It is becoming more and more obvious that we all need to pay more attention to our long term need for capital accumulation. Concerns are growing that the current dysfunction of our federal government and the continuing growth of entitlement programs may force more and more of the middle and upper classes to become self-reliant. It is not a question of approval of the current direction of government. It is whether the resources will be there to meet the promises made, while providing for other needs such as defense, infrastructure, etc.
MKA has focused on benefit programs for executives and professionals that provide income and income protection targeted at post-retirement living. You should know that, in essence, many of these programs provide benefits through capital accumulation that provides significant sums of money to be utilized in a number of ways, including a stream of yearly benefit payments.
Whether your plan is a SERP (supplemental executive retirement plan) provided by your employer, or a true deferred compensation program funded by you with either pre-tax or after tax dollars, it is basically a capital accumulation program. In some instances, you may be locked into a series of fixed periodic payments over a number of years or your lifetime, but in most cases there is flexibility in how you use the values that have accumulated for you.
Today, where possible (sometimes employers have their own ideas about how a plan should work), our SERPs and deferred compensation plans are designed with capital accumulation in mind – and include flexibility within the context of the plan and the limitations of applicable statutes and regulations.
Our planning also looks to see whether it makes more sense to be taxed when contributions are made or, alternatively, when benefits are taken. It might seem strange to consider paying taxes today when you could otherwise defer them. Using a current taxation strategy can result in the same net after tax income that is projected today, but avoids paying taxes in a higher tax bracket environment, which is being predicted by many of those who make a living speculating about the future.
If you don't have a non-qualified SERP or deferred compensation plan, or if you do and are not sure that it provides as much flexibility as is possible, please contact me, Barry Koslow, for discussion of what might be possible, or for a review of what you currently have. You can reach me at bkoslow@mkaplanners.com or 781-939-6050.
Securities offered through Advisory Group Equity Services, Ltd., Member FINRA/SIPC. 444 Washington Street, Woburn, MA 01801 (781) 933-6100.
This article should not be considered as providing accounting, business, financial, investment, legal, tax, or other professional advice or services. It is not a substitute for such professional advice or services, nor should it be used as the basis for any decisions or actions that may affect your business or you personally. This should only be one part of your research. You should seek authoritative guidance from a qualified accountant or attorney before taking any action.
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