Retirement Plan Combos Present Many Opportunities

The adage, “Begin with the end in mind,” from author Stephen Covey’s, book The Seven Habits of Highly Effective People, is especially relevant to savers, aspiring retirees and business owners. Covey writes of beginning each day or task with a vision of the desired direction and destination, and then taking pro-active steps to make things happen. That same approach can help individuals in various categories reach their financial and retirement goals. 

Savers

Saving is a mindset and is contrary to traditional upbringings that are long on consumption and short on financial education. Early-adult savings goals may focus on acquiring long-term items like a car or home, and although retirement may be decades away, the same savings principles of discipline and consistency apply. Rather than buying the next hot electronic gadget like the latest cell phone or game console, savers can instead dollar-cost average purchases of those same companies’ stocks. Portfolio gains and compounding are powerful tools in growing retirement savings.

Aspiring Retirees

Individuals who work in various organizations over time will likely accumulate several types of retirement-targeted plans, and Congress has encouraged such diversification. Different plan types are more favorable for investment, flexibility, deductibility of contributions and even tax deferral. To reach their goals, aspiring retirees must get educated about both the possibilities and limits of their plans, and take ownership of the process, since employers and government authorities will not.

Business Owners

Owners seeking an exit to finance a retirement should pay particular attention to Thousand Oaks transactions, so named for a famed 2013 federal tax case. Under certain provisions, business owners can gain shelter gains from taxes by directing proceeds to retirement plans. The contributions are deductible from corporations’ income and can establish a net operating loss that can extend for two years. Exiting owners should invest in counsel from enrolled actuaries for proper implementation.