharing plan alone.
As an advisor, you need to work with a strong TPA that can help you explore the full range of creative retirement plan options. You need to give your business owner clients more opportunities to achieve financial security today and in later years. Look for a TPA who will provide a complimentary plan design illustration that you can use to target the ever growing Cash Balance and DB/DC Combo plan marketplace.
To learn more about these design techniques to help your clients and prospects and how RSM McGladrey can help, please view our white paper The Power of Plan Design. You can also view our recent webinar on this topic by visiting our event archive at www.rightfitretirementpartner.com. |
