What tax rate are you going to assume on distributions?
-20%
How much are you going to pay to open, close, and maintain including any possible AUM fees?
-2,000 to open , 2,500 to maintain and 2,500 to close and also I have 5 eligible employees and because it will be 401/CB combo I will be required to contribute 2.5% of their salary on top of administrative expenses.
What would your CB plan invest in and how tax efficient is that asset class?
20/80 with 10 year Treasury crediting rate.
Tax deferral is only worth so much.
I have a DB plan and I personally think people should load up the deductions this year (which should/could result in lower deductions/contributions in future years).
The larger question with a Trump plan is if the proposed business tax cut from 35% to 15% applies just to C Corps or to all pass-through entities. Private physician groups may have an opportunity to change their structure and save some serious $.
As far as cash balance plans, for me it makes just as much sense at 39.6% marginal rate, as it does at 33% unless the AUM is crazy high or the investment return target is crazy low. Most of us should still be planning to roll over these funds lump sum to IRA and eventually withdraw or Roth convert them at an effective tax rate below 25%, maybe much lower.
I hope Trump returns to his original tax plan with income brackets in the 5-10-15% range and then “bargains” his way back to a 10-15-20% level. I hate the idea of the 33% bracket starting at a much lower income level. Could hurt docs in the 250-400K income range which is many of us. Will definitely inhibit future Roth conversions and tax gain harvesting. Will still discourage many from working more. Will be difficult for a 33% top personal income rate to co-exist with a 15% business tax rate without much opportunity to abuse the system.
| Current (married filing jointly) | Proposed (married filing jointly) | ||
|---|---|---|---|
| Taxable income | Tax bracket | Taxable income | Tax bracket |
| $0 to $18,550 | 10 percent | $0 to $75,000 | 12 percent |
| $18,550 to $75,300 | 15 percent | $75,001 to $224,999 | 25 percent |
| $75,300 to $151,900 | 25 percent | $225,000 or more | 33 percent |
| $151,900 to $231,450 | 28 percent | ||
| $231,450 to $413,350 | 33 percent | ||
| $413,350 to $466,950 | 35 percent | ||
| $466,950 or more | 39.6 per | ||
The larger question with a Trump plan is if the proposed business tax cut from 35% to 15% applies just to C Corps or to all pass-through entities. Private physician groups may have an opportunity to change their structure and save some serious $.
As far as cash balance plans, for me it makes just as much sense at 39.6% marginal rate, as it does at 33% unless the AUM is crazy high or the investment return target is crazy low. Most of us should still be planning to roll over these funds lump sum to IRA and eventually withdraw or Roth convert them at an effective tax rate below 25%, maybe much lower.
I hope Trump returns to his original tax plan with income brackets in the 5-10-15% range and then “bargains” his way back to a 10-15-20% level. I hate the idea of the 33% bracket starting at a much lower income level. Could hurt docs in the 250-400K income range which is many of us. Will definitely inhibit future Roth conversions and tax gain harvesting. Will still discourage many from working more. Will be difficult for a 33% top personal income rate to co-exist with a 15% business tax rate without much opportunity to abuse the system.
Trump tax brackets:
http://www.cbsnews.com/news/how-your-taxes-may-change-in-a-trump-presidency/
Current (married filing jointly)
Proposed (married filing jointly)
Taxable income
Tax bracket
Taxable income
Tax bracket
$0 to $18,550
10 percent
$0 to $75,000
12 percent
$18,550 to $75,300
15 percent
$75,001 to $224,999
25 percent
$75,300 to $151,900
25 percent
$225,000 or more
33 percent
$151,900 to $231,450
28 percent
$231,450 to $413,350
33 percent
$413,350 to $466,950
35 percent
$466,950 or more
39.6 per
I wouldn’t make any changes until something is actually made law. Obama has proposed lots of things that never came to pass as has every president before him.
Chances are good a DB/CB plan will still make sense for you later if it makes sense now, but obviously the lower the tax rate, the less benefit you get from tax protection.
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