Hey fellow skier and business owner,
You’ve probably heard:
“Skiing is the art of catching cold and going broke while rapidly
heading nowhere at great personal risk.” – Unknown
…But I’m here to tell you that just because this is how you love to live your life most of the time doesn’t mean your business finances have to be that way!
And today, I’m here to talk to you about the Colorado Secure Act and how you can use federal tax credits and exemptions to make this work for you.
You have probably heard of this before. Colorado is mandating that businesses like yours offer retirement plans – but did you know the federal government can “subsidize” your retirement plan (even as a solopreneur) by offering fantastic tax deductions and credits?
All you have to do is start a retirement plan like the ones listed below.
In addition to the “regular” benefits of offering a great retirement plan (employee satisfaction, retention, and competitive benefits that attract top performers) you’ll also have a chance to earn some real money right away by taking on one of these plans.
Here are a few examples of “plans in action”
Safe Harbor 401k
The definition of a win-win for business owners. Contributions up to $73,500 can be deducted from your taxes, with owner contributions on each plan of up to $30,000 annually. This allows owners to secure their retirement while reducing their business tax liability at the same time.
Plus, this valuable benefit helps attract and retain top talent. Roth savings options are also available.
Individual (Solo) 401k
An individual 401k is a retirement savings plan for self-employed individuals or small business owners.
Here’s our example: John is a consultant (and skier) who earns significant income from his work. He opens an individual 401k to save for retirement (including plenty of ski days).
With an individual 401k, John can contribute up to $30,000 annually as an employee and make a profit-sharing contribution of up to 25% of his self-employment income. By contributing to his individual 401k, John can reduce his taxable income, save for his future, and benefit from the growth of his investments over the decades, all tax deferred.
Compared to a SEP IRA, your 401k has some real advantages. While both plans are tax-deferred, an individual 401k gives you higher contribution limits. An individual 401k also allows you to “catch up” on your contributions if you’re over 50, which your normal SEP IRA obviously does not offer.
Your individual 401k also provides loan options, which a SEP IRA does not. Overall, an individual 401k gives self-employed individuals and small business owners more flexibility when maximizing their retirement savings.
Defined Benefit Plans
Another great plan for someone with few employees or none at all.
Defined benefit plans scale based on your income and age. For example, if you’re 50 years old and earn $300,000 per year, you may be able to contribute up to $190,000 or more – annually to your defined benefit plan.
This plan also offers tax benefits, potentially saving you thousands of dollars in taxes each year. A defined benefit plan is a smart choice for those looking to maximize their retirement savings while reducing their tax liability in the future together!
How much does the Colorado Secure Act give you for each?
- With a defined contribution plan, you may be eligible for up to $73,500 in tax deductions
- With a defined benefit plan, you may be eligible for up to $265,000 in tax deductions
- With any kind of plan, you could be eligible for up to $15,000 in tax credits to offset startup and employee educational costs
Interested in learning more? Here at Bluebird Advisory, our specialty is helping business owners, small businesses, and sole proprietors secure their financial future – and retirement plans are central to how we help people like you prepare for a future with lots of ski days!
We’ll help you maximize your savings while minimizing your tax liability and avoiding the “trees, rocks, and moguls” on the “slopes” so you can have fun and manage risk properly.
Vanguard recently released a stat that people with a financial advisor earn about 3% more – compounded annually – than people who go without.1