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Clients whose earnings fluctuate from year to year now can more effectively combine a DB with a 401(k) to achieve a higher total deduction and maintain maximum flexibility year-to-year. Your client age 52 retiring in 10 years with $220,000 of W-2 compensation could contribute as much as $164,700 annually to just a DB plan. He could choose to contribute less, perhaps $130,000 to the DB plus $33,200 to a 401(k). Your client can contribute to the:
- DB -- a "safe" amount that the client is confident can be funded each year. Setting a comfortable amount avoids the hassle of amending the plan in future years as a result of an income shortfall
- 401(k) "employee" contribution. Your client contributes up to an additional $15,000 of income (if under age 50) or up to $20,000 (if 50 or older).
- 401(k) "employer" contribution. Your client contributes an additional 6% of compensation
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