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Many physicians worry that their current retirement plan does not meet their retirement savings goals.
Physicians, along with the retirement committee members, want to have larger tax deductions and accelerated retirement savings.
They are looking for a plan that’s more reliable, safe and has the potential to more than double their tax-deferred contribution amounts and drive down tax liability.
This is where a profit-sharing 401(k) plan with a safe-harbor non-elective option along with a cash balance plan can help achieve their goals.
Here is an actual 401(k) plan design. This plan is for a total of 174 employees, 56 partner physicians over 50 years of age, 58 non-partner physicians over 40 years of age, 10 nurse practitioners over 36 years of age and 12 staff members over 48 years of age.
With this plan design, physicians, along with the retirement committee members, would achieve their goals and have larger tax deductions with accelerated retirement savings. All of the contributions to the plan are creditor protected.
Taking advantage of the new tax law
Let’s break this down even further with a quick example. Qualified retirement plan contributions like cash balance remain the gold standard of deductions, since they reduce both taxable income and adjusted gross income (AGI).
Before & After Adding a Cash Balance Plan
Medical Group Partner, 60, married
AGI: $650,000
No Cash Balance Plan: Not eligible for pass-through deduction.
Add a Cash Balance Plan to 401(k) Profit Sharing Plan: With combined retirement plan contributions of $335,000, AGI is lowered to $315,000 allowing 20% pass-through deduction and reducing effective tax rate to 20.1%.
If your medical group is not this large, then this is the article for your practice What Business Owners Need To Know
Any retirement committee along with the physician partners would be more than happy with these results. Just imagine what this plan design would look like after having the plan in place for several years. Many of the doctors would see dramatic improvement in their retirement accounts, and this outstanding plan aids in physician retention, physician satisfaction and happier employees within the medical group as well.
Scott Krase is the founder and principal of CrossPoint Wealth and specializes in retirement planning for individuals over age 50. His blog is CommonFinancialSense.com.
Read more articles by Scott Krase
Many physicians worry that their current retirement plan does not meet their retirement savings goals.
With this plan design, physicians, along with the retirement committee members, would achieve their goals and have larger tax deductions with accelerated retirement savings. All of the contributions to the plan are creditor protected.
