Retirement Plan Update

August 9, 2010
DB(k) retirement plans are new this year
Have you heard about Plan X?

A 2006 tax law added section 414(x) to the Internal Revenue Code, creating a retirement plan you can establish for the first time this year. The IRS calls this new option an "eligible combined plan" because it has aspects of a defined benefit (DB) retirement plan and a 401(k), which is a type of defined contribution plan. For the same reason, the new plan is also called a DB(k).

An overview.

The DB(k) combines two types of retirement plans into one.
The rules for the defined benefit portion require your company to make contributions on behalf of eligible employees and to pay specified benefits after retirement.
Under the rules for the 401(k) defined contribution portion, you and/or your employees contribute specified amounts before retirement. After retirement, the amount received by each employee depends on how the contributions were invested and how well those investments did.
Some details.

You can offer a DB(k) when you employ at least two but no more than 500 workers.
You can set up the plan using a single document and you'll file one Form 5500, Annual Return/Report of Employee Benefit Plan, each year.
The DB(k) is exempt from rules that generally apply to retirement plans when most of the benefits go to highly paid employees.
Your plan must follow certain vesting, contribution, and nondiscrimination rules.
Retirement plans offer benefits to your business and employees. Give us a call at (949) 453-1521 or email us at taxalert@maxwellcompany.com to discuss whether this new option will work for your company.

Questions to ask before retiring

August, 2010
If you're within a stone's throw of retirement — for most folks, that's somewhere between the ages of 55 and 65 — you've probably spent at least a little time dreaming about life after work. But before you turn off the computer and turn in your retirement paperwork, consider three important questions.

What will you do in retirement? If you love golf, and dream of getting up late and hitting the greens every afternoon, retirement may be just the ticket. But your hobby may not hold the same appeal after a few years. That's why it's important to take stock of your interests, hobbies, and activities before retiring. Consider "field testing" activities you intend to pursue in retirement, such as joining a band, volunteering for a nonprofit organization, or taking classes at a community college. Doing "retirement activities" before you retire can be an eye-opening experience, and may help to separate daydreams from reality.
Will you work? Studies show that the number of older Americans either holding jobs or looking for work has been rising for at least 15 years. Of course, some folks seek employment out of necessity: bills need to get paid. But for many people, work also provides needed social interaction and a sense of satisfaction. Consequently, some may decide to work at least part-time during retirement — whether or not they need the money. Another idea that's gaining popularity is called "serial employment." With this strategy, you spend part of your "retirement" years employed in a series of full-time jobs interspersed with periods of travel and leisure. Such a plan can generate a healthy supplemental income for you and benefits for talent-starved employers.
Have you saved enough? This, as they say, is the million-dollar question. But how much money you'll need to comfortably retire depends on many factors, including the status of your mortgage and other loans, your general health, expected rates of return on your investments, the size of your current nest egg, life expectancy, plans during retirement (including travel), pensions and other sources of income, the cost of health care and insurance, and myriad other considerations. One size doesn't fit all. So it's important to confer with a trusted advisor who'll help you take a hard look at the numbers — before you wave goodbye to your employer.
For guidance in your retirement planning, give us a call at (949) 453-1521 or email us at taxalert@maxwellcompany.com $