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Retirement Planning for Small Business Owners
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Retirement Planning for Small Business Owners


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Greg Stevens, CFP, CRPS, senior financial counselor at Cabot Money Management, Inc., gives an introduction to the various retirement vehicles that are available to today's small business …

Greg Stevens, CFP, CRPS, senior financial counselor at Cabot Money Management, Inc., gives an introduction to the various retirement vehicles that are available to today's small business owner.

Disclosure: These seminars are for discussion purposes only. It is not an offer to buy or sell individual securities or investments. Investors should consider their own individual investment objectives, risks, charges and expenses of their portfolio carefully before investing. Investments are not FDIC insured and may lose or fluctuate in value. Please request our Form ADV Part II for complete disclosures.

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  • 1. Retirement Planning Options for the Small Business Owner
    Greg Stevens, CFP®
    Senior Financial Counselor
  • 2. Does this look familiar to anyone?
  • 3. AGENDA
    • Who is Cabot?
    • 4. What are our capabilities?
    • 5. Why offer a retirement plan?
    • 6. What are my options?
    • 7. How can Cabot help?
    • Founded in 1983 solely as an investment firm
    • 8. Has since developed into an integrated wealth management firm
    • 9. Incorporated institutional money manager component
    • 10. History of working with high net work individuals, endowments, foundations and non-profits
    • Approximately $471.7M in AUM (as of 8/31/2010)
    • 11. Access to leading research on Wall Street
    • 12. Opportunistic investment style
    • 13. Trading/technological capabilities enable Cabot to get access to local shares in other markets
    • 14. Research staff visits companies and countries, which helps enhance research and stock-picking process
    • Firm with national client base and national media exposure
    • 15. CNBC, Bloomberg, FOX Business, Reuters, etc.
    • 16. Fully staffed service group
    • 17. Access to Wall Street Research in addition to own proprietary research
    • 18. Small firm with “big firm” capabilities
    Les Satlow
    Rob Lutts
    Chartered Financial Analyst
    Equity Portfolio Manager
    President, Chief Investment Officer
    Founder of Cabot Money Management
    Dennis Wassung, Jr.
    Bill Larkin, Jr.
    Chartered Financial Analyst
    Associate Portfolio Manager
    Fixed-Income Portfolio Manager
    • Building positions over time when appropriate
    • 20. Limiting the size of individual positions (typically to 5% of value)
    • 21. Diversifying positions across sectors, industries, and geographies
    • 22. Employing a loss discipline process intends to provide:
    Protection of principal during times of market distress
    Objectivity when a position moves counter to our investment thesis
    Attempt to utilize a 20% loss threshold for action
    • Opportunity to invest significant money for retirement
    • 24. All earnings are tax deferred
    • 25. All contributions are made are either pre tax or are tax deductible
    • 26. Can be offered as an employee benefit
    • 27. Allows the business owner a way to compensate employees for their contribution to the business
    • 28. Can be used to attract and keep employees in a difficult labor market
    • “Dramatically high percentages of Americans -- even in the upper-income categories -- are likely to run short of money after 10 or 20 years of retirement.”*
    • 29. “13% of the wealthiest quartile of Americans are in danger of churning through their savings within 20 years of retirement.”*
    • 30. Uncertainty over Social Security
    *Based on a study conducted by the Employee Benefit Research Institute
  • 31. What Are My Options?
  • SEP
    • Considered a small business “profit sharing” plan.
    • 35. Contribution limits: Lesser of 25% of compensation (20% of SE earnings) or $49K.
    • 36. No “catch up” provision.
    • 37. Contributions are vested immediately.
    • 38. Contributions are tax deductible to the employer, tax-deferred growth of assets for the employee.
    • 39. Best suited for individual w/ part-time business , OR
    • 40. Any type of business with a small number of employees.
    • Age 21 or older
    • 41. Must have worked for the employer for at least three of the prior five years
    • 42. Have earned at least a minimum amount of compensation for the year ($550 in 2010)
  • SEP: Advantages/Disadvantages
    • High contributions limits
    • 43. Tax deferred contributions can be made even if the participant is enrolled in a 401k (great for consulting income)
    • 44. Very inexpensive to administer
    • 45. Flexible contributions schedule (can decide each year whether or not to add money)
    • 46. Every eligible employee must have a SEP established on their behalf.
    • 47. Contributions must be made to every eligible employee
    • 48. Employees cannot defer their own salary to the plan
    • SIMPLE (savings incentive match plan for employees)
    • 49. Limited to companies with no more than 100 employees
    • 50. Employees must have earned at least $5K
    • 51. Employees can defer up to $11,500 (2010) or 100% of comp, which ever is less
    • 52. $2,500 “catch up” if over 50 years old
    • 53. Employer deferral requirement:
    • 54. Match up to 3% of employee’s total compensation if they contribute, or
    • 55. Match 2% of employee’s compensation, even if employee is not participating in the plan.
  • SIMPLE PLANS: Advantages/Disadvantages
    • Easy and inexpensive to set up an administer
    • 56. Allows employees a vehicle to save (employee deferrals)
    • 57. Offers the over 50 “catch up”
    • 58. Lower contribution limits than other plans (ie 401k)
    • 59. Employers are forced to make matching contributions on behalf of the employees
    • Designed for business where the owner/spouse are the sole employees
    • 60. Great for consultants, sole practitioners, contractors, etc.
    • 61. Contributions are “split” btw. employee deferrals and profit-sharing
    • 62. Maximum deferral: lesser of $16,500 (2010) or income
    • 63. $5500 “catch up”
    • 64. The “Business” can contribute 25% of owner’s income
    • 65. The maximum combined contribution is $49K (2010)
  • SOLO 401K: Advantages/Disadvantages
    • Much easier to administer and set up than a traditional 401k (no nondiscrimination testing required)
    • 66. Contributions are discretionary year to year
    • 67. Can provide for loans and hardship withdrawals
    • 68. Accepts rollovers from other qualified plans
    • 69. Can be established as a ROTH (tax free growth of assets)
    • 70. Not a great fit for employers that intend to hire employees (plan must be converted to a traditional 401k)
    • Very high contribution limits (annual contributions can exceed $200K )
    • 71. Contribution levels are determined by an actuary
    • 72. Contributions MUST be made each year based on the actuarial calculations
    • 73. Contributions are based on a projected retirement “benefit”
    • 74. Ideal for sole proprietor over 50 yrs in age with a high level of income.
    • 75. Contributions must be made on behalf of any employees
    • 76. Can be combined with a 401k plan to further increase contribution level
    • 77. Eligibility can be set at 1 year of service and 1000 hours per year to exclude part time employees
  • DB PLAN: Advantages/Disadvantages
    • Contributions are tax deductible and grow tax deferred
    • 78. Can be established by any business entity
    • 79. Plan can be amended to adjust annual contribution, if business conditions change
    • 80. Annual administrative costs are higher than many other plan types
    • 81. If a firm has multiple employees, the contribution requirements can be onerous
    • Customized asset allocation
    • 82. Ability to integrate the retirement plan with your overall financial planning needs
    • 83. A history of managing money for high net worth individuals and endowments
    • 84. We can help trustees with their fiduciary obligations (i.e. educational meetings, ensure diversification of assets, etc.)
    • Referral to firms we work with that can administer plans (TPAs, actuaries)
    • 85. Assets are held at Charles Schwab, Cabot oversees the management
    • 86. We can act as a resource for any employees you have in the plan