Transcript OnePersonPlus Advisor Presentation for CPAs

Defined Benefit Plans
for Medical Professionals
A Tax Strategy for High Income
Self-Employed and Small Practice Owners
Defined Benefit Plans ─ in the News
“Creating a pension plan helps business owners and the
self-employed sock away more tax-deferred cash for retirement”
Smart Money, October, 2008
“Create Your Own Pension Plan: Classic retirement
plans are an intriguing option for shielding
small-business income from the IRS”
Fortune Small Business, February 2008
“Benefits in a Pension for Now and Beyond”
November 2007
“High contribution limits and tax
benefits are big pluses for DB plans”
Investment Advisor Magazine
October 2007
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Today’s Presenter
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Advisor Name & photo
Affiliation
Expertise
Connection to audience
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Agenda
 The Personal Pension Plan
– Defined Benefit Plans At a Glance
– Compared to Other Retirement Plans
– The OnePersonPlus® Program from Dedicated DB
 Ideal Financial Situations
 Meeting Your Needs
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Eligible Compensation
Key Dates
Fees
Opening a DB Plan
Follow through
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Defined Benefit Plans at a Glance
 Qualified retirement plan approved by the IRS
 Contributions are tax deductible
 Highest available contributions and
tax deductions of any qualified retirement plan
 Contributions are based on:
– your age
– income
– years to retirement
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Comparison of Retirement Plans
SIMPLE
SEP
Single 401(k)
$21,350
$49,000
$54,500
$134,600
DB
$171,300
DB + 401(k)
Hypothetical Example:
Maximum annual contribution limits in 2009 for a Medical
Professional age 52, earning $245,000 annually, retiring in 10 years
Assumes 5-7% funding rate for Defined Benefit Plans
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Defined Benefit Plans are Goal-oriented
 Goal or “benefit” represents the amount of retirement
wealth the plan will provide annually at retirement age
 Benefit is established when plans are opened
– Based on age, income and years until retirement
– Capped at $195,000 per year (for 2009)
 Employer commits to achieving the goal through regular,
annual contributions large enough to meet the goal
 Retirement age is typically set at age 62 or older
 Plan can be amended to change the goal
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OnePersonPlus from Dedicated DB
A Great Tax Strategy for Baby Boomers!
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Typical Plan Sponsors
• Medical professionals, age 45-70
• Owner + up to 4 employees
• Expect to Contribute 5 successive years
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New Plans
• Avg. annual contributions: $120,000
• Avg. term: 9+ years
• Integrates with a solo 401(k)
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Dedicated DB’s Service
• Prototype plan documents eliminates cost of actuary, tax attorney
• Easy to open, efficient to administer – 2-page adoption agreement, simplified forms,
pre-filled annual census
• Set up fee and annual administration fee
• No administration fees based on size of your account
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You and Your Financial Advisor Select the Investments
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Dr. Charles, Owner-only, Age 52
Sole proprietor, Wants Maximum Tax Deduction
 Annual earnings: $400,000
 Maximum DB+ 401(k) contribution for 2009: $171,300
– Contribution to DB Plan: $134,600
– Contribution to 401(k):
$36,700
 Annual tax savings: $65,100
– Combined marginal tax rate of 38%
 DB Accumulation at age 62: $2.36 Million
– 10 years, 5 - 7% rate of return
 Annual DB Benefit: $195,000
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The Impact of Age on Contribution:
The Older, The Better
Doctor Charles
 Age 52
 10 Years to Retirement
 Compensation: $400,000
 DB Contribution: $134,600
 Annual Benefit at
Retirement:
$195,000
Doctor Tim
 Age 35
 27 Years to Retirement
 Compensation: $400,000
 DB Contribution: $16,200
 Annual Benefit at
Retirement:
$195,000
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Paul, Age 60, Mary, Age 58
Anesthesiologists, C-Corp
Married Couple in Business Together
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5 years from retirement
W-2 Income: $490,000 ($245,000 each)
Total annual DB contribution: $351,800
$171,800 towards Paul’s retirement
$180,000 towards Mary’s retirement
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Annual combined income tax savings: $133,700
Accumulation at retirement:
Paul: $1.1 Million
Mary: $1.16 Million
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Mollie, Dentist, Age 55
+2 Employees
Dentist, C-Corp
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Owner’s W-2 income: $400,000
Employee 1 age 28 earning $35,000
Employee 2 age 35 earning $45,000
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2009 DB contribution for owner: $162,400
DB Contribution for Employee 1: $4,000
DB Contribution for Employee 2: $8,100
93% of contribution for Mollie
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Annual income tax savings for Mollie: $61,700*
Retirement accumulation for Mollie at 62: $1.65 Million
*Assumes 38% combined state/federal marginal rate
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Walter, Age 60, Professor at Med School
Wants to Secure Retirement
with Side Income, Sole Proprietor
In addition to university salary, Walter has self-employment income from
consulting & serving on 2 biotech boards
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Annual self-employment earnings: $100,000*
DB contribution for 2009: $80,000
Annual tax savings: $30,400
combined marginal tax rate of 38%
DB Accumulation at age 65: $513,600
5 years, 5 - 7% rate of return
* High 3-year average, after payment of self-employment taxes
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Kumar, Age 48, Radiologist, C-Corp
Wants high contributions in 2009 but needs
flexibility as his income fluctuates
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2009 W-2 earnings: $135,000
Maximum DB contribution for 2009: $51,800
+ 401(k) contribution for 2009:
$24,600
Total deduction in 2009:
$76,400
2009 tax savings: $29,000
– combined marginal tax rate of 38%
 DB Accumulation at age 62: $1,630,000
– 14 years, 5 - 7% rate of return
 Annual DB Benefit: $135,000
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Eligible Compensation for a DB Plan
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Key Dates
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DB Plans must be opened by the end of your fiscal
year, for most businesses that will be December 31st.
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The Investment Account will be opened once the
Adoption Agreement is signed. If you open the plan
before year end, we recommend investing no more
than 50% of the assets before you have your final
year-end income statement.
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The investment account must be funded when taxes
are filed but no later than eight and a half months after
the end of your fiscal year.
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Fees
Defined Benefit Plan
 DB Plan Set up: $1200 plus $50 per participant
 DB Annual Administration: $1600 plus $100 per
participant
OR
Defined Benefit & 401(k)
 Plans Set up: $1400 plus $50 per participant (owner
and spouse only)
 Annual Administration: $2050 plus $200 per participant
(owner and spouse only)
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Establishing a Plan
1. We can run a feasibility proposal for you
2. Bring your accountant into the discussion early
3. Once the plan meets your objectives, we’ll complete a
Set-up Questionnaire
• Send signed Questionnaire to Dedicated DB
• With Set-up Fee
4. We’ll send you an Adoption Agreement to sign
5. You can begin to fund the investment account
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