Retirement Planning—Options for Women Business Owners

You’re an entrepreneur and you’re not looking back. You’ve opened your own business, whether alone or with other partners, and you’ve found some success. You’ve hired employees, or not, depending on your business and now you’re thinking about retirement, not just for you, but also for any employees you may have.   Many employers find that one way to attract and keep good employees, especially executives with critical skills, is to offer competitive retirement plan packages along with a buffet of other benefits. Yet, employee-sponsored retirement plans are often unavailable to employees working in small private companies and can lead to poor employee retention.   What business owners need to know is that sponsoring a retirement plan, not just for their employees but also for themselves, is really quite easy. Perhaps you think you must fund employee retirement plans and that plan sponsoring requires lots of complicated paperwork. Or maybe you’re perplexed about compensating top executives without pushing them into an even higher income tax bracket. But don’t fear. Help, and advice, from starting and managing retirement plans to planning for the day you retire, is here.   Qualified Plans: Something for Everyone   A multitude of retirement plan options are available as benefits packages or customized products to suit your company’s needs. Currently available qualified retirement plans include defined benefit plans, 401(k)s, Savings Incentive Match Plans for Employees (SIMPLEs), Simplified Employee Pensions (SEPs), profit-sharing plans, and money purchase plans.   The Employee Retirement Income Security Act (ERISA, amended in 1974) governs most private pension and benefit plans. ERISA has a special focus on making sure that qualified retirement plans do not discriminate in favor of highly paid employees.  

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The Nasty “Business Interruption” Insurance Fight

Restaurants, hotels, gyms and other businesses that were forced to close due to COVID-19 are now battling their insurance companies over their business interruption insurance and have asked the federal government to step in. In one corner are businesses who argue that since they paid their premiums for business interruption services, now is the exact time that their claims should be paid. In the other corner are the insurance companies who argue that business interruption policies were never designed – or priced – to pay for such events. And each group has hired powerful lobbyists to convince the federal government to be head referee. Business Insurance in General Business insurance may be considered accident or disability insurance for a business, since it helps to maintain a regular flow of earnings after the business has been completely or partially shut down by disasters, including fires, tornados, and theft. Business interruption insurance is designed to pay for the lost net profits of the business plus any continuing expenses occurring during “down time” caused by a peril covered by the policy. There are many different forms of business interruption insurance, and the price can vary greatly based on the level of risk and the potential cost of getting the business up and running again after a disaster strikes. While business interruption insurance is sometimes included in business owner policies, the type and amount of coverage provided by a standard policy may be insufficient for the needs of many companies. In theory, we all understand the importance of insurance to protect us financially. But many of us pay for insurance every year without knowing exactly what it covers and what it does not. Given

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Is the Roth 401(k) an Option for You?

Since it first became available in 2006, many employers have added the Roth 401(k) to their benefit packages as a retirement savings option. A Roth option is available for Individual Retirement Accounts (IRAs) and 401(k) and 403(b) accounts. To see if a Roth 401(k) would be appropriate for your situation, let’s take a closer look.   To Roth or Not to Roth To start, let’s consider the advantages and disadvantages of both types of 401(k)s. With a traditional 401(k), you make contributions on a pre-tax basis, which lowers your current income subject to taxation, and earnings in the account have the potential to grow tax-deferred. However, your distributions in retirement are subject to ordinary income tax. On the other hand, your contributions to a Roth 401(k) are made with after-tax dollars, but potential earnings and distributions are tax-free, as long as you have held the account for at least five years and are at least 59½ years old. However, non-qualified distributions may be subject to income tax and a 10% early withdraw penalty may also apply. So, is it better to pay taxes on your retirement funds now or later? The most appropriate choice for you may depend on your current tax situation and your long-term financial goals.   It is important to keep in mind that the 401(k) annual deferral limits—$19,000 for taxpayers under age 50 and $25,000 for those age 50 or older in 2019—apply to all 401(k) contributions, regardless of whether they are made on a pre-tax or after-tax basis. If you contribute to a Roth 401(k), you may have to reduce or discontinue contributions to your employer’s traditional 401(k) plan to avoid exceeding these limits. However,

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Balancing Act: Saving for Both Retirement and College

Linda and Peter are worried about their financial future. “We want our one-year-old son, Raymond, to go to college, but we’re concerned that in 17 years, the cost might be more than we can afford,” says Peter. “We also need to save for our retirement,” adds Linda. “Can we reach both of these goals?” Linda and Peter aren’t alone. Millions of Americans are finding it a struggle to balance the high cost of higher education while saving for their own retirement. If you’re one of them or would like to help someone faced with this situation, put your worries aside. Fortunately, there are steps you can take to help overcome this double-sided planning hurdle. For example, because Linda and Peter won’t need their money for 17 years, they decided to begin investing now and often. Starting a regular investment program long before needing the money can potentially work in their favor. That’s because of compounding — which is what happens when previous earnings from an investment remain invested and, in turn, earn more money. They also decided to make the most of their contributions by investing in vehicles that would generate important tax benefits. They chose to funnel $100 each month into a 529 College Savings Plan, which would allow their contributions to benefit from tax-deferred growth and tax-free withdrawals. Meanwhile, they also set aside $200 a month into an IRA. When they receive raises, Linda and Peter will increase their contributions to both accounts. Getting a Late Start Sandy and Paul have a different issue. “We don’t want to be a financial burden on our kids when we’re older, so we’ve always opted to max out our 401(k)s and

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Retiring Business Owners – Plan for Succession

If you’re a small business owner, you’ve invested a great deal of time and effort into building your company. With day-to-day demands, it may be difficult to imagine your eventual transition into retirement. Yet, if you want to build personal financial security and ensure business continuation, it is important to plan ahead. Business succession planning can help create retirement income for a retiring business owner and facilitate the transfer of operations and/or ownership to family or another entity. A succession plan can also provide a strategy to handle unforeseen events, such as death or disability. Laying the Foundation It is never too early to begin planning for succession. An early start can allow you ample time to develop an appropriate exit strategy, choose the right person to be your successor, and train your successor to manage the daily operations of your company. Consider the following points to create a foundation for a successful plan: Valuate Your Business A key aspect of planning for continuation is calculating the worth of your business. There are a variety of techniques for business valuation, and the most appropriate will depend on your business circumstances. A qualified professional can help you choose strategies for valuation. Plan Your Exit Strategy It is important for a retiring business owner to plan his or her departure from the day-to-day operations of the business. A solid plan can help ensure this transition will go smoothly, as well as facilitate the transfer of ownership. Choose a Successor If you plan to keep ownership and control of your business within your family, start by assessing your family members’ interests and qualifications, and how well they match the needs of the business.

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401(k)

What is the Difference Between an Account Rollover and a Transfer?

One common change that investors make during their financial journeys is to move funds from one retirement account to another. Whether this move occurs for tax purposes, because of a change in employment, or for another reason, it’s important to consider how this change will be made: as a rollover or transfer.

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Ask an Advisor

Ask an Advisor: How Much Do I Need for Retirement?

Saving for retirement is an incredibly complex decision and conversation. It’s got to be one of the most common questions that we’re asked here at P&S. There are a lot of rules of thumb out there. But, at the end of the day, it’s an incredibly personal decision, and there’s no ‘one size fits all’

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