Retirement Income Planning

Helping small business owners reach their retirement savings goals in a more tax-efficient manner with annuities and other life insurance backed products.

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SECURE Act Alters 401(k) Compliance Landscape

The new law changes retirement plan design, administration and compliance requirements.

Employers can get up to $16,500 in tax credit to set up an employee retirement plan.

Not having a retirement plan could be costing you money.

President Donald Trump on Dec. 20, 2019, signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act, a bill to help employers create and run retirement plans for workers. 

Small-Business Incentives

Among the provisions to encourage employers to become plan sponsors, the SECURE Act will:

  • Increase the business tax credit for plan startup costs to make setting up retirement plans more affordable for small businesses. The tax credit will increase from the current cap of $500 to up to $5,000 in certain circumstances.

  • Encourage small-business owners to adopt automatic enrollment by providing a further $500 tax credit for three years for plans that add auto-enrollment of new hires.

  • Simplify rules and notice requirements related to qualified nonelective contributions in safe harbor 401(k) plans.

  • Extend the period of time for companies to adopt new plans beyond the end of the year to the due date for filing the company tax return, giving employers additional time to cover their employees with a profit-sharing contribution.

  • Offer a consolidated Form 5500 for certain defined-contribution plans with a common plan administrator to reduce administrative costs, but also increase penalties for failure to file retirement plan returns such as Forms 5500, required notifications of changes and required withholding notices.

 
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Are You Saving Enough for Retirement?

 
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The credit is available for the plan’s first year and the two years immediately following.


In our example, the fee to set up the plan would be $600, and the annual administration fee would be $1,260.


The credit would be calculated as follows:
($600 + $1,260) x 50% = $930
$250 x 3 non-highly compensated employees = $750
Tax credit = $750


Not having a plan would have cost the business owner in our example $15,220 and he would have missed out on a $750 tax credit for 2020.

 

Business Tax Strategy

If you are a business owner and you do not yet have a comprehensive "business tax strategy" - watch this short video to discover substantial tax benefits available to business owners that most tax advisors know too little about.

 

Challenge:

Many business owners delay saving for retirement while they focus on building a successful business, potentially leading to inadequate retirement savings.

Strategy:

Cash value life insurance may protect and complement a tax‑diversified retirement income strategy with tax-free death benefit and tax-free supplemental income.

Next Steps

At Jennifer Lang Financial Services, we will work with you to help build a program using life insurance and supplemental income designs that will benefit you today and tomorrow.

 

How Can Cash Value Life Insurance Help With Retirement Income Planning?

Life Insurance for Risk Protection (LIRP)

Protection Now. Income Later.

Business owners spend years building successful enterprises. As they plan for life after they exit their businesses, many face inadequate retirement savings.

Help Protect Against a Retirement Income Shortfall

In addition to financial protection against premature death, cash value life insurance offers a potential source of supplemental income independent from Social Security benefits, qualified plans, or any proceeds from selling a business. This asset may help make up any retirement income shortfall.

Help Protect Against an Uncertain Future

A cash value life insurance may also serve as the missing asset within your overall retirement strategy, helping to diversify your portfolio in two ways.

  1. It may add a tax-free asset that may be accessed in the event of a high-income tax environment at the time of retirement.

  2. It may protect against market-based losses if it offers guaranteed minimum interest crediting rates. An asset that is protected from market losses may provide a source of supplemental income during market downturns. Policy’s cash value will be reduced by policy charges.

 

Here's How

Policy

Business owner buys a cash value life insurance policy on his or her life.

Growth

Any growth in the policy’s cash value is tax‑deferred.

Withdrawals

Business owner may take tax-free withdrawals and loans from the policy’s available cash value to supplement their income.

Death Benefit

At business owner’s death, policy’s beneficiaries receive tax‑free death benefit.

 

Popular Materials

DOWNLOAD | The Tax-Free Bucket Client Flyer

 

The Tax-Free Bucket

Failure to diversify tax liabilities at retirement may negatively impact retirement income. See how current tax rates impact various income-producing assets.

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Disclaimer: No Rendering of Advice The information contained within this website is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant.

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