Defined-Benefit Plans: Is The 10-Year Retirement Plan Achievable?

Jul 29, 2014 | by Franck Cushner, CFP®

Seeing an ad for the “10 year retirement plan” certainly raises some eyebrows.  After looking beyond the skepticism, it’s a legitimate saving strategy, but it’s certainly not for everybody.

This plan certainly has a niche market, but it’s a lot narrower than you think. It’s aimed at small business owners, but only businesses with a few owners, who are in their 50’s, and have already saved a small portion of retirement money. For those who couldn’t afford to save enough earlier, but can now afford to put aside a lot, this is certainly the right plan.

Here’s how it works:

The money put into this plan is used as a business expense, so it’s a big tax advantage for the business owners. Typically, around $100,000 is set aside each year, for the 10 year period. The minimum amount needed each year has to be met, and there needs to be some money allocated aside to cover additional payments, if needed, so that the policy doesn’t default. The smaller the business, the easier it is to manage these types of plans. The reason is that the benefits and minimum payment can be adjusted to fit any circumstance the funders are in.

For those who need a do-over on their retirement funding, are looking for tax-advantages, and have the spare cash, this is certainly an option for a quick retirement savings option.

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