Many Americans do not save enough, especially for retirement. In fact, over half of households aged 55 to 64 have no retirement savings according to a survey conducted by the Federal Reserve in 2013. Individuals, however, are not the only ones who lack in retirement savings. More than 50 percent of business owners, including those who are self-employed, are not saving in a qualified plan. In addition, employer-sponsored pension plans cover only half the workforce and haven’t changed in 30 years.
Retirement planning for many sole practitioners and business owners often means investing profits back into their companies. By investing back into the business, they are attempting to grow at a faster rate to increase their business’ value. However, did you know that 55 percent of business owners are forced to leave earlier than expected? The unexpected can arise from changing technology or health-related incidents. When an unexpected exit happens, all of the wealth that has been created in the company essentially disappears. Another option is to pass on the business to either a family member or key employee. As it turns out, many family members don’t want to join the family business, or they are unfit to properly run a successful company. Creating a retirement plan allows you to slowly pull value from the company, invest that money into other companies and get growth side by side with your firm.
I always receive the same question when discussing the corporate 401(k) plan: Where will I get the money for the plan? Most of the money will come from your tax bill. That’s right, instead of paying Uncle Sam you can pay yourself in a tax-deferred retirement plan. It has two fantastic features. One, the majority of the money put into a plan comes from reducing your tax bill. Two, it grows tax-free in your investment account until you or your employees retire.
The primary benefit is that you build wealth outside of your business. You will be shocked at how fast you can save. You can offer a retirement plan to your employees, which helps attract better talent with little to no extra cost to the business.
Creating a retirement plan is easy today, there are five necessary steps:
- Contact Fogel Capital Management to set up a meeting and discuss all of the advantages of implementing a retirement plan
- You will need an employee census; this is easy to get from the payroll report.
- Review the report FCM creates for you, highlighting how much you’ll save on taxes.
- Put us in contact with your accountant to make sure all documentation flows to them.
- Open up a corporate retirement investment account to be funded.
The best time to start saving is now, you will be amazed at the wealth you can build. I look forward to helping you implement a new plan or reevaluate an old plan. If you would like to discuss this article further or set up a meeting, feel free to call me at (772) 223-9686 or email Michael@FogelCapital.com.