The Methodology of How You Correctly Evaluate Data & Information Will Impact Your Judgment

Business owners need to qualify themselves through a proven process to help determine the right strategy or tactic. The preamble to this is an understanding of their risk tolerance, cash liquidity, reasonable projections on earnings and whether any strategy or tactic is suitable.

Probably the most important first step is collecting the right data and understanding the psychological disposition of the business owner. From that data a hypothetical, customized plan is drafted that reflects the client’s financial goals. One of the goals is a quantifiable analysis of the first year’s contributions. Then there’s a refinement of the numbers over several iterations of the plan until you land on feasible goals. Finally a detailed plan emerges and that’s when the bill is due. The fee can range from $4000-$5,000 and is deductible.

Letters of engagement are crafted and agreed to. Keep in mind that a good letter of engagement cites what the actuarial firm will do as well as what the business owner will do. The strategy uses a defined benefit plan and a profit sharing plan (sometimes a 401(k) as well as additional paperwork if the plan is designed for the ultimate tax deduction and benefits. There are annual administration costs to factor in as well:

• Actuarial valuation and certification of contribution ranges
• Preparation of IRS and PBGC filing requirements
• Annual fees are a function of plan complexity and demographics

Financial security through tax management and actuarial science can generate a substantial economic benefit both now and in the future.

• Financial security for participants and their spouses
• Financial security for the next generation
• Ability to Reward loyal employees
• Tax credits offset costs of providing benefits

It’s important that accurate information be validated so that the plan’s numbers are within a reasonable proximity. The tax deductions and ongoing benefits can place the business owner and his family in a strong financial position to enjoy their retirement.

Charlie Day is a co-contributor to this press release.