Pension Services

Could You Create Your Own Pension Plan?
SBOs are taking a new look at old-school defined benefit plans. Provided by Dywane A. Hall, MA, RFC, CRPC, AIF   Contrary to popular belief, classic pension plans have not disappeared. Corporations have mostly jettisoned them, but highly profitable small businesses are giving them a second look. Why are small business owners deciding to adopt old-school, employer-funded retirement plans? The tax breaks attached to a defined benefit plan may be substantial. In fact, if these plans are funded with insurance contracts or guaranteed insurance products, plan contributions made by the owner become tax-deductible for the business.1 There is no cap on how much you can save. IRAs, 401(k)s, and SEPs all have annual contribution limits. Traditional employer-funded pension plans do not. Business owners have the potential to accumulate millions for the future through such a vehicle. For the record, the IRS does limit the yearly retirement income that a participant in a defined benefi...
Pension Questions After the Detroit Bankruptcy
How many retirees face the possibility of less recurring income? Provided by Dywane A. Hall On July 18, Detroit became the largest American city to file for Chapter 9 bankruptcy. What will happen to the pensions of its 20,000+ retired public employees? There is a possibility they could be reduced – perhaps greatly. In the wake of Detroit’s fiscal problems, current and future pension recipients across the country are wondering about the stability and amount of their promised incomes.1,2 In Michigan, the fate of the pension checks for these employees may be determined in the courts. While a federal judge is overseeing Detroit’s bankruptcy proceedings, Michigan’s state constitution states that pension benefits can’t be altered. On July 24, the aforementioned federal judge froze assorted state-court lawsuits brought against the city arguing that the bankruptcy filing was unconstitutional (at the state level). As much as Detroit might want to scale back pensions for fiscal rel...
SOCIAL SECURITY CLAIMING STRATEGIES
 What can married couples do to increase joint lifetime benefits? Presented by Dywane A. Hall, MA, RFC, CRPC What is your “magic number”? Roughly half of retirees claim Social Security benefits at age 62, as soon as they become eligible. Some people delay benefits and postpone using their retirement savings as an income source. Others apply out of necessity; their financial situation leaves them little choice.1 These factors aside, what if you have a choice? If you wait a few years to apply for Social Security, how much more income might you realize? Could you wait until age 66? The Social Security Administration has made 66 the “full” retirement age for people born during 1943-1954. If you were born in this period and you apply for Social Security at age 62, you will reduce your retirement benefit by 25% and your spouse’s by 30%.2,3 That alone might convince you to wait. In addition, there are claiming strategies that may bring spouses much greater cumulative lif...
CASH BALANCE PLANS
A look at why small businesses and professional practices like this option. Presented by Dywane A. Hall, MA, RFC, CRPC In 1985, there were 114,000 defined benefit plans in America. By 2011, that number had shrunk to 38,000. Since 1985, some businesses have elected to replace a traditional pension plan with an alternative: a cash balance plan.1 Cash balance plans offer partners and owners of highly profitable businesses an option to ramp up their retirement savings through large pre-tax contributions. Contributions to these plans are age-dependent, so the older you are, the more you can potentially sock away for retirement.2 How does this differ from a traditional defined benefit plan? In a cash balance plan, a business or professional practice maintains a hypothetical account balance for each employee. Employees get periodic statements showing their "balances". Every year an employee participates in the plan, he or she collects pay credits and interest credits. (The interes...
FIDUCIARY STANDARDS vs. SUITABILITY STANDARDS
Explaining the difference, and what it means to be a Registered Investment Advisor. Presented by Dywane A. Hall, MA, RFC, CRPC If you meet with a financial professional, be sure to ask a critical question. If you make an appointment with a financial consultant on behalf of yourself, your family or your company, make the following inquiry before the meeting ends: “Are you held to a suitability standard or a fiduciary standard?” This distinction is very important. You should be aware of the difference. What is a suitability standard? Investment brokers are frequently asked to abide by suitability standards: when they recommend a financial product to a client, they are ethically bound to recommend a product which is “suitable” for that client. As laid out in the manual of FINRA (the Financial Industry Regulatory Authority, formerly known as the NASD or National Association of Securities Dealers), the suitability standard has long demanded that a broker make “reasonable...