August 3, 2011
Business owners and independent professionals have powerful tax-saving options available to them that the rest of the population simply does not.
By opening and funding an IRS-approved qualified retirement plan called a small business defined benefit plan, a business owner or independent professional can make tax-deductible contributions to the plan in excess of $100,000 per year and thereby save $38,000 or more in taxes each year.
Defined benefit (DB) plans are not right for everyone, however.
Do you fit this profile?
• Self-employed or small business owner with up to five employees
• 40 years of age or older
• Willing and able to contribute more than $50,000 annually to a qualified retirement plan and continue this level of funding for at least 3 years
Defined benefit plans enable the self-employed to build a very large nest egg in a very short amount of time. DB plan participants can accumulate as much as $1,000,000 to $2,000,000 in a retirement account in just 5-10 years. Once a DB plan is funded to the IRS limit of $2.36 million, the DB assets can simply be rolled into a regular IRA.
Here is a list of the typical professions of people with defined benefit plans:
• Independent Corporate Directors
• Graphic Designers
• Independent Insurance Agents
• Manufacturer’s Reps
• Mortgage Brokers
• Real Estate Agents
• Software Developers
DB plans enjoy several powerful features.
• Highest allowable contributions to a qualified plan–$100,000 or more (much higher than the contribution limits on SEP-IRAs and 401(k)s.
• Annual tax savings of $38,000 or more
• Investments grow tax-deferred, building wealth faster
• Tax-free rollover to an IRA at retirement (or plan termination)
• Flexible range of investment choices
Defined benefit plans are not appropriate for everyone, but for those in the right circumstances they can provide large tax savings and a very fast way to “catch-up” on amassing a substantial retirement nest egg.
We would be pleased to generate a complimentary proposal for you if you would like to see how much you could save in taxes by establishing a defined benefit plan. Just give us a call or send an email. It takes just a little time and won’t cost you a thing.
If you would like more information about how DB plans work, simply contact me and I will send you our 2011 Defined Benefit Plan White Paper.
Peter C. Thoms, CFA
Orion Capital Management LLC
1330 Orange Ave. Suite 302
Coronado, CA 92118
About the Author:
Peter C. Thoms, CFA, is the founder and managing member of Orion Capital Management LLC, an independent Registered Investment Advisor based in Coronado, California. The firm focuses on managing global investment accounts for institutional and private clients.
This document is for informational purposes only. Nothing in this report is to be construed as a specific investment recommendation. This document does not constitute the provision of investment advice, which is only provided by Orion Capital Management LLC under a written investment advisory agreement and only in states in which Orion Capital Management LLC is registered or is exempt from registration requirements. Orion is not a tax advisor and does not provide tax advice. For tax advice individuals should consult their CPA.