Privately held Businesses and Corporations face unique challenges that require the knowledge of an entrepreneurial firm like KWM. A qualified retirement plan can provide large tax deductions while allowing the business owners to save for their retirement with right advisory services. Qualified plans include a 401(k) Plan, a profit sharing plan, a defined benefit plan or a hybrid combination.
Kolinsky Wealth Management’s Retirement Planning Division has the resources and depth of experience to provide a variety of retirement plan designs and services for privately held business.
As our clients are different, so are the retirement plans we develop for them. High net worth individuals sometimes require unique elements to their plans. Each plan design should have components that reflect a client’s current circumstances and future needs. It is our goal to provide the expertise and tools that will help ensure a secure financial future with insurance planning for each of our clients.
The following comprehensive financial plan design examples make the following assumptions (if the actual situation differs, the contributions may be different). Retirement Age: The later of age 62 or 5 years of participation in the plan. Entity Type: Corporation, contributions might differ for sole proprietors. Income Type: W-2. Business Start Date: 1/1/2017 (note IRS contributions limits have changed since then).
Retirement Plan Designs
OWNER + EMPLOYEES MEDICAL PRACTICE
Objective: Maximize owner contribution and tax deductions
Profile: Doctor, age 48, with 5 employees
Solution: Profit Sharing Plan
| Participants | W2 Salary | Employer Profit Sharing Contribution |
| Owner | 270,000.00 | 55,000.00 |
| Employee | 130,000.00 | 6,500.00 |
| Employee | 17,000.00 | 850.00 |
| Employee | 51,500.00 | 2,575.00 |
| Employee | 40,000.00 | 2,000.00 |
| Employee | 24,000.00 | 1,200.00 |
| Plan Total | 68,125.00 | |
| Owner’s % of Contributions | 81% |
FATHER + DAUGHTER BUSINESS
Objective: Maximize father’s contribution and have daughter to save money for retirement
Profile: Father, age 60, and Daughter, age 30.
Solution: 401k plan to max out Father’s contribution and allow daughter to deferral salary
| Participants | W2 Salary | Employer Profit Sharing Contribution |
| Father | 270,000.00 | 61,000.00 |
| Daughter | 130,000.00 | 15,000.00 |
BUSINESS OWNER-NO EMPLOYEES
Objective: Maximum contribution and tax deduction
Profile: Business owner, age 50, has W-2 income of $300,000 and plans to retire at 62.
Solution: Defined Benefit (DB) Plan for 10 years and a 401(k)
| DB Only | DB & 401(k) | |
| 2017 Contribution: | $186,800 | $227,000 |
| Tax Savings@ 38%: | $70,900 | $86,200 |
| Projected DB Accumulation: | $2.60 Million | |
| Annual DB Benefit: | $215,000 |
BUSINESS OWNER-NO EMPLOYEES
W-2 INCOME FLUCTUATES
Objective: Reduce taxes, retain flexibility
Profile: Plumber, age 46, W-2 income of $185,000 this year, not sure it will always be this high.
Solution: DB Plan for 14 years, optional 401(k)
| DB Only | DB & 401(k) | |
| 2017 Contribution: | $110,300 | $139,400 |
| Tax Savings@ 38%: | $41,900 | $52,900 |
| Projected DB Accumulation: | $2.24 Million | |
| Annual DB Benefit: | $185,000 |
MARRIED BUSINESS PARTNERS,
NO EMPLOYEES
Objective: Maximize retirement savings
Profile: Husband & wife marketing firm partners, Steve age 59, Jessica age 57, W-2 income for each is $270,000, both plan to retire in 5 years.
Solution: DB Plan for 5 years, optional 401(k)
| DB Only | DB & 401(k) | ||
| 2017 Contribution: | $429,500 | $509,900 | |
| Tax Savings@ 38%: | $163,200 | $193,700 | |
| Projected DB Accumulation: | $2.49 Million | ||
| Annual DB Benefit: | $215,000 |
EMPLOYEE WITH SIDE-INCOME
Objective: Reduce taxes on side income
Profile: W-2 Employee of a firm, age 52, with a consulting business on the side has $150,000 in sole proprietor income (after paying self-employment taxes) and plans to retire at 62.
Solution: DB Plan for 6 years for side income
| 2017 Contribution: | $120,000 |
| Tax Savings@ 38%: | $45,600 |
| Projected DB Accumulation: | $886,800 |
| Annual DB Benefit: | $71,500 |
SPOUSE HAS SELF-EMPLOYMENT INCOME
Objective: Invest earned income for retirement
Profile: Husband, age 61, has been earning $100,000 (after paying self-employment taxes) from a side business, which is supplemental to his wife’s income.
Solution: DB Plan for 5 years
| 2017 Contribution: | $80,000 |
| Tax Savings@ 38%: | $30,400 |
| Projected DB Accumulation: | $463,800 |
| Annual DB Benefit: | $41,000 |
RETIRED CORPORATE EXECUTIVE,
CONSULTING FOR A FEW YEARS
Objective: Reduce tax hit and delay Required Minimum
Distributions (RMDs)
Profile: Self-Employed, age 69, earns $200,000 in W-2 income. She needs to begin taking distributions from her retirement plan this year, and wants to reduce her tax liability while she’s working.
Solution: DB Plan for 5 years with a 3-yr. cliff vesting
schedule, No RMDs from this plan until 2019
DB only DB + 401(k)
| 2017 Contribution: | $143,500 |
| Tax Savings@ 38%: | $54,600 |
| Projected DB Accumulation: | $843,300 |
Learn more about our Small Business Retirement Plans
