There Could Be a Pension Plan in Your Future

If you are self-employed, you know that planning for your retirement is entirely your responsibility. And if you�ve experienced financial success as a self-employed professional or small business owner, you know how hard it is to keep your money in the face of high marginal tax rates. Perhaps it�s time to consider an aggressive approach to both funding your retirement and cutting your taxes significantly by starting a Small Company-DB Plan�a defined benefit pension plan.

The good news with defined benefit plans is you can select the investments, for example, mutual funds*, unlike some plans that have been popular lately such as 412(i) and 419 plans. These plans put tax savings ahead of investment selection. There has also been much talk of the tax risks in 412(i) and 419 plans. The last thing you want is to be left with is a poor investment as you enter retirement after you find your tax benefits taken away.

A Small Company-DB Plan is a retirement savings alternative that offers the highest deductible contributions allowed in a qualified retirement plan. Contributions can be three to four times greater than the maximum contributions to a 401(k), Profit Sharing, SEP or SIMPLE Plan. Since all contributions are tax deferred, qualified individuals can cut taxes significantly and direct their tax savings towards their retirement.

Individuals who qualify for a Small Company-DB Plan include sole proprietors and small business owners age 45 or older who can contribute more than $46,000 annually to the plan for at least three years. Typical candidates for a Small Company-DB Plan include:

• Business owners, incorporated or proprietors, with five or fewer employees
• Doctors, dentists, lawyers, independent contractors, realtors, and other professionals
• Employees with a side business who receive self-employment income
• Self-employed spouses of high income earners

Recent pension legislation has raised the contribution and deductibility limits as well as simplified plan fund requirements, making defined benefit plans like a Small Company-DB much more attractive to small business owners than other types of retirement plans available today. Small Company-DB is not designed for everyone. If you think you fit the profile for this plan, you owe it to yourself to explore the extraordinary advantages of starting a Small Company-DB Plan. For those looking for modest contributions, and no funding requirements, a Small Company 401(k) plan or a SIMPLE IRA may be more suitable. Check with your Certified Financial Planner™ professional.

Troy Smith, Certified Financial Planner� offers fee-based or fee only Financial Planning advice to clients in Raleigh, Durham, Chapel Hill, Cary and other locations. His home page is www.asktroy.com.

DISCLAIMER: This article is intended to serve as a basis for further discussion with your professional advisers. Competent legal and tax advisers should be a part of every sound financial plan. This information is not intended as legal or accounting advice and should not be relied upon in the preparation tax returns or when making any business or personal financial decisions. You should always seek the counsel of your advisers to understand how this information applies to your particular facts and circumstances. *Mutual fund investing carries risks. Investment returns and principal values fluctuate and shares, when redeemed, may be worth more or less than original cost.