Your Business Owner Clients Would Like to Retire One Day


Your clients won’t work forever and with the current unpredictability of the investment market, now is the time to be creative, yet conservative, in order to meet your clients’ retirement goals. Clients will expect you to be sensitive to their desire to accumulate money quickly, save income taxes, and grow their money using solid investments. That’s where a Split Funded Defined Benefit Plan comes into play.

  • Before we address specific funding of these designs, let’s discuss who are good prospects. Here’s a good example:
    A husband and wife in their early 60’s running a successful business, employing about a dozen staff, including their son and daughter in their 30’s. The clients/owners and their heirs have been maxing out the contributions on their 401(k)/profit sharing plan. Lately, the couple has been thinking about retiring within 5 years and passing the company on to the son and daughter. Finally, their CPA is concerned about the current business tax bill.
  • While the clients are eager to retire, they also realize that they have re-invested much of the company’s profits back into the business. Additionally, their savings have been depleted meeting their children’s higher education obligations. But the company is highly profitable and the clients are confident they can contribute about $600,000 per year, PRE-TAX, to contribute to a custom pension plan each year, for the next 5 years.
  • If the following three conditions could be addressed effectively, the clients feel that the company could be passed to the children and the clients would have sufficient income to retire.

1)The need to quickly accumulate retirement income
2)Contributions need to be income tax deductible to the business
3)The plan needs to include life insurance in order to protect the wealth transfer
The adviser presented a Split Funded Defined Benefit Combo Plan as follows (contributions are annual):
Total 401(k) for the clients: $48,000
Total Split Funded Defined Benefit for the clients: $550,000
Required contribution for the employees: $43,000
Total Tax Deductible Contribution: $641,000

  • In a 45% tax bracket, the $641,000 represented a tax savings of about $289,000/year with the clients realizing about 94% of the contribution.
  • The plan provided the husband and wife with approximately $1.5 million of whole life insurance. The two life insurance policies are assets inside the defined benefit plan with total target premiums of $260,000.
  • In addition to the life insurance, the adviser will receive at least $381,000 of new managed assets each year for the life of the plan.
    The above Split Funded design is a solid strategy for this client – assuring a solid retirement income as well as the continuation of the business they worked so hard to build and can now successfully pass on to their family. Does this scenario sound familiar; do you have clients that fit this profile?

Let the PensionQuote Team help you identify prospects for Split Funded Defined Benefit Plans. We will assist in identifying cases and provide the tools to help you close them.

About Us

We are pioneers in retirement planning, featuring tax-advantaged defined benefit pension plans as exit strategies for high net worth clients. We partner with top industry Advisers to bring their clients preferred solutions to achieve large income tax deductions.


Coral Gables, FL

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Phone: 1-800-717-4723

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