Three Mistakes to Avoid in 2011

As you begin to implement your marketing plans for 2011, we want to share a few tips that we gathered from talking with so many advisors and potential clients about retirement plans in 4th Quarter 2010. Advisors come to us with high income clients looking for a strategy to help manage their tax liabilities. When we can help them establish Defined Benefit (DB) plans for their clients — or for themselves — everyone is delighted. But we ran into a number of issues that can get in the way.

Here are three common issues we came across:

1. SEP IRA contributions might make it impossible to open a DB. Hold off funding SEP accounts.

   If your client has high income and is a prospect for a defined benefit plan, hold off on funding a SEP for 2011. Most SEP plan documents do not allow any other retirement plan to be funded in the same year. Clients who had funded SEPs earlier in the year missed out on significant tax savings in 2010.
   
   Use our DB calculator or call our defined benefit specialists to determine quickly whether your client might be able to benefit from opening a DB plan this year.




2. Do not fully fund 401(k)s.

   Again, if the client wants maximum contributions and deductions, call us early in the year and set up the DB plan first. They may also fund the $16,500 salary deferral (plus $5500 catch up if over age 50) in the 401(k) but only up to 6% for the employer contribution.
   
   Opening a DB and 401(k) together potentially allows the largest retirement contribution and provides extra flexibility when your high income client wants to increase or decrease contribution in future years.




3. Low W-2 means smaller defined benefit contributions.

   Many small business owners who are corporations keep their W-2 compensation low to minimize payroll tax and take higher dividend distributions. In calculating DB contributions for corporations, only W-2 compensation is taken into account. In 2011, the reduction in payroll taxes may make it more advantageous for clients to increase their W-2 income and make higher deductible DB contributions. Please call 1-866-269-2706 for questions about defined benefit plans for your high income clients or about opening a plan for yourself in 2011.

2010 Defined Benefit Sales Results

We had a busy 4th quarter with sales up 23% over 2009. The improving economy meant more high income clients had the cash flow and confidence to take advantage of the tax savings a defined benefit plan provides.

It also made it possible for business owners in a wider range of occupations to open DB plans. Physicians slipped to second place occupation behind Consultants who represented 22% of sales. As more baby boomer executives retire and become consultants for five to ten years, they are great DB candidates. More financial advisors adopted plans for themselves — rising from 10% to 13% and "Sales" as an occupation climbed from 8.6% in 2009 to 10% in 2010. Most striking however, are business owners in diverse fields such as, farming, political analysis, education and child care services that had sufficient compensation to open defined benefit plans.

The message: income and age are stronger drivers than occupation in finding great prospects for DB plans.

2010 Top Defined Benefit Occupations:

Please click to see a list of top occupations for defined benefit plans in 2010.

Looking Ahead to 2011

We'll be sending you updated DB marketing materials this quarter to help you identify additional prospects who might benefit from these plans. Meanwhile, check out our website at www.OnePersonPlus.com and our Sales page to find tools you can use right now.

To run a 2011 proposal, please complete the Proposal Request Form — we'll turn it around for you within 24 hours.

Together we'll meet your clients' needs — and exceed their expectations.

We will do everything we can to help you bring in DB sales in 2011. Contact our defined benefit specialists. We can create custom proposals and design plans to fit your client's situation. Call us toll free at: 1-866-269-2706 or email us at dbplans@dedicated-db.com.

Visit www.onepersonplus.com