Sub Headline: The Psychology of a Business Owner May Surprise You Synopsis: Even successful business owners have self-doubt about maintaining an ongoing profitable enterprise. They lose sleep over their businesses just as a worried parent does over a child. The psychonomics of ownership is dealing with anxiety, most of which is unwarranted.   Watch the video interview with nationally recognized author, speaker and retirement authority, Peter Hibbard. Content: Over the years, forty-five-year financial veteran Peter Hibbard was quoted as saying, “I don’t think I’ve ever met a business owner who hasn’t had some sort of paranoia about continuing their success, and very few are really ready for retirement.” Peter has also observed that, even among successful business owners, many do not have an exit strategy or succession plan. Many entrepreneurs are sweating bullets at night, as they lie awake worrying about their continued success, their business transition and their retirement lifestyle. And if that’s true for successful business owners, what of the marginally successful? The real story here is the human factor.  Business owners are nagged by insecurities and a sense of powerlessness regarding preparing their businesses for success into retirement. The psychonomics of business ownership is very fragile and that’s   Read more…

Overview: What distinguishes a retirement plan, which is Benefit Focused from one that is Lump Sum Focused (such as the traditional split funded insured defined benefit plan?)  A Benefit Focused Plan provides no distribution or cash out of the lump sum value of the participant’s monthly retirement benefit.  This restriction of no cash out permits the plan: to fund to a more valuable benefit, i.e. a 100% joint and survivor monthly retirement benefit; to provide a death benefit of 100 times the monthly pension until the death of the participant while the surviving spouse continues to receive the participant’s monthly benefit (vs. the traditional split funded plan where the insurance death benefit must end at normal retirement age), and; to protect the value of this benefit from estate tax since there is no distribution of this value (vs. the traditional split funded insured defined benefit with a single life annuity and a cash out at retirement). The fundamental plan provisions of the Benefit Focused Plan, which are backed by IRS letters of determination and include the most recent restatements, are what distinguishes the Benefit Focused Plan from Lump Sum Focused Plan.  They include the following: The Benefit Focused Plan provides   Read more…

Cash Balance A cash balance plan is a defined benefit plan that defines the benefit in terms that are more characteristic of a defined contribution plan. In other words, a cash balance plan defines the promised benefit in terms of a stated account balance. In most cash balance plans, a participant’s account is credited each year with a “pay credit” (such as 5 percent of compensation from his or her employer) and an “interest credit” (either a fixed rate or a variable rate that is linked to an index such as the one-year treasury bill rate). Increases and decreases in the value of the plan’s investments do not directly affect the benefit amounts promised to participants. As a result, investment risks are borne by the employee. When a participant becomes entitled to receive benefits under a cash balance plan, the benefits that are received are defined in terms of an account balance. For example, assume that a participant has an account balance of $100,000 when he or she reaches age 65. If the participant decides to retire at that time, he or she would have the right to an annuity based on that account balance. Such an annuity might be   Read more…

401(k) profit sharing plans are advantageous because they potentially allow you to contribute significantly larger amounts of money the plan compared to a SEP IRA, SIMPLE IRA or most other available retirement plans (excluding certain other defined contribution and defined benefit plans). The 401(k) profit sharing plan is available to any business, including businesses, which employ only owners and their spouses, including C corporations, S corporations, partnerships and sole proprietorships. The 401(k) profit sharing plan contains generally higher contribution limits compared to SEP IRA, SIMPLE IRA. Employer contributions — deductible contributions up to 25 percent of eligible compensation based on a maximum compensation amount of $270,000 (2017 limit.) (Slightly lower limits for sole proprietorship based on net Schedule C income and SEI tax adjustments.) Salary deferral contributions — Individual salary deferral of up to $18,000 of income (2017 limit). “Catch-up” contributions — If you are age 50 or older, you 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). Other key benefits: Contribution flexibility — As plan sponsor, you decide each year how   Read more…