1330 Orange Ave., Ste 302
Coronado, CA 92118
p: 619-319-0520
f: 855-691-0427
Read financial tips and market updates in our weekly newsletter
Copyright © 2002 – 2023 Orion Capital Management LLC • Coronado, CA
Disclosure: Orion Capital Management LLC (“Orion”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC). The firm offers advisory services in the State of California and in other jurisdictions where registered or exempted. Registration does not imply a certain level of skill or training. The information on Orion’s website or in its distributed commentary shall not be directly or indirectly interpreted as a solicitation of investment advisory services to persons or entities of another jurisdiction unless otherwise permitted by statute. Orion’s individualized responses to consumers in a particular state in the rendering of personalized investment advice for compensation shall not be made without the firm first complying with jurisdiction requirements or pursuant to an applicable state exemption.
The information on Orion’s website or in its distributed commentary is not investment, tax, accounting or legal advice. Orion is not a tax advisor. For tax advice individuals should consult their CPA. This information is also not an offer or a solicitation of an offer to buy or sell any security, or to be construed as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon in the making of investment decisions. All content on this site is for informational purposes only, and nothing herein should be construed as an investment recommendation. Opinions expressed herein are solely those of Orion, unless otherwise specifically cited. Material presented is believed to be from reliable sources, but no representations are made by our firm as to other parties’ informational accuracy or completeness. All information or ideas described on Orion’s website or in its distributed commentary should be discussed in detail with an investor’s personal financial advisors and legal counsel prior to implementation.
Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested.
The information on Orion’s website or in its distributed commentary is provided “AS IS” and without warranties of any kind, either express or implied. To the fullest extent permissible pursuant to applicable laws, Orion Capital Management LLC disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose.
Testimonials or reviews on Orion’s website are from current clients. Orion does not compensate for reviews or testimonials and has no material conflicts with clients offering reviews.
Orion does not warrant that the information on Orion’s website or in its distributed commentary will be free from error. Your use of this information is at your sole risk. Under no circumstances shall Orion be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if Orion or an Orion authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy or an offer to sell any security, or a recommendation to buy or sell any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.
Schedule a quick introductory call with you and see if we would be a good fit for you.
The Most Powerful Retirement Plan You’ve Never Heard Of . . .
A Tale of Two Tax Bills
Mike and Mark are identical twins. Both are 58 years old and have successful medical practices. Their practices are precisely the same size, with the same number of employees and the same revenues. They both earn business income of $350,000. The startling difference between them is this: Mark’s income tax bill ($122,500 @ 35% rate) is nearly twice as large as his brother’s. How can this be?
If you own a successful small business or professional practice, the single biggest drain on your income and wealth is probably taxes . . . and potentially the best way to start plugging this drain is to make a large, annual, tax-deductible contributions to an IRS-approved qualified retirement plan called a cash balance plan.
Cut Your Taxes and Boost Retirement Savings
Your contributions to your cash balance plan reduce your taxable income dollar-for-dollar. For example, if your taxable income is $300,000 and you then make a $100,000 contribution to your cash balance plan, your taxable income drops to $200,000. This move would save you $35,000 in taxes per year, assuming a 35% tax rate. Now, instead of just writing big checks to the IRS and state for your estimated taxes, you can write them to your own retirement plan as well.
True, few terms sound more boring than “cash balance plan”. But for those who contribute to cash balance plans, saving tens of thousands of dollars each year on taxes while rapidly building a multi-million dollar retirement nest egg can be quite exciting.
Many small business owners start off by contributing to 401(k) plans or SEP-IRAs, but the IRS contribution limits for these plans are much lower than for cash balance plans. As owners get older and their incomes increase, however, the retirement plan calculus changes. More and more, owners of successful businesses are opening cash balance plans to significantly cut their tax bills while accelerating their retirement savings. Some high-income business owners are able to make very large contributions that can enable them to slash their annual tax bill by $40,000, $60,000 or even $100,000, depending on their circumstances.
Cash balance plans are often paired with Safe Harbor 401(k)/profit sharing plans to provide the highest possible tax savings for the business owner.
Unlike a 401(k) plan or SEP-IRA, each cash balance plan is custom-designed to meet the specific tax reduction and retirement savings needs of the business owner. The allowable plan contribution is calculated based on several factors, including age, compensation, and years of employment.
Here are several reasons that cash balance plans are increasingly popular with small business owners and professional practices:
Is a Cash Balance Plan Right for You?
So, how do you know if a cash balance plan is right for your business? Just ask us. We only need a few pieces of information about your situation to generate a complimentary tax-savings proposal for you. There is no cost to you for this service and no obligation whatsoever.
If you find that a cash balance plan works for your situation, you will have to start soon if you want to save on your 2020 tax bill. Plans must be established by December 31 of the year for which contributions are made. However, it takes time to devise the plan and create the plan documents, and pension administrators are typically very busy in the last couple of months of the year. Thus, it is best to begin the process of establishing your plan right now.
Cash balance plans do not work for everyone, but for those in the right circumstances they can be a very powerful tool for both reducing taxes and building wealth.
Read more about cash balance and defined benefit plans here:
Share This!
Join Our list!
Join our email newsletter list to receive more market updates and financial articles like this one.
The Fed and Jackson Hole
Fed to Present Update at Jackson Hole on Friday In the year since Federal Reserve Chairman Jerome Powell’s last speech
Soft Landing Back in Play
Soft Landing Hopes Rising A “soft landing,” a scenario in which the Federal Reserve tames inflation through interest rate hikes
Markets Calm Amid Crosscurrents
Both stock and bond markets seem to be taking today’s many conflicting financial and political cross currents in stride, with
Peter Thoms, CFA, MBA