Potential crisis looms in retirement plans.Most small business owners are taking two immense risks with their financial future, and don't even know it. [They will pay far too much tax when they retire. This is because so many retirement plans are built upon the assumption the taxes will go down as we get older. But with the pending bankruptcy of Social Security and an ever increasing national debt now 7.3 trillion One thousand times one billion, which is 1, followed by 12 zeros, or 10 to the 12th power. See space/time. (mathematics) trillion - In Britain, France, and Germany, 10^18 or a million cubed. In the USA and Canada, 10^12. dollars and still skyrocketing, there is very good reason to believe taxes may actually go up severely when Baby Boomers See generation X. retire, not down. They are ignoring the great possibility of the BIG stock market crash, predicted sometime into the next decade, by people like Robert Kiyosaki (Rich Dad, Poor Dad books) and even stock market bulls like Harry Dent, (The Roaring ROARING. A disease among horses occasioned by the circumstance of the neck of the windpipe being too narrow for accelerated respiration; the disorder is frequently produced by sore throat or other topical inflammation. 2. 2000's Investor). This could cause millions of Americans to radically change their retirement plans, being forced to continue working just at the moment in their life they thought they would be free to retire. Don't get me wrong, I believe that the investment markets still have many great years left to deliver! My point is that the vast majority small business owners and key executives are at risk because they have been advised in only one narrow strategic direction in their retirement plans 1.) Let all your retirement income be taxed upon withdrawal, and 2.) Pray that the stock market doesn't crash right before you're ready to retire. The problem with too many small business owners is that the concept of retirement planning Retirement financial planning refers to a collection of systems, methods, and processes which, in their aggregate, support a family unit's (client's) desire to achieve a state of financial independence, such that the need to be gainfully employed is optional. is dreadfully dread·ful adj. 1. Inspiring dread; terrible. 2. Extremely unpleasant; distasteful or shocking: dreadful table manners; this dreadful heat. confused with strategies for wealth retention. So they think of their Qualified Retirement Plan as the only wealth retention strategy available to them. It's apples and oranges. And with all due respect, many CPAs and financial advisors often don't get it either. For small business owners, officers, and key executives the best retirement plan is a diversified diversified (di·verˑ·s retirement plan. No one can know for sure what the investment environment or the tax environment will be for the next 20 years. But there are critical ways to prepare for the good or the bad; and the only catastrophe would be to not prepare at all. Business owners and key executives tend to have a completely different personal economy than the rank and file. As such, they can make tactical mistakes in trying to fit their retirement planning into a model designed by Congress to favor the rank and file--and set their future on a course for critical tax nightmares when they retire. Such key people should focus on several alternative approaches that most financial advisors target for only the seven-figure Board of Director types but yet are just as available to small and mid-size business. These approaches, where feasible, will stress: TAX-FREE income tax-free income The income received but not subject to income taxes. For example, interest from most municipal bonds is free of federal income taxes and often from state and local income taxes as well. Compare tax-deferred income, tax-sheltered income. at retirement. Safety triggers which can provide stock market-like gains in the good years, and prevent losses in the bad years. Maximum reduction in today's taxes for the business owner and key executives, where feasible. Reduction or elimination of any caps on contributions, which can prevent highly compensated individuals from being able to save enough to perpetuate per·pet·u·ate tr.v. per·pet·u·at·ed, per·pet·u·at·ing, per·pet·u·ates 1. To cause to continue indefinitely; make perpetual. 2. their current lifestyle after retirement. Small business owners take tremendous personal risks to provide a livelihood for themselves and their employees. The proven tax and retirement planning strategies of Fortune 500 companies can be brought to small and mid-size businesses, where they are needed just as urgently. But don't wait for Uncle Sam Uncle Sam, name used to designate the U.S. government. The term arose in the War of 1812 and seems at first to have been used derisively by those opposed to the war. Possibly it was an expansion of the letters "U.S. to lay it on a silver plaiter plait n. 1. A braid, especially of hair. 2. A pleat. tr.v. plait·ed, plait·ing, plaits 1. To braid. 2. To pleat. 3. To make by braiding. for you. It will take some homework. Bruce M. Weide is with TAX FREE Benefit Specialists in La Crescenta. For more information, please contact 818-896-5958. |
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