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What Every Business Owner

Retirement Plans Undressed…. What Every Business Owner. NEEDS to Know!. Today is not the usual 401(k) talk... You are going to hear things you have NEVER heard before. L I S T E N W I T H B O T H E A R S. YOU, as an owner who wants to accumulate significant $$$ toward

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What Every Business Owner

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  1. Retirement Plans Undressed… What Every Business Owner NEEDSto Know!

  2. Today is not the usual 401(k) talk... You are going to hear things you have NEVER heard before.

  3. L I S T E N W I T H B O T H E A R S . . . YOU,as an owner who wants to accumulate significant $$$ toward your own retirement and defer taxes on current income YOU,as an employer… attracting and retaining the best talent

  4. A G E N D A Undressing the 401(k) Plan Myths and Facts Case Studies Summary / Q&A agenda

  5. H O W I M P O R T A N T I S Y O U R 4 0 1 ( k ) P L A N ? Name some sources you count on for retirement - Home - Business - RetirementPlan - Inheritance - Other Which of these can you control? introduction

  6. H O W I M P O R T A N T I S Y O U R 4 0 1 ( k ) P L A N ? Which of your personal assets/parts of your business may be protected from litigation? What aspects of employee compensation/benefits are easily changeable when business conditions fluctuate? introduction

  7. I F Y O U C O U L D , W O U L D Y O U ? Put $49,000 pre-tax in your own 401(k) plan each year with 100% approval from the IRS? Pass all required discrimination tests? Retain your most talented employees longer? introduction

  8. I F Y O U C O U L D , W O U L D Y O U ? Provide performance incentives for staff members who are most important to your success…and be able to change how you do it each year? Shift company dollars from taxable bonus programs to the tax-deductible 401(k) plan? introduction

  9. I F Y O U D I D , W H A T D O E S I T M E A N F O R Y O U ? Accumulating$1.4 millionin your individual 401(k) plan account over the next 15 years, tax deferred. $1.4 million in 15 years Accumulating$2.2 millionin the next 20 years. $2.2 million in 20 years Deferring over$435,000in personal income taxes over the next20 years. Assumes interest rate of 6.5% introduction

  10. W H Y A R E N ' T Y O U D O I N G T H I S ? introduction

  11. U N D R E S S I N G T H E 4 0 1 (k) P L A N undressing the 401(k) plan

  12. 4 0 1 ( k ) P L A N S A T F I R S T G L A N C E undressing the 401(k) plan

  13. 4 0 1 ( k ) P L A N S : B E L O W T H E S U R F A C E Investments + Plan Document Design Most people are never shown below the surface. undressing the 401(k) plan

  14. R E S U L T S = P L A I N V A N I L L A IRS rules allow flexibility, but traditional solutions don’t include it. Their focus is on investments (and making a profit)! Big companies/traditional providers choose to avoid plan design because their profit is derived from the investments. undressing the 401(k) plan

  15. C O N S E Q U E N C E S O F P L A I N V A N I L L A ? Business owners are boxed in! undressing the 401(k) plan

  16. T R A D I T I O N A L C H O I C E S = V A N I L L A , C H O C O L A T E O R S T R A W B E R R Y 401(k) plans have become a commodity… IRS rules allow undressing the 401(k) plan

  17. I T T A K E S T W O T O M A K E A P L A N P E R F O R M Financial Advisor Retirement Plan Design Knowledge of investment and fiduciary responsibilities Knowledge of tax law and plan design expertise Investment progress to match employee and business objectives Customized, IRS-approved retirement plan document Continued evaluation of investment choices for performance and fiduciary compliance Continuous evaluation of plan design so that each year’s solution meets business’s objectives undressing the 401(k) plan

  18. MYTHS&FACTS myths & facts

  19. G R O U P Q U I Z Maximum amount you can save each year? - $22,000 - $54,500 - $250,000 True/False: Discrimination rules force owners to provide the same level of benefit to all others as they provide to themselves True/False: All retirement plan documents are basically the same and use similar methods of operation myths & facts

  20. M Y T H S A N D F A C T S : M Y T H # 1 I take back money every year! Low employee participation won´t allow me to have a meaningful plan. There are ways to predict and prevent testing failures through plan design that allow owners to maximize contributions. MYTH! FACT. myths & facts

  21. M Y T H S A N D F A C T S : M Y T H # 2 Everyone knows that owners max out at only $16,500 per year. Owners can save up to $49,000 in 2010, including Their $16,500 401(k) deferral. MYTH! For those age 50 and older you can receive an additional $5,500. FACT. myths & facts

  22. M Y T H S A N D F A C T S : M Y T H # 2 Everyone knows that owners max out at only $16,500 per year. Employer Contributions! + 401 (k) deferral = $49,000* total tax deferred * $54,500 for those over 50 IRS Allows $49,000!!! myths & facts

  23. M Y T H S A N D F A C T S : M Y T H # 2 Only a custom plan allows the maximum to be reached efficiently. Owners 83¢ of every $1.00 contributed. Employees 17¢ myths & facts

  24. M Y T H S A N D F A C T S : M Y T H # 3 It is illegal to treat employees differently in a 401 (k) plan. Custom plan documents allow different treatments for different people. MYTH! Owners may select individual employees and give them more – without having to give more to the newer and unproven staff members. FACT. myths & facts

  25. M Y T H S A N D F A C T S : M Y T H # 3 D I S P E L L E D I can reward individuals who are important to my business! Give unproven staff members the minimum required. Give your star performers more! + = myths & facts

  26. M Y T H S A N D F A C T S : M Y T H # 4 Once an initial approach is in Place, you´re stuck for good. Customized plan designs allow patterns and methods to be changed on a yearly basis to meet owners’ objectives as circumstances change – without amending the plan document! MYTH! FACT. myths & facts

  27. M Y T H S A N D F A C T S : M Y T H # 4 D I S P E L L E D HAVE A PLAN THAT´S TAILOR-MADE EVERY YEAR! Changes? NO NEED TO PANIC... myths & facts

  28. M Y T H S A N D F A C T S : M Y T H # 5 There is no way to improve my current design. I already shelter the maximum; it is as good as it is going to get Receiving 70% of all contribution dollars paid into your plan is good; fine tuning the design may allow 93%! MYTH! FACT. myths & facts

  29. M Y T H S A N D F A C T S : Let me dispel your myth... Prepare for Retirement (speed accumulation) (reward individuals) Attract & Retain Talent Maximize Tax Deferral Opportunity (defer till death) (help for family businesses) Succession Planning myths & facts

  30. W H O I S A N I D E A L C A N D I D A T E F O R A C U S T O M I Z E D P L A N D O C U M E N T / D E S I G N ? 1. Owners or partners earning $200,000 or more per year 2. Owners or partners already making employee contributions (such as matching employee 401 (k) deferrals) 3. Owners or partners who wants to maximize tax deferred savings 4. Owners or partners who want to reward select employees 5. Fewer than 200 employees myths & facts

  31. C A S E S T U D I E S is this for me?

  32. G R E G ‘ S S T O R Y 45 years old Taking over the family business 25 employees Mom (79 yrs. old) still working in business part-time Greg’s W-2 between $200,000 & $250,000 each year Greg’s pain point: plan limits what he can shelter is this for me?

  33. Plain Vanilla Custom Design $49,000 to Owner! Employees $39,000 Profit Sharing $6,900 to Owner! Employees $2,600 Profit Sharing $1,300 Match $900 Match $17,200 Match $17,200 Match $6,000 401 (k) deferral $8,700 401 (k) deferral G R E G ' S S T O R Y : is this for me?

  34. G R E G ' S S T O R Y : B O T T O M L I N E No Plan Plain Vanilla Custom Plan 60% 49% 71% is this for me?

  35. S U E ’ S S T O R Y 52 years old Built a successful business over the past 20 years 100 employees 6 – 8 key executives earning > $110,000 Annual W-2 for Sue = $320,000 Sue’s pain points: - employees don’t value the plan - Sue’s restricted in her own savings is this for me?

  36. Plain Vanilla Custom Design $54,500 to Founder! Employees $25,500 to Founder $32,500 Profit Sharing $3,500 Match $51,000 Match Employees $22,000 401 (k) deferral $22,000 401 (k) deferral $7,200 Profit Sharing S U E ' S S T O R Y is this for me?

  37. S U E ' S S T O R Y : B O T T O M L I N E No Plan Plain Vanilla Custom Plan 60% 34% 82% is this for me?

  38. Plain Vanilla Custom Design $247,000 to Founder and Key Executives $92,500 to Founder and Key Executives $17,500 Match $172,000 Profit Sharing Employees $75,000 401 (k) deferral Employees $40,000 Match $75,000 401 (k) deferral $32,000 Profit Sharing S U E ' S S T O R Y : C O N T I N U E D is this for me?

  39. M A R K ’ S S T O R Y 60 years old 30 employees Landed a 10-year contract, guaranteeing increased income Mark’s annual income will exceed $450,000 each year Mark’s pain point: - “I need a tax shelter!” - $54,500 per year is not enough is this for me?

  40. Plain Vanilla Custom Combination Design $217,000 to Owner! $172,000 Pension Employees Employees $14,300 to Owner $1,200 Pension $23,000 Profit Sharing $1,800 Match $19,200 Match $16,500 Profit Sharing $12,500 401 (k) deferral $22,000 401 (k) deferral M A R K ' S S T O R Y is this for me?

  41. M A R K ' S S T O R Y : B O T T O M L I N E No Plan Plain Vanilla Custom Plan 60% 57% 92% is this for me?

  42. SUMMARY/ Q&A summary / q&a

  43. K E Y P O I N T S 90%of 401(k) plans = PLAIN VANILLA key points

  44. K E Y P O I N T S The allows much more flexibility = Banana Split key points

  45. Lori Gordon Principal & CEO C E L L : 2 1 5 - 3 5 9 - 5 5 2 0 O F F I C E : 2 1 5 - 2 2 2 - 5 0 0 0 L G O R D O N @ M A N D . C O M W W W . M A N D . C O M contact

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