Mini Case Study: Saving Over $370K Per Year for Retirement
This week, we reviewed the tax returns for one of our high income, business owner clients in Eagle, Idaho and saw that he is saving almost $400,000 per year in various retirement accounts.
We helped him set up the plan that allowed for these retirement savings. Here’s what that looked like:
Our client owns a professional services business (an S corporation) here in town that employs 11 individuals and is very profitable.
The company offers its employees a 401(k) plan that includes a “safe harbor” contribution. This means the employer contributes money (the “safe harbor”) into each eligible employee’s account. In addition, the company has what’s called a “Cash Balance Pension Plan” (CBPP).
Combining the 401(k) + Safe Harbor + CBPP allow the client and his wife (who is the firm’s office manager) to save over $364,000 towards retirement per year on a pre-tax basis!
This client also has two sons in high school that work for his company on an hourly basis. Because that gives them earned income, they are eligible to contribute to a Roth IRA. And while those contributions are on an after-tax basis, that’s another $15,000 that is being saved annually by his family in retirement accounts.
Below is a breakdown of which funds end up where:
While presented as a streamlined plan to the client, this required months of planning, coordination among various service providers, and implementation.
The end result is more than worth it as we have a client who is saving over $140,000 per year in taxes and well on their way to a secure retirement.
Send me an email (rob@swrpteam.com) if you’re dealing with a similar situation and need a trusted Advisor that can help.
This material is purely intended to be general and educational in nature, and should not be construed as specifically-tailored investment, financial planning, tax, legal, or other professional advice. Information and data contained herein is as-of the date of publication, and may be subject to change in the future without notice. Any investment performance referenced is purely past performance, which is no guarantee of any future performance. Nothing contained herein should be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or other financial product or investment strategy. All investment, tax, and financial planning strategies involve risk that you should be prepared to bear. You are highly encouraged to consult with professionals of your choosing before taking any action based on this material.