I have had the recent pleasure to work with a talented consultant and had the opportunity to talk about her success with her small business and her plans for the future.
She shared some interesting insights about her own business and personal planning that I thought may benefit any small business owner, and that is no matter how small your business is, you probably can benefit from a qualified plan.
Patty’s Story
I spent most of my career in corporate America. Ten years ago I left to start a consulting business of my own. I missed the many benefits that the company had provided, and I have to admit, I missed the guaranteed paycheck, but the move was worth it. I loved the flexibility and control I had in being in business for myself.
Although I’m incorporated, the business is still just me. Every month I write myself a paycheck and put a little aside to add to my retirement. My account was growing, so that was good. However, it was easily accessible too so if I ever wanted something extra, a big splurge, I would pull from there–even though I knew I was jeopardizing my future retirement a little bit at a time.
I had been working with a financial consultant, and I was confident he was steering me in the right direction. Until I spoke with someone else who offered me “a no obligation second opinion.” He said I had nothing to lose and plenty to gain, so I decided to meet with him to see what he had to say.
Our meeting went well. As I suspected, I was doing ok. However, when we started talking about my retirement he asked if I had a qualified plan. My answer was, yes, I had one with the company I had left. But what he really wanted to know was if I had one through my business? My answer was no. He asked why not? Wouldn’t I want to leverage business dollars to build a secure retirement and supplement my former employer plan?
Well, maybe I did?
I was surprised to learn that even a very small business like mine can have a qualified retirement plan and can contribute tax advantaged dollars to my plan. Granted, I will have to pay taxes later on, when I begin taking distributions–but I believe I will be in a lower income tax bracket by then–so I’d pay less taxes later than I would now.
The 30 minutes I spent in my “no obligation” appointment was well worth it. I set up a qualified plan. I now make my contributions once a year when I do my tax returns–that works for me. Because I don’t have easy access to the qualified plan dollars, my retirement account is really starting to grow and will provide a much greater benefit for me in retirement.
You owe it to yourself, and your family, to speak to a financial consultant about your retirement needs and find out what would work best for you. Even if you already have a plan, it may be worth getting a second opinion. I know I feel a lot better about my financial future today than I did prior to putting a plan in place.
Learn more about the benefits of a qualified plan.
Distributions from a qualified retirement plan are taxed as ordinary income and, if taken prior to reaching age 59½ may be subject to an additional 10% federal income tax penalty.
TC86999(0915)3