The main benefit is saving for retirement. Employers who perform economic due diligence on the use of defined benefit plans, defined contribution plans or a combination on both are likely to design the optimal retirement scheme for their company and employees. Often employers use the benefits to recruit top talent and retain skilled employees that are highly valued. Many times those who generate income for the firm are called  “rainmakers” and are highly sought after in competitive markets. Even highly organized operational experts that run the day-to-day operations are of equal value to a company.  Some organizations use additional compensation perks that are generally discriminatory and categorized as non-qualified plans to lure major players in the market place and retain the bench strength of their existing personnel. Qualified plan benefits can save significant tax dollars every year. In addition, defined contribution plans like 401(k)s  allow individuals to defer up to $18,000 of income (2017 limit). And for older contributors ages 50 or more can contribute an extra $6,000 into your 401(k) plan in 2017. The sum of employer contributions and your salary deferral contributions cannot exceed $54,000 in 2017 ($60,000 for individuals over 50 years of age in 2017). Jodie   Read more…

Defined Benefit Plans are one of the most useful of all retirement plans that can favor the older business owner with large income tax deductions while securing significant retirement and estate benefits. This is a brief outline of the potential benefits of these plans. Actual benefits must be calculated and certified by a qualified actuary. General Plan Design: These plans work best when the business owner(s) are older than the general employee population. A Defined Benefit Plan favors older employees because larger contributions are required in light of the shorter time to retirement. Contributions are mandatory each year based on the plan’s benefit formula, unless that formula is amended prior to the accrual of any benefits during the plan year (i.e. first few months of the plan year) or if the plan is terminated. These plans are best suited for those companies that have consistent profits and have a need for ongoing business tax deductions. Integration of a Defined Benefit Plan with a 401(k) Plan: We will strive to have the benefits of the non-key employees funded in the 401(k) plan, while the Defined Benefit plan will fund the benefits for the owners and older employees. Plan Contributions by the   Read more…

The federal formula for assessing how much a family can pay for college is strictly focused on the finances of parent and child. So 529 plans opened by grandparents go uncounted in the federal calculus. In distributing their own aid, however, colleges often look at all 529 plans that name the student as beneficiary. So even if the strategy works for the federal-aid calculation, it won’t necessarily work for the institution’s own aid assessment. – From Wall Street Journal; December 18th, 2006 Here are a couple of lines taken from CSS Profile, Section Q #521) Enter the total value of assets held in Section 529 college savings plans that were established for the student by someone other than the student’s parent(s) #523) Enter the estimated amount that will be withdrawn for the student for the 2017-2018 academic year from Section 529 plans established for the benefit of the student. If you own a 529 Plan, make sure you have a competent college funding advisor examine it BEFORE you apply for financial aid. One last thought: 529 Plans are often funded with mutual funds and ETFs. A lesson learned during the “lost decade” (2001-2010) is that markets are volatile. The S&P   Read more…