Steven L White

Over the weekend I though about sheding light on what this site is about.

This blog is about providing you, the reader and member of my community with a complete and comprehensive resource about the three most important factors of building, sustaining and protecting your financial and non-financial estate and assets. This includes your retirement planning, business planning and estate planning. You will often see and hear me refer to this as “The Third (and best) Option”. More about that later. 

I am going to share with you my 20 years of life and professional experiences that go beyond what you know as traditional financial strategies. It is my goal to bring you into the financial world of the 21st century. To equip you with knowledge and wisdom so that you can lay down the tracks of success and have an edge in learning intermediate and advanced concepts and strategies that will add tremendous value to your personal estate and business if you choose to act and implement them with a proper and suitable strategy. 
You will see and hear what you have learned before and you will see and hear something new and from a fresh strategic perspective.  Our financial environment has changed dramatically and these changes require us to take our financial knowledge and acumen to the next level if we are to experience success, and I know that you want to succeed. 

Steven L White

Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice. 

Neither Park Avenue Securities nor its representatives provide tax or legal advice; please consult your advisors regarding your specific situation

You are halfway through 2007, maxed out on your current qualified retirement plan, earning incredible income and are concerned about 2 thoughts. One, how do I retire with a decent cash flow when I can only defer a fraction of my incredibly large income? Secondly, with my significant amount of income how can I defer larger amounts of income to create a better retirement distribution? Congratulations, you have just graduated from the typical qualified retirement plan menu of defined contribution plans that are typically associated with lower gross incomes. 

No worries, there is a solution that is commonly used with high-income earners.  This qualified plan you may want to consider is a section 412(e)(3) fully insured plan  (formerly know as 412(i)) because of the section of the Internal Revenue Code which authorized it. Unlike traditional tax qualified “defined contribution” plans such as an IRA, 401k and Simple plans this is a tax qualified “Defined-Benefit” plan. So instead of the monthly contribution and the long-term growth or loss of principal of your contribution determining your retirement distribution ,  a “defined benefit” plan determines your actual benefit paid out at retirement, currently maximum is $180,000 per year…guaranteed and with significantly larger annual deferrals going into the plan, some as high as $200,000+ in one year.

The main characteristic of a section 412(e)(3) plan is that it is a “defined benefit” plan in which the plan benefits are funded entirely by insurance and annuity contracts or solely  by annuities issued by a reputable  insurance company with a long and favorable track record. This kind of contract is funded by level premiums that begin when an employee becomes a plan participant and end no later than the employees end retirement age under the specific plan.

Some of the characteristics that make the 412(e)(3) attractive are no full funding limitation or current liability test to limit the employers deduction which makes significantly larger deductions possible. With increased funding, larger benefit payouts are likely at retirement subject to IRS limits, and these plans are exempt from the minimum funding standards. If death of the participant occurs before retirement, a portion of the beneficiaries’ death benefit is income tax-free rather than 100% taxable as is the account value of more “vanilla” type of retirement plans.

Anything of great value and benefit does have a downside. These plans do not allow loans and tend to have less investment flexibility than other qualified plans so it is a give-and-take scenario for the well informed participant and plan sponsor.

Who could benefit from a properly funded 412(e)(3) plan? A Great question! A generally suitable situation is a Self employed man or woman in late 40’s, 50’s or more, earning a healthy, steady and  stabilized  6 figure income who feels they have not put enough away for retirement and want a viable option to help them catch up and take advantage of significant tax deferrals now. This person generally owns his or her own business and has a handful of employees. A 412(e)(3) could be just what the doctor ordered and an incredible vehicle to move you closer to your financial and retirement aspirations. As always, please consult with qualified professionals in advanced planning with these kinds of plans as they are highly specialized. Free feasibilty study offered upon request!
As seen in The Villager Newspaper-Steven L White