Score A Big Tax Break for 2021!
Have You Discussed The Benefits of a Cash Balance Plan with Your Clients?
A qualified retirement plan remains one of the best tax advantaged savings opportunities available to small business owners and their employees.
Even if your clients already have a 401(k) retirement savings plan in place, you can maximize their tax savings and increase their retirement savings by adding a cash balance plan to the mix. This employer-funded qualified plan has generous contribution limits, and can help speed up retirement savings – owners can contribute potentially $300,000, depending on age, service, and wages/earnings. The benefits can be more advantageous the older they are, as the contribution limits increase with age. Please note, however, that defined benefit plans aren’t for all clients because they have required contributions and additional reporting requirements.
Other retirement plans can also be valuable for maximizing tax savings for this year. Profit sharing plans (PSPs) allow each owner to receive a total allocation of $58,000. If they add a 401(k) option and they are age 50 or older, it could be $64,500. And for self-employed/owner-only/owner-spouse business owners with low W-2 wages, a solo 401(k) plan can help maximize deductions (for instance, deduct $29,500 with only $40,000 in wages; if 50 or older, the deduction increases to $36,000).
For help in maximizing your clients’ retirement savings and tax savings by establishing a retirement plan, contact us today.
