THE 412(i) DEFINED BENEFIT PLAN
A UNIQUE RETIREMENT PLAN FOR THE SUCCESSFUL SMALL-BUSINESSPERSON
Looking for good news? Try this: Successful small-business owners have a plan that maximizes current tax deductions and secures a guaranteed income at retirement. In fact, the "412(i) defined benefit plan" is the only qualified retirement plan to provide guaranteed retirement benefits payable at normal retirement age, with reduced benefits payable at an earlier retirement date.
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412(i) Plans are ideally suited for small-business owners with six or fewer employees who want to put away a very large, tax deductible contribution. The plan is designed to provide guaranteed retirement income for life--up to $160,000 in 2002, based on documentable earnings--starting at a predetermined date.
"The 412(i) plan has been designed, ideally, for the closely held business owner who, late in life -- say in his 40s, 50s or 60s -- did not lay enough aside and needs to catch up," said Bert Cutler in an interview. Cutler is president of Florida-based Wealth Preservations Strategies, founded in 1972, specializing in tax planning for affluent small business owners.
"Best of all," added Cutler, "the plan can be fully insured, so benefits are paid to a spouse or other beneficiary if the business owner dies. We fund exclusively with fixed life insurance and fixed annuity products," or products with guaranteed minimum cash value returns.
How does the plan work? As an example, said Cutler, "we have an actual client who is 63. He wants to retire in five years." He has documentable compensation of $87,000 a year. "Using whole life to fund the plan, we were able to give him a fully tax-deductible annual contribution of $296,812 in the first year. This will give him a guaranteed monthly income for life of $7,309. There's also a death benefit of $1.845 million."
Drawbacks and limitations: The 412(i) defined benefit plan is not for everyone. There are limitations and restrictions. Among them:
A 412(i) plan may be the way to meet multiple objectives. Or perhaps another plan is best for you. Talk to your New York Life agent for an analysis of your needs and a discussion of your options. No cost. No obligation. Just quality service and quality products.
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TEN REASONS TO CONSIDER A 412(I) DEFINED BENEFIT PLAN FOR YOUR BUSINESS
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