For a small-business owner, retirement planning can be a complex exercise, according to Robert Weiss, market manager for JP Morgan Private Bank in New Jersey.
"The business owner has to think about the asset they are relying mostly on to meet their retirement needs — and that is their business," Weiss said.
While salaried employees ponder a combination of retirement savings and Social Security to fund their old age, Weiss said the business owner is different.
"(They are) looking at either a full or partial liquidation or monetization of their business. That becomes part of their overall retirement plan," he said.
Weiss noted that tax rates have gone up in recent years: There's the new 3.8 percent surtax on unearned income (part of the Affordable Care Act), and he pointed out that in New Jersey, the highest income tax bracket for the wealthy is 8.97 percent.
Given the higher tax rates, Weiss finds giving is getting bigger.
"Philanthropic giving as part of an overall plan is something people have tended to focus on a little bit more," he said. "If they feel comfortable that their retirement needs are met, then optimizing their tax situation by considering philanthropic giving is turning out to be more of a conversation we are having with families in the high net worth space."
The key is to be constantly looking.
Weiss said using income tax and wealth transfer strategies works.
"It's not unusual to see the wealth of a family improve by 20, 30, even 40 percent over the long term," he said.
And the higher tax rates now faced by wealthy business owners is causing those that don't now offer a 401k plan to take another look.
"Something where they can put pretax dollars away is very powerful for people," Weiss said.
By creating a 401k plan and fully funding it, the business owner can defer income to the future when they retire and may be in a lower tax bracket or live in a state that does not tax distributions from a 401k or IRA.
In some cases, employers are motivated by their own retirement needs to create a 401k that will also help their employees.
"I am seeing more discussions around this," Weiss said. "I haven't seen a lot of people implementing them yet, but I have seen discussions.
Business owners are saying: 'This is something I should consider for the employees' — especially smaller business owners."
Weiss said the recovery of the stock market in recent years "has caused some people to say, 'Did I miss it? Is it too late?'"
At the same time, the market volatility so far in 2014 is creating anxiety.
"We try to help them realize that the fundamentals of the U.S. economy are still very strong, and longer term, things still look good if you put together the right plan with the right assumptions," he said.
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