|Now, that is what 412 i is
basically all about.
|But, it even gets better.
|We saw earlier that
traditional retirement vehicles dramatically limit the amount of annual
contributions you’re able to make each year. It doesn’t take a math wizard to
figure out that if a participant is getting a late start on his retirement
savings, he’s just not going to be able to get the job done making maximum
contributions of just $12,000 each year. Instead, the participant needs a
vehicle that will allow him to put away as much money as possible each year.
So, how much of a tax-deductible contribution can a participant make into a
412(i) each year?
|Well, a prototype 412 i plan
can provide a significant contribution and correlative deduction. However, as we will see in a minute, the
regular, vanilla, prototype plan is good, but limited in terms of benefits
and flexibility. A prototype plan is
really a form document the is minimally customized to suit the client’s
needs. The nature of this plan –
initially low out of pocket costs, is really deceptive. The irony is that it frequently is much
more expensive in the long run to create and maintain – as we will see soon.
|There are ways of designing
a 412 i plan so that a taxpayers benefits are maximized to the fullest extent
possible – much more than a prototype.
Indeed, by as much as $300,000 for each of the business owners alone! Of course, the plan participant can put
away much less, if that suits his needs better. But if the plan participant is getting a late start and needs
to build retirement wealth quickly, the 412(i) offers an unprecedented
opportunity to do so.