401(k) Profit Sharing Options

401(k) PROFIT SHARING OPTIONS

Professional firms & businesses use them to reward employees.

Presented by Jared Daniel of the Wealth Guardian Group

 

Could you help your employees save more for retirement? Adding a profit sharing feature to your company’s 401(k) plan could allow you to do just that. It could also help your firm compete against the “big fish” as you try to recruit the best.

 

Most 401(k) plan participants know about the annual employee contribution limit on their accounts: $17,500 in 2013, with up to $5,500 of additional elective deferrals permitted for those 50 and older. The annual maximum deferral limit (the limit for combined employee/employer contributions to a 401(k) per year) is less well known. For 2013, that limit is $51,000.¹

 

In addition, employer contributions to a profit sharing plan are usually tax-deductible at both the federal and state level. So 401(k) profit sharing may help your firm shrink its tax burden.^2,3

 

SBOs can also take advantage. You can receive profit shares yourself as an owner, a move that may let you greatly reduce your own tax liability. You can even determine the size of your profit share for a given year after the year is over (you can do this between January 1-March 15 if your company is a corporation or between January 1-April 15 if your business is a partnership, sole proprietorship, or other business entity on a calendar fiscal year). Solopreneurs can also direct profit shares to themselves.⁴

    

You have great flexibility. Many firms simply direct equal profit shares into each employee’s 401(k) account. Other businesses opt for age-weighted or comparability profit sharing methods; a comparability analysis from the plan advisor instructs how the profit sharing formula should be weighted toward older or key employees. This formula may be refined and adjusted as a byproduct of yearly testing.²

 

The amount of profit sharing can vary year to year. There is no requirement to make annual employer contributions. This means that if your business has a lean year, you aren’t obligated to share what little profit there is with 401(k) plan participants.²

 

In 2013, the per-employee profit sharing contributions made by an employer cannot exceed the smaller of 100% of an employee's eligible compensation or $51,000. (The amount of compensation taken into account is limited to $255,000 for 2013.) A company’s total deductible profit sharing contribution can’t exceed 25% of its total eligible payroll.^1,3,5

 

Your employees have more impetus to excel. Not every employee sees the (direct) link between their performance and attitude and a company’s success. When profit sharing is introduced, that link is recognized. Workers have motivation to succeed regardless of how they are managed. Profit sharing has the potential to leave owners, employees, and even a firm’s clients or customers happier.

 

There is still time to arrange this for 2013. If you have wondered about introducing a profit sharing option for your workers in 2013, there is still probably time to do so. You can often purchase a plan just weeks before the end of a year, and your firm will have until almost its tax deadline next year to make profit sharing contributions for 2012.⁴

        

Jared Daniel may be reached at jared.daniel@wealthguardiangroup.com or www.wgmoney.com.

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   

  

 

Citations.

1 - www.shrm.org/hrdisciplines/benefits/Articles/Pages/2013-IRS-401k-Contribution-Limits.aspx [10/19/12]

2 - www.dol.gov/ebsa/publications/profitsharing.html#.UKQs8IaG1G8 [11/14/12]

3 – www.irs.gov/publications/p560/ch04.html#en_US_publink10008978 [11/13/12]

4 – www.forbes.com/sites/stuartrobertson/2011/11/01/how-401k-profit-sharing-helps-small-business-owners-maximize-their-savings/ [11/1/11]

5 - benefitslink.com/src/irs/IR-2012-77.pdf [10/18/12]

Are Your Children Financially Literate?

ARE YOUR CHILDREN FINANCIALLY LITERATE?

Most Young Adults Aren’t … And They Could Pay A Painful Price.

Provided by Jared Daniel of Wealth Guardian Group

How bad is financial illiteracy today? So bad that your adult children may be at risk of making some serious financial mistakes. Recent surveys have shown that many young adults are not only wayward financially, but also pessimistic about ever becoming wealthy.

Young women at particular risk. A 2006 OppenheimerFunds survey of women aged 26-39 found that 62% of respondents had no investment accounts at all, and that 67% were living paycheck-to-paycheck. In a 2005 Consumer Federation of America/VISA USA survey, 55% of the women polled between ages 25-34 had emergency savings of less than $500.

Surprising cynicism. In 2005, the CFA and the Financial Planning Association undertook joint surveys that illustrated a startling expectations gap. In the FPA survey, most of the financial planners contacted felt that more than 80% of young adults could amass $250,000 in net worth over a 30-year period, and that about 50% could accumulate $1 million of net worth in the same time span. But only 26% of the young consumers the CFA surveyed believed they could amass $200,000 at any point in their lives, and only 9% felt they could someday accumulate $1 million.

A little knowledge can be dangerous. Don Blandin, CEO of the non-profit Investor Protection Trust, commented that “the entry of most Americans to the securities market is by buying a product rather than understanding the process." Too many young investors elect to fly solo into the stock market through the Internet; too many young homebuyers know just enough (but not enough) about mortgage and lease options. And then there’s the widely publicized case of 24-year-old Casey Serin (iamfacingforeclosure.com), now $2.2 million in debt as a result of what he didn’t know about real estate investment.

Prescriptions in progress. The Ad Council and the American Institute of Certified Public Accountants have started a national campaign, Feed the Pig™, to try and correct this dilemma (learn more by visiting www.feedthepig.org). The National Council on Economic Education has also helped launch www.TheMint.org to provide young adults with vital financial principles.

Jared Daniel may be reached at www.wgmoney.com.

These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative or Broker/Dealer give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

What to Bring to a Meeting with a Financial Advisor

WHAT TO BRING TO A MEETING WITH A FINANCIAL ADVISOR

Crucial questions & essential documents.

Presented by Jared Daniel of Wealth Guardian Group

The financial planning process is not merely a matter of numbers. When you meet with a financial advisor to map out a strategy for wealth accumulation or wealth preservation, you may find yourself intellectually and emotionally engaged on a level you hadn’t anticipated. It may actually give you a better understanding of what you want from life.

 

A solid, multi-aspect financial plan takes many things into account. It may include a tax minimization strategy, an estate plan, an investment policy statement, defined steps toward business continuation or a business exit, and more. Now, what is at the root of all of this? What might make you adopt a particular investment style, establish a particular trust, or set certain financial and lifestyle goals for retirement? Your values, your attitudes, your lifestyle circumstances, your needs and your wants.

 

It all revolves around you.

 

The discovery meeting & beyond. Financial advisors commonly have a discovery meeting with a new client. Beforehand, you will likely be asked to share some pertinent information in a questionnaire, such as:

 

* Your age.

* Your present income level and projected future income;

* Your current and future needs;

* Any projected expenses;

* Your assets and liabilities;

* The number of dependents you are responsible for;

* Any possible health or external issues that may impact your finances

 

The completed questionnaire is commonly emailed or mailed to the advisor prior to the discovery meeting. To complement the rather basic information in the questionnaire, the client usually brings the following items to the discovery meeting:

 

* Recent financial statements for your IRA(s) and 401(k)s, assorted funds and other types of investment accounts, and Social Security benefits (if you currently receive Social Security income)

* Information on insurance coverage, employee benefits, any wills and trusts, and any pension income or stock options, COLI or forms of deferred compensation

* A copy of your latest personal (and if applicable, corporate) tax returns

 

This may seem like information overload, but it has a purpose. It gives the advisor a necessary briefing on the state of your financial life. It also opens the door to a quite necessary conversation – one which can prove valuable and illuminating.

 

For example, what purpose does money have in your life? What is it there for, what should it help you accomplish? What should it do for your heirs? To greater or lesser degree, your investment strategy, your retirement strategy, your business continuation strategy and your estate plan will express your values and beliefs. Your financial decisions should be aligned with those values and beliefs.

 

Questions to consider while engaging the advisor.  Ask how much time they will devote to looking out for your investments, and ask what kinds of investments they commonly recommend to clients with an analogous financial situation. Query them about how they will work with other financial professionals you trust (your accountant, your insurance agent, and so forth). Ask them about their money management and risk management approaches and if they have changed since 2008. Ask how they typically use their knowledge base to advise similar clients.¹

 

Also, how is the advisor paid? Does this advisor earn the bulk of his or her income from fees for advice and portfolio management? (Some charge clients a fee representing a percentage of their total assets under management.) Or does this advisor regularly earn commissions on the sale of financial products? Some people believe that fee-based advisors will be less inclined to “push” products.  Some advisors allow you to choose how they will be paid during the relationship.¹

 

If you become wealthier from the financial strategy you adopt, you can take satisfaction in the tangible financial progress you make. Apart from that, there is also the emotional satisfaction of knowing that you have been proactive and addressed important financial concerns in your life.  

 

Do you have a financial strategy in place? Or could your current approach use some refinement given the way the markets and the economy have changed recently? A meeting with a Certified Financial Planner™ professional or other qualified wealth advisor could give you new insight and new ideas to help you pursue your objectives.

 

Jared Daniel may be reached at (480) 987-9951 or jared.daniel@wealthguardiangroup.com.

http://www.wealthguardiangroup.com

 

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

   

    

Citations.

1 – online.wsj.com/article/SB10001424052970203609204574316542532636618.html [7/28/09]

An Investor's Best Friends

AN INVESTOR’S BEST FRIENDS

Meet diversification, patience and consistency.

Provided by Jared Daniel

Any investor would do well to call on three friends during the course of his or her financial life: diversification, patience and consistency. Regardless of how the markets perform, they should be a part of your investment philosophy.

Diversification. The saying “don’t put all your eggs in one basket” has real value when it comes to investing. In a bear market, certain asset classes may perform better than others. Ditto for a bull market. If your assets are mostly held in one kind of investment (say, mostly in mutual funds, or mostly in CDs or money market accounts), you could be hit hard by stock market losses, or alternately lose out on potential gains that other kinds of investments may be experiencing. So there is an opportunity cost as well as risk.

This is why asset allocation strategies are used in portfolio management. A financial advisor can ask you about your goals and tolerance for risk and assign percentages of your assets to different classes of investments. This diversification is designed to suit your preferred investment style and your objectives.

Patience. Impatient investors obsess on the day-to-day doings of the stock market. Have you ever heard of “stock picking” or “market timing”? How about “day trading”? These are all attempts to exploit short-term fluctuations in value. These investing methods might seem fun and exciting if you like to micromanage, but they will add stress and anxiety to your life, and they are a poor alternative to a long-range investment strategy built around your life goals.

Consistency. Most people invest a little at a time, within their budget, and with regularity. They invest $50 or $100 or more per month in their 401(k) and similar investments through payroll deduction or automatic withdrawal. In essence, they are investing on “autopilot” to help themselves build wealth for retirement and for long-range goals. Investing regularly (and earlier in life) helps you to take advantage of the power of compounding as well.

Are diversification, patience and consistency part of your investing approach? Make sure they are. If you don’t have a long-range investment strategy, talk to a qualified financial advisor today.

Jared Daniel may be reached at http://www.wealthguardiangroup.com/, (480)987-9951 or jared.daniel@wealthguardiangroup.com.

These are the views of Peter Montoya, Inc., not the named Representative or Broker/Dealer, and should not be construed as investment advice. Neither the named Representative or Broker/Dealer give tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.