Retirement Planning For Business Owners
Do you think retirement plans are only for large corporations? I debunked this myth with Bill Black from Pension Specialists in the recent episode of the Profitable Home Services Podcast. We discussed how small businesses can significantly benefit from these plans. A qualified plan allows for an income tax deduction and offers tax-exempt growth to maximize profitability.
Bill and I have been working together for many years, assisting small business clients with tax planning to minimize their tax liabilities and increase profitability. We’ve discovered that qualified retirement plans for small businesses are vital to increasing profit. Contrary to popular belief, these plans are not just for large corporations.
In this episode, Bill and I discuss:
- Qualified retirement plans for small businesses
- Debunking the misconception that qualified plans are only for large corporations
- Types of businesses that can benefit from qualified plans
- Custom-designed plans vs. one-size-fits-all options
- State-mandated retirement plans for small businesses
- Drawbacks of state-mandated plans
- Common myths and misconceptions about retirement plans for small business owners
- Maximizing benefits for business owners while providing incentives for employees
- Process of setting up a pension plan
- Benefits of a qualified retirement plan in saving on income taxes
The key moments in this episode are:
- [00:02:31]- The definition of a qualified retirement plan
- [00:05:57]-Customized plans for small business clients
- [00:09:09] – States implementing mandatory retirement plans
- [00:12:05] – Exploration of how custom design plans offer more tax deductions and benefits for the employer compared to state-mandated plans.
- [00:15:49] – The importance of considering retirement planning for small business owners
- Improving plan eligibility and benefits
- [00:22:38] – Myths about employer contributions
- [00:30:09] – Discussion on the paperwork involved in opening an account for the pension plan and the time it takes due to regulations.
- [00:31:02] – Information about the deadline for filing tax returns and the decision deadline for creating a pension plan, including the need for paperwork and account opening.
- [00:38:30] – The tax benefits of a qualified plan
- [00:39:24] – Accessing money from a tax-deferred plan
- [00:40:12] – Working with an accountant for tax planning
“You’re always better off deferring those taxes because when you take it out you don’t take it all out at once you take it out a little bit at a time and so you will always end up paying less in taxes and have more in your pocket and I’ve done spreadsheet after spreadsheet on that and it’s a fact.” Bill Black
The Power of Qualified Retirement Plans
A qualified plan allows employers to make contributions that qualify for an income tax deduction. These plans also offer tax-exempt growth and asset protection from judgment creditors. They are suitable for any type of business, including sole proprietors, partnerships, LLCs, LLPs, S corporations, and C corporations. By creating a qualified plan, business owners can maximize their tax deductions, protect their assets, and build wealth for retirement.
Custom-Designed Plans vs. State-Mandated Plans
Custom-designed plans are a better choice than one-size-fits-all options offered by payroll companies. Bill discussed the implementation of state-mandated retirement plans for small businesses, using California’s CalSavers program as an example. While these state-mandated plans claim to be cost-free for employers, there are administrative costs involved, and nothing is deductible for the employer.
On the other hand, custom-designed plans can provide significant tax deductions for the employer, with the majority of contributions going to the employer rather than the taxing authorities. These plans are not primarily focused on retirement planning but rather on reducing taxation for small business owners.
Debunking Retirement Plan Myths
Bill debunked some common myths and misconceptions about retirement plans for small business owners. For instance, many business owners believe that they are limited to a safe harbor match, where the employer matches the employee’s contributions. However, there are other options available to maximize benefits for the owner while still providing incentives for employees.
Setting Up a Pension Plan: The Process
Setting up a pension plan typically takes around 30 to 45 days. Pension Specialists aim to make the process as easy as possible for clients, handling eligibility determination, conducting enrollment meetings for new participants, and providing ongoing support.
The Tax-Saving Power of Qualified Retirement Plans
Bill discussed the benefits of a qualified retirement plan and how it can save business owners money on income taxes. By investing $100,000 into a plan like this, business owners can save $50,000 in income taxes. The money invested is deductible, meaning that $100,000 is working for them instead of $50,000 if they didn’t have a plan.
About Bill Black:
Bill Black has been in the pension administration business for over 40 years and is responsible for the marketing efforts of the firm assisting producers nationally with the sale of qualified plans.
Bill has a B.A. from Rollins College in Business Administration and Economics, is a CLU, ChFC, Life and Qualifying member of the Million Dollar Round Table (MDRT), and 20 times Court of the Table and 20 times Top of the Table qualifier. Bill brings that unique and necessary combination to the marketing effort. He is comfortable with the explanation of complex ideas and able to put them into easily understood concepts, with the ability to sell.
Having spoken nationally and internationally on the topics of qualified plans, Bill is a much sought after speaker. He is certified to teach continuing education to CPA’s and insurance professionals. Additionally, he has had numerous articles published in industry journals and has been featured on radio programs that address financial planning matters.
Licensed in 43 states, we are truly a national practice. Bill has marketed and administered plans in virtually every state in the union.
Connect with Bill: