How to Use Your Business to Reduce Your Tax Pain

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Have you ever wondered what other creative business owners are doing differently to defer taxes and save for retirement? No, I’m not talking about a 401(k), SIMPLE IRA, or a SEP. I’m talking about a plan that affords you the opportunity to take advantage of large tax and retirement limits that aren’t typically available in traditional retirement plans.

If you haven’t heard already, you need to know about the cash balance plan, a defined benefit retirement plan designed for accelerated tax-deferred savings. For instance, in 2016, a 40-year-old employee could defer as much as $80,736 into a cash balance plan on top of their $18,000 deferral to a 401(k) plan. In essence, it allows this employee to pack away $98,736 in 2016 when a traditional defined contribution plan would have only allowed for a $53,000 contribution. The older the employee, the higher the maximum contribution. At age 50, an employee could contribute as much as $155,908 to a cash balance and 401(k) plan combined compared to the $59,000 traditional defined contribution limit. Wow!

So how do you know if it’s right for you and your company? Here are 4 basic things to consider:

  1. Your owners or key executives want to defer more than $53,000 a year into their retirement accounts,
  2. Your business has demonstrated steady profits,
  3. You are willing to contribute three to four percent to employees, and
  4. Your owners are age 40 or older.

There is also a solo cash balance version for small, closely-held businesses.

My name is Valerie Leonard and I’m your not-so-typical financial advisor who works with people just like you every day to help find creative business solutions that others often miss. If you want to learn more about whether the cash balance plan could help reduce your tax pain and save for retirement, let’s chat. You’ll want to know all the facts before going down this road, but I’d love to show you how powerful this strategy can be when designed and optimized correctly.

Four Ways to Get Ahead in the New Year

2017-goals-photoLet’s look at how you can get ahead in 2017 by focusing on short, bite-sized goals that are easy to meet. Here are four things you can knock out today to set yourself up for financial success this year:

  1. Sit down and add up all the expenses you expect to have in the next 30 days. Take into account any spending money you may need and try to limit your discretionary spending for the next 30 days. Cut back on anything that is not necessary for the next month.
  2. Make a list of all your debt balance, minimum monthly payment amounts, and interest rates.
  3. Compare the income you expect to receive over the next 30 days to your expenses. Determine whether you expect to have any money left over once all expenses are paid. If so, plan to use the extra money toward your debt, focusing on the account with the lowest balance first. If you don’t have any money left over, see whether you can raise some money by selling something you no longer need, doing an odd job for someone, or taking on a second temporary job.
  4. Mark your calendar for 30 days from today to repeat this exercise. In the meantime, only worry about what you can do to take control of your finances for this month. Don’t overwhelm yourself by trying to look too far into your future. Seize the day!

As always, I am happy to answer any questions you may have.

 

“Yes, You Can Quit Your Job!”

“Yes, You Can Quit Your Job!”

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There is no greater feeling on this planet than to be able to have a conversation with one of my dear clients to reassure them that they’re in a position to chase their dreams.

The other day, a client called me and explained that she was frustrated with her job and felt like she was missing out on time with her young children. Not only that, but she also had a dream of pursuing a business and knew she’d be successful if she could only be free of the ties that bound her in her current job. I could sense the uncertainty over taking the leap of faith and she wanted to be sure she would not be jeopardizing the financial security of her family.

But here’s the thing…this lady was prepared to take the risk, she just didn’t know it. She had made sound financial decisions her entire life. She had saved enough cash to support her during the transition, she carried little debt and wasn’t a slave to crazy monthly payments, she had thought about the decision to quit her job from multiple angles and even had a fallback plan, and most importantly, she had faith that God would always take care of her.

I crunched some numbers and was able to tell her with reasonable confidence that she could make it work – and she will likely do just that!   You see, there’s a right way and a wrong way to start a new business and, thankfully, I’m excited to join her on the ride to pursuing her new endeavors.

If you need help chasing your dreams or starting a new business, let me know! I’d love to help. And thanks for sharing with anyone you know who may be on this path…

~Val

 

Actual results will vary. The above case does not constitute a recommendation as to the suitability of any investment for any person or persons having circumstances similar to those portrayed, and a financial advisor should be consulted