1. Arnold Schwartz has a business. Arnold is thinking about establishing a retir

Question

1.   Arnold Schwartz has a business. Arnold is thinking about establishing a retirement plan. He has told you that his objectives for the plan are:

Maximize benefits for older owner-employees and key employees

Maximize benefits for older employees

Reward long-service employees

Provide a predictable pension that replaces a percentage of salary

What kind of plan would you advise Charley to adopt and why?

2.   Rainy Days & Mondays, Inc. is a business that manufactures umbrellas. Unfortunately, cash flow varies with the weather. The owners, Michael and Janet, would like to establish a qualified plan, but they would like to be able to withdraw their funds in the future, if they need to expand their business. What type of qualified plan would you advise for Michael and Janet? Why?

Explanation / Answer

1)

ans)

For Arnold Schwartz 401K Plans is the best plan because :-

Competitive base pay, medical insurance and a 401k plan are the must have benefits necessary to attract and keep talent in your company.

401(k) plans were introduced in 1978, but it took a tax change starting in 2002 to allow business owners to contribute substantially more that they would with IRAs, SIMPLEs, and SEPs.

401K Plans: The maximum amount that you can contribute, tax-free, per year to a solo 401K plan is $44,000. If, however, you are over the age of 50, that number goes up by five thousand dollars. If you want to be able to stash quite a bit in your retirement plan without paying taxes on it, this is probably the best way to go, as with the high contribution limits, you could be ready for retirement sooner than you think.

2)

ans)

The INTEGRIS PPP with its flexible tax effective design allows you to do this through its Defined Contribution option.

One of the techniques that have proven to work effectively in saving for retirement is to invest the same amount regularly by dollar cost averaging. It is entirely mechanical and thus removes human emotion from preventing individuals from investing when prices have fallen and investing too much when they have risen. The combination of a relatively early start and dollar cost averaging invested in a diversified portfolio with tax protection will ensure a reasonable amount has been accumulated within a decade or two. Another approach that can be very successful is the one advocated in David Chilton

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