This year has continued to challenge many business owners as they wade through these challenging economic times. By looking beyond the current difficult environment many business owners can prosper by planning for the future. One such idea would be to set up a New Comparability Profit Sharing Plan. This is a Qualified Retirement Plan under ERISA (Employee Retirement Income Security Act) and can give great flexibility to companies looking to benefit key employees and owners. We here at Perennial Financial Services tend to use such a strategy for many of our clients that own businesses, or are part of professional partnerships such as: law firms, medical firms, etc. The reason for this is that New Comparability can be an efficient vehicle for individuals to max out their pension contribution up to $49,000 (an additional $5,500 catch up contribution is permitted starting in the year an individual turns 50 allowing for contributions up to $54,500).
The New Comparability Plan includes both age and compensation when factoring the contribution amount to each participant. For this reason, a New Comparability Plan can be highly advantageous; as many business owners tend to be older and make more compensation than their employees. The ability to maximize what you can put away tax-deferred into a qualified retirement plan can be a great benefit to owning a business.
As we continue through these difficult economic times, it is important that we find ways to focus beyond the here and now. As an advisor I focus on my clients’ financial goals and aspirations when recommending the best possible retirement vehicles for their situation. Continuing to fund plans in down markets may allow for greater possible returns in the future. Therefore, it is just as or even more important to put away now as it was when times were prosperous.
Brad. B. Harris is a Managing Director at Perennial Financial Services and can be reached at 424-442-2589. Brad. B. Harris and the representatives of Perennial Financial Services are registered representatives with and securities offered through LPL Financial Member FINRA/SIPC. This material is for informational purposes only. Please talk to an attorney or CPA for legal or tax advice on your specific situation. Limitations and restrictions apply to retirement plans.