"As a CPA, I appreciate the unique expertise EGPS brings to DB/DC plan designs. They share our core philosophy of providing creative and practical solutions to meet our clients' goals."
36 year-old Kelsey started her own consulting firm, and after a few years of growing her business, considered her options for aggressively expanding her retirement savings. With the help of her financial advisor, she sought advice from EGPS. How much could she put away?
| Owner: | Salary: | Defined Benefit: | 401(k) Contribution: | Profit Sharing Contribution: | Total Contributions: |
|---|---|---|---|---|---|
| Kelsey | $265,000 | $101,984 | $18,000 | $15,900 | $135,884 |
Even if her salary remained flat, if she maintained the contribution she is making, her retirement account assets could be over 2.5 million by the time she is 62.
A food import business owned by a married couple has put off saving for retirement while using their capital to start their own business. Now that their business has been successful for several years, they want to start saving aggressively for retirement. They have always managed a 401k, but would like to start playing catch-up for the earlier years when they were growing their business.
Implementing a cash balance plan allows them to take advantage of their increased profits and grow their retirement plan.
| Partner: | Age: | Compensation: | 401(k): | Safe Harbor: | Employer: | Cash Balance: | Total Contribution: | % of Compensation: | % of Total: |
|---|---|---|---|---|---|---|---|---|---|
| Leslie | 54 | $28,000 | $24,000 | $0 | $0 | $0 | $0 | 0% | 0% |
| Ron | 55 | $265,000 | $24,000 | $0 | $35,000 | $184,463 | $219,463 | 82.82% | 91.11% |
| April | 34 | $58,001 | $1,800 | $1,740 | $3,770 | $1,160 | $6,670 | 11.5% | 2.77% |
| Andy | 34 | $43,000 | $0 | $1,290 | $2,795 | $860 | $4,945 | 11.5% | 2.05% |
| Donna | 51 | $59,001 | $1,800 | $1,770 | $2,655 | $0 | $4,425 | 7.5% | 1.84% |
| Gary | 58 | $71,501 | $0 | $2,145 | $3,218 | $0 | $4,425 | 7.5% | 2.23% |
| Total: | – | $534,503 | $51,600 | $6,945 | $47,438 | $186,483 | $240,866 | – | – |
The safe harbor portion of their plan means their plan automatically passes any cross-testing, so they don’t have to worry about an audit every year. The safe harbor portion means that everyone receives a 3% automatic contribution to their 401k, so the employer feels secure about the fairness in the plan. The high percent of total also means that the employer receives the majority of the plan contribution.
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