Brent D. Gardner, ChFC
November 5th 03, 06:25 PM
"Sgt. Sausage" > wrote in message >...
> Question: I own a business, and that business offers a
> SIMPLE IRA for its employees. I participate in this
> plan also.
>
> I'm currently maxed out: 8K this year (goes up over
> the next several years).
>
> My wife is maxed out on her 401k at her employer.
>
> Combined, my wife and I have enough income that
> we are currently ineligible to contribute to a Roth IRA.
> Bummer.
>
> Does anybody have ideas on contributing more -- to
> any plan -- for the long term that is tax deferred like
> the IRA/401k.
>
> I've got about an additional 30K a year that needs
> invested. Currently investing in a regular investment
> account -- by "regular" I mean not tax deferred.
>
> I won't be needing this money for about 18 years, so
> I'd like to get the benefits of the tax deferral if possible.
>
> Any ideas?
>
> Thanks.
A simple solution: A deferred annuity, variable, fixed, equity
indexed, or all three.
Pro-
- Tax deferred
- Often creditor exempt (a bonus for business owners)
- Often doesn't count against you when you send the kids to college
and apply for financial aid
- Can guarantee growth, or at least the premium paid, even if invested
in the stock market (extra costs for this benefit)
- You can discriminate - no mandatory wealth redistribution
- No mandatory funding
- No limits - pile in the cash!
Con-
- Access prior to age 59.5 requires 10% excise tax, and is fully
taxable (exceptions under IRC Sec. 72 for "turning on the faucet")
- Limited investment choices
- Cannot use as collateral for a personal or business loan, without
paying taxes and penalties
- Long term, they can create a tax problem that must be solved with
life insurance
You can use an overfunded life insurance policy to do all of the
above, with the ability to use as collateral and have access to cash
without penalty or tax prior to age 59.5, AND income tax free death
benefits. If you have a C Corporation, there are some potential tax
advantages that can be used, but a discussion of these nonqualified
plans is beyond the scope of this forum, except to list the three
basic plan types here:
1. Deferred Compensation
2. Executive Bonus
3. Split Dollar
You may be a candidate for a defined benefit plan, which allows for
greater contributions than a defined contribution plan (like a 401(k)
or SIMPLE IRA). If you fully insure the plan (guarantee all benefits),
then you can REALLY sock away some cash. Contributions are deductible,
assets grow tax deferred, just like an IRA, but the downside is you
have to contribute to each employee - you cannot discriminate.
Finally, you may want to become charitable - a CRT, or Charitable
Remainder Trust, can allow you to get a tax deduction, enjoy tax
deferred growth (if funded with an annuity), and control when you get
the money (turn on the cash faucet). These plans are also generaly
exempt from the claim of creditors, but you also limit your access.
All of these plans require the help of a professional. You can get one
now, and do well, or get one later to fix the problems you create by
trying to do these yourself. As a rule, we get paid more to fix
problems. The lowest toll is today. =)
> Question: I own a business, and that business offers a
> SIMPLE IRA for its employees. I participate in this
> plan also.
>
> I'm currently maxed out: 8K this year (goes up over
> the next several years).
>
> My wife is maxed out on her 401k at her employer.
>
> Combined, my wife and I have enough income that
> we are currently ineligible to contribute to a Roth IRA.
> Bummer.
>
> Does anybody have ideas on contributing more -- to
> any plan -- for the long term that is tax deferred like
> the IRA/401k.
>
> I've got about an additional 30K a year that needs
> invested. Currently investing in a regular investment
> account -- by "regular" I mean not tax deferred.
>
> I won't be needing this money for about 18 years, so
> I'd like to get the benefits of the tax deferral if possible.
>
> Any ideas?
>
> Thanks.
A simple solution: A deferred annuity, variable, fixed, equity
indexed, or all three.
Pro-
- Tax deferred
- Often creditor exempt (a bonus for business owners)
- Often doesn't count against you when you send the kids to college
and apply for financial aid
- Can guarantee growth, or at least the premium paid, even if invested
in the stock market (extra costs for this benefit)
- You can discriminate - no mandatory wealth redistribution
- No mandatory funding
- No limits - pile in the cash!
Con-
- Access prior to age 59.5 requires 10% excise tax, and is fully
taxable (exceptions under IRC Sec. 72 for "turning on the faucet")
- Limited investment choices
- Cannot use as collateral for a personal or business loan, without
paying taxes and penalties
- Long term, they can create a tax problem that must be solved with
life insurance
You can use an overfunded life insurance policy to do all of the
above, with the ability to use as collateral and have access to cash
without penalty or tax prior to age 59.5, AND income tax free death
benefits. If you have a C Corporation, there are some potential tax
advantages that can be used, but a discussion of these nonqualified
plans is beyond the scope of this forum, except to list the three
basic plan types here:
1. Deferred Compensation
2. Executive Bonus
3. Split Dollar
You may be a candidate for a defined benefit plan, which allows for
greater contributions than a defined contribution plan (like a 401(k)
or SIMPLE IRA). If you fully insure the plan (guarantee all benefits),
then you can REALLY sock away some cash. Contributions are deductible,
assets grow tax deferred, just like an IRA, but the downside is you
have to contribute to each employee - you cannot discriminate.
Finally, you may want to become charitable - a CRT, or Charitable
Remainder Trust, can allow you to get a tax deduction, enjoy tax
deferred growth (if funded with an annuity), and control when you get
the money (turn on the cash faucet). These plans are also generaly
exempt from the claim of creditors, but you also limit your access.
All of these plans require the help of a professional. You can get one
now, and do well, or get one later to fix the problems you create by
trying to do these yourself. As a rule, we get paid more to fix
problems. The lowest toll is today. =)