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  • Writer's pictureDavid H. Kinder, RFC®, ChFC®, CLU®

The #2 Planning Problem for Business Owners in Retirement... (And they don't know it)

Updated: Jan 20, 2023

In my last blog article, I talked about the very real problem of business owners not having a way to save for a secure retirement.

But there are also a lot of business owners who ARE saving for retirement and saving very well! They *may* have a false sense of security because they see their 401(k) and/or IRA statement and see MILLIONS in it and believe "I'm going to have a great retirement! I've saved, I'll be able to sell my business, my home is paid off... I'm going to have it made."

So, what's the problem? The problem is... they may not have done the retirement income math.

You see... all that money in their 401(k) and IRA... hasn't yet been taxed! And because of where your money sits... will depend on how the IRS will treat you when you go to take withdrawals from it.

It's been said that "Excessive overhead kills businesses."

Did you know that, depending on where your retirement assets are... you STILL have overhead? It's "Retirement Overhead". Just like in business: Everyone else gets paid first, before YOU do.

  • Rent

  • Property and Equipment Taxes

  • Workman's Comp Insurance

  • Property & Business Insurance

  • Employee Payroll

  • Employee Benefits

  • Inventory

  • Suppliers & Vendors

  • Business licenses & permits, etc.

And after they all get paid... you still pay the TAX man after all those tax-deductible expenses.

  • Federal Income Taxes

  • FICA Taxes

  • State Income Taxes (now only deductible up to $10,000 due to latest Trump tax plan)

  • Local taxes

Everybody else gets paid... before YOU do.

And retirement... is the same way, depending on where your retirement capital is.

If your retirement savings is held in IRS Regulated Retirement Plans (you know, the people who determine if you are 'wealthy' or not?)... you will have the following overhead:

  • Federal income taxes

  • State income taxes (depending on your state)

  • Taxation of Your Social Security Retirement Income Benefits

  • Additional costs of your Medicare premiums (IRMAA)

  • Investment fees to put your capital at risk (IN OTHER PEOPLE'S BUSINESSES?!) so you can have the money to pay the above.

You are paid SIXTH in line.

Here is my question to you: Does that bother you?

  • Does it bother you that you had spent your entire business life "fighting" with the IRS... only to have them come after your retirement income FIRST... because you are successful?

  • Does it bother you that you had paid into the Social Security system for years at 15% (as employer and employee) and then they are going to add in 85% of your benefits BACK into your taxable income... because you are successful?

  • Does it bother you that you had your own medical insurance, and are now MANDATED by the government to not only pay for THEIR medical plan (Medicare), but you will pay MORE for that exact same coverage with no change in benefits... because you are successful?

  • Does it bother you that you would have to pay an asset manager to continue to manage your assets and they are paid on the GROSS of your savings in order to generate enough INCOME in order to PAY these taxes in the first place... because you are successful?

Let me ask you this: Is the Government hurting for money right now?

  • Do you believe that, regardless of which political party is in power, that taxes must ultimately go up?

  • Do you want to reward their spending by letting them dictate what 'success' means to them?

  • Do you want your retirement at their mercy?

There IS another way! One where you can accumulate as much wealth as you want OFF THE RADAR OF THE IRS... so you don't even have to FILE a tax return in retirement! And it's all according to the tax code - that is 107 years old as of this year (2020).


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