Spending your working life planning for retirement means you deserve the assurance that your plan will deliver when you need it most. Our experts at Glover Park Wealth are dedicated to ensuring your retirement strategy is robust, guiding you towards a prosperous future in your retirement years. Consider the following critical questions:

• Are your social security benefits maximized for your advantage?
• Is a pension part of your retirement income strategy?
• Do you possess income-producing real estate or other valuable assets?
• How have you adjusted your portfolio to sustain you in the absence of employment income?

At Glover Park Wealth, we approach retirement planning from a holistic perspective, focusing not only on the financial aspects but also considering the impact on your lifestyle, estate, and the tax implications for future generations.

Your lifestyle choices in retirement play a pivotal role in shaping your planning decisions. At Glover Park Wealth, we understand that envisioning your retirement lifestyle is the first step toward creating a financial plan that aligns with your dreams and aspirations. Whether you imagine a life of travel and adventure, spending more time with family, or pursuing hobbies and passions, these choices significantly influence how you prepare financially.

• Have you considered the costs associated with your desired retirement lifestyle?
• Do your retirement savings support the lifestyle you envision?
• How will your spending change with your transition into retirement?
• Are there hobbies or passions that require financial planning?

We believe that a fulfilling retirement is about more than just financial security; it's about living life on your terms. That's why our planning process at Glover Park Wealth integrates your lifestyle goals with financial strategies, ensuring your retirement plan is as unique as your vision for the future.

In the realm of financial planning, clients frequently inquire about the size of the retirement savings they need to secure. The answer varies widely, depending on each client's distinct financial circumstances, which we uncover through a detailed exploration of their retirement dreams and financial goals. This process enables us to determine the necessary assets for a comfortable retirement.

**Early Accumulation Phase (Ages 21-35):** The journey to retirement begins here, where early contributions to retirement plans, such as a 401(k), are vital. Starting young allows individuals to benefit from employer matches and the powerful effect of compound interest, especially through investments in cost-effective, dividend-reinvesting funds, laying a solid groundwork for wealth accumulation.

**Mid-Life Phase (Ages 36-65):** As individuals enter their highest earning years, harmonizing a comprehensive financial plan with retirement aspirations is key. This includes maximizing 401(k) contributions, diversifying investments through IRAs, Roth IRAs, and personal investment accounts, and tackling important planning areas like tax strategies, mortgage planning, insurance, and setting up education savings.

**Distribution & Retirement Phase (Ages 66+):** As retirement begins, the emphasis shifts towards balancing assets and liabilities to support both necessary and discretionary spending, including travel and leisure. Adjusting investment risk and coordinating with financial advisors to maximize social security and other revenue streams becomes crucial for a stable and enjoyable retirement.

Each stage of financial planning is customized to fit the client's specific life phase, financial conditions, and objectives, highlighting the bespoke nature of retirement planning and our dedication to guiding clients through every milestone of their financial path.

Increase Productivity & Incentives with a 401(k) Plan with Profit Sharing

Profit-sharing plans provide multiple contribution options for the employer to reward long-term employees for their contribution to the business and to give them a share of the profits in the business.  

Profit sharing plans are like 401(k) and Traditional IRAs, the assets grow tax deferred. Participants are also able to take a loan, like a 401(k) or 403(b).

Profit-sharing plans also provide the employer flexibility on the contributions, they can increase or decrease contributions or even skip years.

Eligibility to Contribute

Employee eligibility requirements such as age and length of employment are determined by the 401(k)-plan administrator and company when the plan adoption documents are established.

Note: The Profit-sharing plan adoption document or agreement can be edited to update the employee eligibility requirements.

Maximum Annual Contribution

Profit sharing and match: Up to the lesser of 25% of compensation or $69,000 including employee contributions for 2024.

The total combination of employer and employee (salary deferral) contributions may not exceed $69,000 ($76,500 if age 50 or older) for 2024.

Tax-Deductible Contributions

Profit-sharing plan contributions are tax deductible from federal taxable income.

Taxation of Earnings and Withdrawals

Pre-tax 401(k) contributions and earnings are subject to stare and federal income tax, penalties apply if withdrawn before 59 ½ years old.

What type of Investments are allowed in a Profit-sharing plan?

Profit-sharing plans are typically administered by the employer and there is a set mutual fund lineup like the 401(k) or 403(b) plan.  In some circumstances, employees can invest in their company stock or direct the investments inside the plan.

Withdrawal Penalties

The 10% IRS penalty applies on withdrawals if the distribution is before age 59½ unless an exception below applies. You can read more about this in our “Tax Planning” section or visit the IRS website: Retirement Topics Tax on Early Distributions | Internal Revenue Service (irs.gov)

Exceptions

Separation of service in year turning age 55 or older

Death

Disability

Substantially equal periodic payments over life expectancy

Qualified military reservist

Up to $5,000 for qualified adoption and/or birth expenses

Required Withdrawals (RMD):

Beginning in tax year 2020, the Required Minimum Distributions (RMDs) to start taking qualified distributions or withdrawals changed from age 70½ to age 72 (However, this does not affect participants who turned 70½ on or before 12/31/2019.)

If you are still employed by the employer sponsored retirement plan: 401(k), 403(b), Simple IRA or small-business account then your RMDs may be delayed until the year of retirement.

Keep in mind, some expectations do apply, and we recommend that you meet with your CPA or Tax Advisor.

ERISA Retirement Plan Startup Deadline

For years after 2020, 401(k) plans may be set up by the tax filing deadlines plus extensions.

Employee salary deferral contribution(s) must be deducted from participants’ paychecks.

Employer contributions or profit sharing may be made by the tax filing date plus allowable extensions.

To learn more about Profit-sharing plans, see the IRS website: Choosing a Retirement Plan: Profit-Sharing Plan | Internal Revenue Service (irs.gov)

Defined Benefit Plans for Retirement 

Defined Benefit Plans are designed usually for self-employed or small business owners to give them the ability to make very high tax-deferred contributions.

A personal Defined Benefit Plan works best in our opinion for individuals in their highest earning years and who are age 50 or over. These individuals will need to make annual contributions of $90,000 or more for at least five years.

Defined Benefit Plans are designed for high earning individuals to increase their retirement assets in a very aggressive manor over the age of 50 years old, individuals who participate in these plans are typically highly compensated business owners or key employees in their highest income years. 

Administration

Personal Defined Benefit Plans allow for the highest contribution limits in the IRS code, however, there are high costs and administrative requirements which require hiring a Third-Party Administrator (TPA).

Actuarial calculations provided by a Third-Party Administrator (TPA)

Requires annual funding based on the Third-Party Administrator (TPA) and actuarial calculations

IRS filing fees

Form 5500 with a schedule SB annual filing with IRS

Defined Benefit Plan | Internal Revenue Service (irs.gov)

Withdrawal Rules from a Personal Defined Benefit Plan?

Penalty-free distributions may be allowed upon retirement or termination of service under certain circumstances.

Required Minimum Distribution (RMD) withdrawals or distributions must start by age 70½ (if you were born before July 1, 1949) or age 72 (if you were born on or after July 1, 1949).

You are required to take Required Minimum Distributions even if you are still employed.

You may receive your benefit payout by rolling assets into an IRA, setting up an annuity, or receiving a lump-sum distribution.

There is a 50% penalty on the total amount of the distribution if the amount is less than required or is not taken. Distributions before age 59½ are subject to the IRS 10% penalty on the total distribution.

Withdrawal Penalty Exceptions

There are certain circumstances where you can avoid the 10% IRS penalty and take distributions before age 59 ½ years old. Rollover assets into an IRA or new employer plan

Termination of employment at or after age 55

Death or disability

Qualified birth and/or adoption expenses

Non-reimbursed medical expenses exceeding 7.5% of adjusted gross income

Withdrawals made in equal installments over the account holder’s life expectancy

What is a SIMPLE IRA?

A SIMPLE IRA is an employer sponsored retirement salary deferral plan without the cost or administrative responsibilities associated with traditional 401(k) or 403(b) plans.

Eligibility to Contribute

Employer and Employees can contribute at any time.

The company must have fewer than 100 employees and each employee must earn a minimum of $5,000 in compensation in the prior year.

Maximum Annual Contribution

Employer: is required to make contributions in the SIMPLE IRA:

3% employee match, dollar-for dollar

2% of compensation for all eligible employees

Employees: Contribute up to 100% of compensation or $16,000 maximum for 2024, however this can not to exceed 100% of employee’s compensation (If you are 50+ years old, the contribution limits increase to $19,500 for 2024)

Tax-Deductible Contributions

Employers’ contributions are tax deductible from federal and state taxable income

Employee can make pre-tax contributions which are deductible from state and federal taxable income

Taxation of Earnings and Withdrawals

SIMPLE IRA contributions and earnings are subject to state and federal income tax, penalties also apply if withdrawn before 59 ½ years old or the two year penalty, see below.

Withdrawal Penalties

There is a 25% IRS additional tax if withdrawn prior to two years from the first deposit into the participant’s account. After that, a 10% additional tax applies before age 59½ unless exception applies.

Types of Investments

Stocks, bonds, mutual funds, ETF’s, options, treasury bills & notes, CD’s

Exceptions

Death

Disability

Medical expenses in excess of 10% of Adjusted Gross Income (AGI)

Health insurance premiums if unemployed for 12 consecutive weeks

Qualifying higher education expenses

Qualifying first time home purchase ($10,000 lifetime limit)

Qualified military reservist

Substantially equal periodic payments made over life expectancy

Involuntary IRS levies

Conversion to a Roth IRA

Up to $5,000 for qualified adoption / birth expenses

 Required Withdrawals (RMD)

Beginning in tax year 2020, the Required Minimum Distributions (RMDs) to start taking qualified distributions or withdrawals changed from age 70½ to age 72 (However, this does not affect participants who turned 70½ on or before 12/31/2019.)

If you are still employed by the employer sponsored retirement plan: 401(k), 403(b), Simple IRA or small-business account then your RMDs may be delayed until the year of retirement.

Keep in mind, some expectations do apply, and we recommend that you meet with your CPA or Tax Advisor.

ERISA Retirement Plan Startup Deadline

For years after 2020, 401(k) plans may be set up by the tax filing deadlines plus extensions.

Employee salary deferral contribution(s) must be deducted from participants’ paychecks.

Contributions must be made within 30-days after end of month

Employer contributions or profit sharing may be made by the tax filing date plus allowable extensions.