The Principal Financial Well-Being Index for the third quarter of 2013 contains some interesting information about small to medium businesses. It was conducted nationwide during the first three weeks of July, 2013 among more than 600 owners of businesses with 10-500 employees.
- 62% have surplus capital, and 75% of those owners are letting it accumulate.
- 41% believe they need to save more in order to live comfortably in retirement.
- 34% fear they will outlive their savings.
- 25% are concerned over being able to generate enough retirement income.
- 45% have no succession plan.
- 37% use no financial professional.
A small business with sustainable profits should consider a retirement plan. They come in several varieties, and depending on facts and circumstances one type might fight a particular business better than another. The variety with the largest potential for accumulating value fast is the defined benefit plan. In fact, companies with a 401k plan often install a defined benefit plan, either in addition to their 401k or instead of the current plan.
As long as a tax deferred retirement plan is set up correctly, higher funding can mean higher tax deductions, which brings me back to the Well-Being Index. If you are one of the small businesses wanting to use high tax rates to your advantage, please contact us right away. We are happy to coordinate opportunities with your tax preparer.
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