“Junior gets a degree and they get to enjoy the fruits of their labor thanks to Uncle Sam”

The cost of a college degree in this country is soaring, with nothing but future skyrocketing in sight. A recent CNN Special Report Ivory Tower [ link ] highlighted the point with alarming acuity. “Student loan debt in the United States grew to over $1.2 trillion and tuition increases continued at nearly triple the rate of inflation.” 

Beyond the philosophical question of whether college is worth it, most parents want their kids to get that degree, and they will figure out how to pay for it. High-income business owners might have more money than most to fund that tuition bill but wouldn’t it be nice if Uncle Sam were footing the bill instead? A well- designed Defined Benefit Plan will help you achieve that.

College is a hotly debated topic in the initial stages of planning discussions among Financial Advisors and those business clients. One child might be getting ready to head off to those hallowed halls, with another one waiting in the wings to leave the nest in a couple years. The overriding theme is that business owners between the ages of 40-60 are faced with a mountain of escalating college costs, along with the fear that cost of living increases, large mortgage payments, lifestyle needs, and saving for their own retirement, will make them fall short in the end.

With the help of a properly designed Defined Benefit Plan, and some basic “pay yourself first” principles (rather than leaving it in the business until the end of the year to pay your tax bill) you may be hard pressed to believe that the IRS will pick up the rest of the tab… and greatly relieve your college cost burden.

Most business owners who fail to see this simple solution make the same mistake consistently; they pay their share of tax on ALL of their income. Throughout the course of a tax year a business owner will generally take a substantial “salary” to meet their monthly home and lifestyle obligations. This same owner who indicates that they cannot afford to enter into a Defined Benefit Plan for even a modest $100,000 annual contribution will then leave that 100K in their business and it will be included as taxable income at the highest tax bracket.

A Defined Benefit Plan contribution ALWAYS creates an initial “double pronged effect”. The most obvious is the immediate large tax deduction realized. In most states that equates to a 40-50% tax deduction, money that in the past would have gone directly to the IRS coffers and stayed there.

Once educated to this common misstep, the business owner now realizes that by setting aside even $100,000 to contribute to a Defined Benefit Plan the 40-50K they had been sending off to the IRS for years as a tax can now be set aside on their side of the ledger annually, thus relieving the college saving stress. This simple approach can be magnified in the Owner’s favor with a $200,000 contribution and now the IRS will foot the college tuition bill for a couple of the Owner’s children.

In addition to the large tax deduction the Defined Benefit Plan creates immediately to cover the rising cost of college, the Owner also has the ability to rapidly catch up on funding of their well-deserved and impending retirement.

So, now the double-pronged effect is complete; college is paid for going forward with the use of the tax deduction now squarely in the Owner’s favor (use of the money saved in the large deduction that in the past has gone off to the IRS). Secondly, the business owner can set aside all of the dollars that reside protected in the Defined Benefit Plan to address their own retirement goals.

Your client is in the driver’s seat. Junior gets a degree and they get to enjoy the fruits of their labor before and during their Golden Years thanks to Uncle Sam.

About Us

We are pioneers in retirement planning, featuring tax-advantaged defined benefit pension plans as exit strategies for high net worth clients. We partner with top industry Advisers to bring their clients preferred solutions to achieve large income tax deductions.

Location

Coral Gables, FL

Call Us

Phone: 1-800-717-4723

Working Hours

Monday-Friday: 9:00am – 5:00pm

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