$382,500/Year In Tax-Deferred Retirement Savings
Small business owners should be considering every option for reducing taxes and saving for retirement. This is a must read if you are a business owner and have any of the following:
- High income
- Few employees
- Own a solo 401(k)
How Do You Even Put That Much Money Away?
The strategy involves a combination of a 401(k) plan and a cash balance plan.
Maxing Out the Defined Contributions at $73,500 ($66,000 if under 50)
An individual can contribute up to $22,500/year (under 50 years old) or $30,000/year (50+ years old) to a Traditional 401(K) or Roth 401(k).
You can fund the remaining balance of ($73,500 – $30,000) $43,500 through any of the following ways:
- Employer can contribute via matching or profit sharing
- Employee can contribute with after-tax dollars
Maxing Out the Cash Balance Plan
The annual cash balance contribution is dependent on the owner’s compensation and age. The older the employee the higher the allowable annual cash balance contribution. As you can see in the above example an owner who is 40 years old can contribute up to $114,000/year whereas an owner who is 60 years old can contribute $309,000/year.
Summary
This is a complex strategy so you will need a Certified Financial Planner and an actuary. If you have further questions or need help creating a 401(k) or cash balance plan, please call or email us for further discussion.
Reach Out to Us!
If you have additional federal benefit questions, reach out to our team of CERTIFIED FINANCIAL PLANNER™ (CFP®) and Chartered Federal Employee Benefits Consultants (ChFEBC℠). At PlanWell, we focus on retirement planning for federal employees. Learn more about our process designed for the career federal employee.
Preparing for a federal retirement? Check out our scheduled federal retirement workshops. Sign up for our no-cost federal retirement webinars here! Make sure to plan ahead and reserve your seat for our FERS webinar, held every three weeks. Want to have PlanWell host a federal retirement seminar for your agency? Reach out, and we’ll collaborate with HR to arrange an on-site FERS seminar.
Want to fast-track your federal retirement plan? Skip the FERS webinar and start a one-on-one conversation with a ChFEBC today. You can schedule a one-on-one meeting here.
