American Benefit Corporation has just released a new article illustrating the tax advantage of using a non-qualified deferred compensation plan to fund for retirement.
Art Linkletter said in his book Old Age is Not for Sissies that old age is not for the timid. If old age isn't for the timid, imagine old age without adequate retirement income.
According to James Herlihy, while everyone should accumulate funds during their working years for retirement, the highly compensated are the most vulnerable. Their children are unlikely to get meaningful college financial aid, thereby increasing their educational costs, and government regulations limit the amount of retirement income that can be delivered by 401(k)s and pension plans. The solution is a non-qualified deferred compensation plan combined with proper planning.
The mechanics of a proper retirement plan are simple. Calculate what existing company benefit plans and Social Security will provide in estimated retirement income. If the calculation shows a retirement income deficit calculate how much would need to be deferred to a non-qualified plan in pre-tax income each year to close the gap. If an individual doesn't feel comfortable doing this calculation, his accountant can be asked for assistance or a financial planner may be hired.
While income taxes may go up in the future this may be offset by the tax deferred accumulation of funds and by moving to a state at retirement that does not have an income tax. It is not necessary to be smart to accumulate funds for retirement, but it is necessary to have discipline.
Consider an executive currently age 50 who decides to save $60,000 per year on his own with after-tax money. If he saves for 15 years, at age 65 he will have accumulated $699,794, assuming he earns 6% (3.6% after tax) per year and is in a 40% federal and state tax bracket.
Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/19/prweb9052395.DTL
Art Linkletter said in his book Old Age is Not for Sissies that old age is not for the timid. If old age isn't for the timid, imagine old age without adequate retirement income.
According to James Herlihy, while everyone should accumulate funds during their working years for retirement, the highly compensated are the most vulnerable. Their children are unlikely to get meaningful college financial aid, thereby increasing their educational costs, and government regulations limit the amount of retirement income that can be delivered by 401(k)s and pension plans. The solution is a non-qualified deferred compensation plan combined with proper planning.
The mechanics of a proper retirement plan are simple. Calculate what existing company benefit plans and Social Security will provide in estimated retirement income. If the calculation shows a retirement income deficit calculate how much would need to be deferred to a non-qualified plan in pre-tax income each year to close the gap. If an individual doesn't feel comfortable doing this calculation, his accountant can be asked for assistance or a financial planner may be hired.
While income taxes may go up in the future this may be offset by the tax deferred accumulation of funds and by moving to a state at retirement that does not have an income tax. It is not necessary to be smart to accumulate funds for retirement, but it is necessary to have discipline.
Consider an executive currently age 50 who decides to save $60,000 per year on his own with after-tax money. If he saves for 15 years, at age 65 he will have accumulated $699,794, assuming he earns 6% (3.6% after tax) per year and is in a 40% federal and state tax bracket.
Source: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/12/19/prweb9052395.DTL
No comments:
Post a Comment