Tax Planning – Retirement Planning Strategies

CPA services provided by Contryman Associates, P.C., Investment Adviser services are offered through Contryman Wealth Advisors

Description:
Services designed to capitalize on provisions of current tax laws with regard to retirement planning strategies to minimize taxes as you save for retirement and as you withdraw from the funds to pay expenses in retirement.

Benefits:
As tax professionals with Contryman Associates, P.C., who also have experience and knowledge of retirement planning issues through Contryman Wealth Advisors, we can discuss the tax advantages and contribution limits of the many retirement planning options to help you make an informed decision from both the tax and retirement planning standpoints. We can advise you on making contributions to your employer-sponsored retirement plan or help you determine which type of retirement plan may suit your needs.

We can help you determine required minimum distributions from your retirement savings and help you determine when to begin taking distributions depending on other income sources, your life expectancy, etc., to help you maximize tax-deferred growth when possible. Through Contryman Wealth Advisors, we can handle the paperwork involved in rolling your lump-sum retirement plan distribution into an IRA or other investment to help you minimize or avoid current income tax and potential penalties.

Note that the examples mentioned here are only a very few of the tax strategies that may apply to your situation to help reduce your tax liability.

Process:

  • Meet with a Contryman retirement tax professional
  • We can evaluate your current retirement plan and your contributions
  • We can discuss tax implications of current and other retirement plan options
  • If you are nearing retirement, we can discuss options for retirement funds in your employer’s plan, when to begin taking distributions, and how you may minimize taxes associated with the withdrawals
  • If you are retired and already taking distributions from your retirement plan, we can advise you on strategies for reducing the amount that must be paid in taxes to help your retirement nest egg last longer

Case Example:
The owner of a construction company had a Self Employed Pension (SEP) retirement plan for his 14 employees. He was making all of the contributions to the plan – between 10 and 15% of each employee’s wages. His business was struggling when they experienced a downturn in the economy so the employer was looking for options to reduce his costs while still allowing him to offer a retirement plan to his employees.

For this employer whose business is a C Corporation, a Simple Plan may make sense. His employees can defer some of their income for retirement and the employer would match a modest 3% of those employees’ wages. Alternatively, he could contribute 2% for every eligible participant, whether or not they elect to defer any of their own income. Either way this Simple Plan provides savings to the corporation. And, even if most of his employees do not participate, the employer is still allowed to put in a maximum of $10,000 a year for himself (based on 2006 law) and an additional $2,500 more if he is over age 50. Employees who elect to participate are allowed to defer up to 100% of their wages for retirement (subject to maximums set by the IRS).

A Simple plan has minimal administration costs. It may allow the employer to put away more than the SEP plan allowed for his own retirement, and reduces or eliminates his contributions for his employees while still allowing him to provide a plan for them.

There are tax benefits with a Simple plan for both this owner and his employees. The income of the corporation would be increased, but because he has losses, the owner doesn’t need the extra deduction for contributions to the SEP plan for his employees. The owner’s personal taxes would be reduced because he is now deferring $10,000 for his own retirement, lowering his personal income. Employees’ taxable income would be reduced by the amount of their contributions to the Simple plan.

Another option would be a 401(k) Profit Sharing Plan which will allow employee contributions, matches similar to a Simple Plan, and an option for an employer to make additional profit sharing contributions, depending on profits. This type plan is more expensive than a Simple Plan to administer but may better meet the retirement goals of the employer.

This case study may not be representative of the experience of, or the results realized, by other clients. There is no guarantee of future performance or success.


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