Tax-Free Deferred Compensation Plan
My Father did very well for himself as a corporate executive for nearly 30 years. Because he worked with a financial adviser early on his career, he was in a position to retire at age 50. My mother and father both retired and began traveling all over the world in their early 50s and continue to do so in their early 70s. That's how life should playout...work hard for 30 years, get your children "grown and gone" and then enjoy the next 35 years or more doing what you want to do.
The key components to my Dad's retirement plan include 401k savings, company pension, personal investments and deferred compensation. Most Americans don't have access to 2 of those key components-a pension and deferred compensation. Most employers no longer offer pensions because of the expense of paying someone for years after they retire and very few employees qualify for deferred compensation unless they are top executives.
At Carter Financial, we have a unique solution for the average retirement saver to create and fund a deferred compensation plan that will pay them tax-free income in retirement, for the rest of their lives, just like a pension. This plan is based on your budget and income goals in retirement.
Because so many of us are saving in pre-tax retirement plans such as a 401k, it makes sense to also create a personal retirement plan that is post-tax. Meaning, you will not pay any taxes on the income you receive in retirement. That is the only regret that my Dad has about his retirement strategy... It did not include any sources of tax free income. His 401k, pension, deferred compensation, personal investments and social security all require income tax to be paid each time he receives the income.
Call us today for help designing and building your retirement strategy. There is no fee for our consultation, plan design and implementation.
3 Thieves Threaten Your Retirement
Why are so many Americans behind on their retirement savings? We see 3 common pitfalls that our clients face and come to us to avoid. These 3 Thieves, as we call them, are Risk, Fees and Taxes. Each thief can wreak havoc on a retirement plan.
Risk: Retirement assets invested in the stock market with no downside protection, are subject to losses that take years to recover. Since 2009, there were two devastating crashes within the space of a decade: 2000 to 2002, when the S&P 500 fell 49% over 30 months and an even bigger disaster between 2007-09, when the S&P 500 plunged a staggering 56% in just 17 months.
Fees: According to AARP, 8 out of 10 people have no idea as to the types of fees that they’re paying in their investment accounts. Here are common fees to be aware of: advisor fees, expense ratios, wrap fees, soft dollar cost, transaction costs, redemption fees, deferred sales charges.
Taxes: A simple way to visualize the impact of taxes on your money is to divide your assets into four buckets. 1. Taxable, 2. Tax Deferred, 3. Tax-Free and 4. Income & Estate Tax-Free. To minimize taxes in the future, you must understand the appropriate distribution of your assets in each category.
We can protect your retirement plan against the 3 thieves. Call us today.