 |
Tax-Advantaged Wealth AccumulationPosted by SEP-SOLO-IRA-401k-ROTH on: 2007-02-02 14:42:23 in category:
Retirement Planning News [ Print | Permalink / 0 Comment(s) ] By Michael Potter, J.D. With longer life expectancy improved health care and better lifestyle choices, today’s adults have more options than their parents did in saving for and funding their retirement. However, many have relied solely on the Social Security system as their sole means retirement income. They realize that means living in poverty in their 'golden years' and they see the need to ‘catch up’ and are looking for specific ways to do so. CONTROLLING THE SIZE OF YOUR RETIREMENT If you are a part-time or full-time investor, property owner or business owner you have a better chance of controlling the size and the timing of your retirement. Some retirement planning options are available only to companies -- including small, private companies. The maximum amounts allowed for contributions to Defined Benefit Plans, Defined Contribution Plans, 401(k) Plans, Roth and traditional Individual Retirement Plans, and Welfare Benefit Plans have been increasing and offer attractive dollar amounts. Additionally, non-qualified retirement funding through insurance policies that grow without taxation during the accumulation phase offer yet another path to wealth accumulation. SHOULD WE EVEN COUNT ON 'SOCIAL INSECURITY'? Many people working today joined the Social Security system as teens or young adults. They contributed to it over the years. The common belief was that retirement was many years away and there is always ‘plenty of time’ to save. But now, with Congress borrowing for years from what was supposed to be an untouchable Social Security trust fund and with changing demographics, Social Security is at risk of bankruptcy. Even if the Social Security system is saved, most now realize that its benefits provide only a ‘poverty-level’ income at best. RETIREMENT PLANNING OPTIONS To enjoy the lifestyle you want in retirement, consider several options: • §401(k) Plans, Defined Contribution and Benefit Plans, Self-Directed IRAs, and of course single-employer Welfare Benefit Plans under §419(e) are ways to reduce taxes while saving for retirement. In addition, the Self-Directed IRAs and Self-Directed Solo §401(k) allow you to invest in real estate, foreign currency exchange, and much more (see our separate Special Report on Self-Directed IRA accounts more including asset protection options). • Single Employer Welfare Benefit Plans in a Restricted Property Trust (under §419(e) with an 83(b) election) allow you to save even more for yourself and ‘key employees’ without requiring coverage for all employees. It allows you to cover just yourself if you want. The large deductions available are nice. A NEW ERA IN ACCELERATED RETIREMENT WEALTH Some well-meaning CPAs are leery of 419 plans. I don't blame them. In 2003 the IRS issued guidelines that curbed two abusive multi-employer plan design models and encouraged the use of §419(e) Single Employer Welfare Benefit Plans. The tax-compliant plans were left alone. They use a separate ‘restricted property trust’ for each employer under IRC §83(b) to distinguish restricted property from deferred compensation. The best Restricted Property Trust §419(e) / §83(b) plan design provides: • Tax deductible contributions with no annual maximum limits; • Access before age 59½; • Asset Protection of accumulating wealth from lawsuits; • A predictable fixed Rate of Return; • Death Benefits may be used for Estate Planning and/or Business Buy / Sell Agreements LOOKING UNDER THE HOOD. Using the best Restricted Property Trust plan design, let’s “do the math” on just one example. Irene is a 41 year old business owner & investor in good health. She contributes $50,000 from the otherwise taxable revenue of her LLC. The company takes a 100% tax deduction on that amount and Irene takes an 83(b) tax election on a portion. Assuming a rate of return based on current dividends and assumptions, after 20 years the net deductions total $700,000, the cash value is $1,526,662 and the death benefit totals $3,735,140. Unlike certain plans, Irene does not have to include her employees. She can choose to cover ONLY herself if she wants. The plan’s features focus on compliance under the guidelines established by the IRS. It’s easily distinguished from the specific abusive plans which the 2003 IRS regulations targeted. To maximize Retirement Wealth, I say use every single legal tool at your disposal. Work with savvy advisors that can sing more than one song and have many tools in their toolbox. Maximize your deductions and don’t retire with just a Social Security poverty-level income. If you’d like information on how the Restricted Property Trust works, e-mail me and I’ll give you information on How To Get Started. ABOUT THE AUTHOR: Michael Potter, Esq. is a familiar face to many business owners and investors. His Integrated Planning practice is focused on Tax-Advantaged Wealth Accumulation, Accelerated Retirement Planning, Asset Protection, Business and Estate Planning, and core-values based Multi-Generation Legacy Planning. His e-mail address is WealthPreservation@cox.net |
|
Post new CommentThis site does not allow anonymous comments. Registered members can login to participate. Registration is free and takes only a few seconds |
|