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McKinley Financial Group

555 Twin Dolphin Drive, Ste 170

Redwood Shores, 94070

Tel: (650) 551-8900

Fax: (650) 551-8919

Call us today for a free

consultation!

Text Box: Myth: I can only contribute a maximum of $42,000 into a Retirement Plan. Reality: You are not limited to a dollar number, but based on age and other factors may be able to put in much more. A 40 year-old may be able to put $150,000 per year, and a 60 year old as much as $300,000 per year into a tax deductible retirement plan. Myth: I can only contribute 25% of my salary to my retirement plan. Reality: You can put up to 100% of your salary into your retirement plan in certain instances. Myth: If I make a contribution for myself, I have to contribute equal amounts for my employees. Reality: You can use one of many formulas to determine employee eligibility and contributions based on tenure, position, income and other factors. Myth: My SEP plan is protected from creditors and law suits. Reality: The only types of “qualified” retirement plans that are protected from

Text Box: Defined Benefit Plans go back to the 1930s and have been an intricate part of American retirement plans. Many of our parents have “pension plans” that guarantee income. These are types of Defined Benefit Plans. Today’s Defined Benefit Plans often look very similar to 401(k) plans in their investment options and distributions, yet instead of having a maximum “Contribution,” they have a maximum “Benefit” that can be used to calculate the contribution allowable. Simply stated: A defined benefit plan can have a contribution sufficient to fund a $170,000 per year income at “normal retirement age.” This means that a 40 year-old, who has a 20 year funding period until his normal “age 60” retirement plan may only be able to fund $150,000 per year to create a sum large enough for an income of $170,000 per year at retirement. Likewise, an individual age 55 may be able to fund $300,000 per year into his/her retirement plan each year to reach the same sum, creating a stream of income of $170,000 per year at age 60. What does this mean? It means that in the later earning-years business owners may make MUCH larger contributions, helping to catch up on their retirement planning goals, while taking advantage of much higher tax benefits due to these limits. Other possible benefits: Disability Income Self Completion for spouse upon death Estate tax planning Liability Protection

By funding a Defined Benefit Plan with “borrowed money” and only paying the interest on the loan, the tax savings can pay for a significant part of your retirement.

Consider for example, a realtor who has significant equity in rental properties and falls in the 45% combined tax bracket: By funding $100,000 into a Defined benefit plan borrowed from the property, he/she saves $45,000 in taxes per year. The interest on the loan is 6.5% ($6,500) in today’s market, creating a surplus of $38,500 in year one. Continuing this for 5 years, tax savings amount to over $185,000 and the retirement account has reached $600,000 (contributions plus earnings) and he/she isn’t “out of pocket” one penny.

This strategy, if used properly, can self sustain for up to 16 years, with the tax savings paying for the loan interest. At the end of that time the contributions in the plan can pay off the loan and there cam be still hundreds of thousands of dollars to spare. The Best Part… you didn’t pay a penny for it. The IRS funded it ALL!

This is for illustration purposes only. Strategies may not be appropriate for everyone. Your results may vary. Registered Representative offering Securities through FFP Securities, Inc. – Member NASD/SIPC Registered Investment Advisory Representative offering services through First Advisors Service, Inc. Advanced Equities Companies CA License # 0B96613