Investment Updates
412(i) Plan Is Complex But A Boon In Some Situations
Published Monday, July 7, 2008 at: 7:00 AM EDT
If you own a small business or professional practice with five or fewer employees and have already maxed out your defined contribution plan, you may want to consider a little-known type of defined benefit plan known as a 412(i) plan.
The 412(i) is designed for small-business owners and professionals who need to move large amounts of money into a pension plan. It’s a type of defined-benefit retirement plan but differs from traditional defined-benefit plans because it must be funded entirely through annuities or other insurance products that have a minimum rate of return that is guaranteed by the full faith and credit of an insurance company. Since that insurer-backed rate of return is normally lower than the rate used to calculate contributions to traditional defined-benefit plans, you can contribute far more to a 412(i) than to a traditional defined-benefit plan.
The 412(i) is a good vehicle to consider if you’re in your 50s or 60s and have been unable to save enough for retirement until now. If you’ve been pouring money into college tuition, home renovations, and a vacation home and have neglected to save enough for retirement, this is a "catch-up" vehicle. As a business owner, you can put away a maximum of $54,000 in 2017 in a 401(k) plan—plus another $6,000 a year if you’re age 50 or older. The 412(i) plan let’s you sock away far more.
© 2024 Advisor Products Inc. All Rights Reserved.
More articles
- Ever Think About Investing In A Vineyard?
- Is The 4% Solution Right For Your Retirement Plan?
- Succession Planning For Solo Businesses
- Understanding The Myths Surrounding Your Estate
- Leave A Legacy To Future Generations-On Video
- How Can Wealthy Parents Avoid Spoiling Their Kids?
- Preparing For A Takeover Of Your Family Business
- Stocks Closed At A Record High
- Federal Reserve Projects Strong Growth
- The Best People Were Wrong
- This Week’s Investment News In Six Charts
- U.S. Investor Picture Of The Week
- The Conference Board Backs Off Its Recession Forecast
- Softening Economic Data, Inflation Fears Dampen Stock Rally
- S&P 500 Closes Above 5000 For The First Time Ever