To determine if your business has the proper 401(k)/profit sharing plan design and if there is a way to tweak the design to skew the numbers in favor of your key employees/business owners, please contact our firm at admin@aspencreekfinancial.com for a free consultation.
While most people think it’s a good idea to fund a “tax-deferred” qualified retirement plan; many times not the case. In fact, tax-deductible qualified retirement plans can be more tax-hostile than tax-favorable.
Are Qualified Plans Tax Hostile or Tax-Favorable?
You may have had someone ask you if it is better to pay taxes on the harvest or the seed? What this question is asking you is whether it is a better idea to pay income taxes now on your current income (the seed) if you could let that money grow tax-free and be removed tax-free later in retirement, or is it a better idea to let your money grow tax-deferred for years in a qualified retirement plan and then pay income taxes on ALL of the money that is withdrawn (the harvest).
We’ve run the numbers and for most clients under the age of 60, paying taxes on the seed while letting your money grow tax-free and come out of a wealth-building tool tax-free in retirement will be much better than simply income tax-deferring money the traditional way through a 401(k) or other tax-deferred qualified plan.
To learn how you can build a tax-favorable retirement nest egg outside of a qualified retirement plan, please click on the image below.