Many business owners are putting the finishing touches on their New Year’s resolutions. It could be a new workout, eating and drinking less, a better golf game, or even a new charity to sponsor. All are good goals but what about a retirement plan… one that will allow you to live well now until you retire? That commitment takes serious planning; not procrastination. It takes a lot of discipline to put away a large part of our net income after paying for vacations, private school tuitions, nice cars, and a mortgage. Life is expensive and the more we make the costlier it gets.
But a solid retirement plan that gives you maximum income tax deduction now has huge advantages. If your earned income is large enough, you can contribute as much as $55,000 – $61,000 pre-tax, in a Defined Contribution Plan (401(k), Profit Sharing Plan, etc.). For high earners however, this might help but may not be enough. With a Defined Benefit/Cash Balance Pension Plan, based on your age and income, you can possibly contribute up to $200,000 – $250,000+ pre-tax, per year. You can even “turbo charge” a Defined Benefit/Cash Balance Plan with the addition of a life insurance component to increase annual deductions even further.
So if you are a business owner, the beginning of the New Year is the time to crunch the numbers and vow to get your financial house in order. It doesn’t matter if you are structured as an S-Corporation, a C-Corporation, a Partnership, LLC, or even a Sole Proprietor. Just as long as you have “earned income” you may consider contributions to a qualified plan. Start the year off right by staying on track with your financial goals in 2018. You may not lose the weight you planned to but you will surely lose some money if you don’t make the right investment choices. A hefty Cash Balance Plan could make the difference between keeping your hard-earned dollars…. or sending a big check to Uncle Sam this year.
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