On this week’s episode of Your Questions, Answered Patricia Kummer and Brian Leitner discuss tools to help small businesses with savings, and answer the following question:

“What makes wealth planning for small business owners unique?”

Do you have questions you’d like answered? Email them to [email protected], and we’ll provide answers.

Transcript:

Brian Leitner: You have questions? We have answers. Back with another quick clip. The question of the day is, I know you work with a lot of small-business owners. What makes planning for small-business owners a bit unique as it relates to maybe other folks that you might work with? 

Pat Kummer: Sure. Well, as you know, I live and work in the great state of Colorado. So, we have a lot of folks who move here first because they want to live here and then worry about how they’re going to make a living after they get here. So that lends itself more to entrepreneurs and small-business owners than maybe some other states. And we find this is a special group of people, but they do have a lot of unique challenges that they’re faced with. 

Brian: So, what are some of those challenges for those business owners? 

Pat: Well, first of all, business owners, consultants, self-employed folks alike, they often are faced with unpredictable or erratic income throughout the year. And it makes it difficult to plan for the future or even to put away systematically for goals. I mean, you know, there are many tools available through Mariner for small-business owners that we first have to recognize what these challenges are. 

Brian: So, what are some of the tools that Mariner offers? 

Pat: Well, there are two mains that I use all the time to give good results for our business owners and they’re interrelated. First is tax and tax planning. So, understanding self-employment tax and planning all year for your taxes so that there are no big surprises. Also, retirement planning in particular, the solo 401(k) plan. 

Brian: So that makes sense. Tell me a little bit about the solo 401(k) plan, what that looks like and how that helps small-business owners. 

Pat: I think a lot of small-business owners and consultants don’t even realize that they may be eligible for a solo 401(k) plan for their, for themselves and for their family members who are also employees, without all the legal overhead and costs of a traditional 401(k) plan.  

So, these are great because, in 2020, a self-employed person, depending on income, can put away up to $57,000 a year. And if they’re over 50, another $6,500 in a catch-up provision. So, this is where one of the benefits of being both the employee and the employer can lead to extra contributions and of course tax saving benefits.  

Brian: It’s an incredible way to sock away a great deal of money for some of these small-business owners. Any other provisions that we should be aware of as it relates to the solo 401(k)? 

Pat: Well, new in 2020, thanks to the SECURE Act. you can now open up and fund a solo 401(k) plan after the end of the year. So again, back to that erratic income, if all of your income comes in December, for example, it was very hard for people to put away a whole year’s worth of retirement contributions. But now they have up until their tax filing deadline in order to open and contribute to a 401(k) plan. 

Brian: So, if you didn’t get it done, you have a little bit more time for these business owners that are really busy working on their business. Right. 

Pat: Right. And you can also choose whether you want it to be a Roth contribution or a pre-tax contribution. So, this is where partnering with your advisor for some advanced planning every year, because it could change from year to year, is very important.  

Brian: Yeah. And it also shows you how integrated the retirement plan, investment plan and the tax plan actually are. Pat, that’s terrific. Thank you very much for being here. Really appreciate your time today. 

Pat: Thank you, Brian. 

Brian: And if you or anyone else has questions, they’d like answers to please feel free to email us at [email protected]. Thanks for watching.