Are you a business owner looking for additional 2020 deductions? Have you heard about qualified plans / retirement plans, and don’t even bother to look into them because they’re too complex? We’re here to help. Our three-part series will focus on case studies, showing you how we’ve designed unique plans for three different business owners, depending on their goals and objectives.

Think one may be right for you? Give us a call, and we’ll check it out!…(read more)

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Retirement Plan Case Study: Floor-Offset Plan

As individuals near the end of their working career, one crucial aspect they must consider is their retirement plan. retirement planning requires a thorough analysis of various options available, taking into account the individual’s financial goals, risk tolerance, and personal circumstances. One retirement plan that has gained attention in recent years is the Floor-Offset Plan, which offers a unique alternative to traditional retirement plans.

The Floor-Offset Plan functions as a hybrid between a defined contribution plan, such as a 401(k), and a defined benefit plan, such as a pension. It provides retirees with a stable income floor, while also allowing for potential asset growth and inflation protection. Let’s delve deeper into a case study to understand how the Floor-Offset Plan works and its benefits.

Mr. Smith is a 55-year-old executive who has been diligently saving for retirement throughout his career. He wants a retirement plan that guarantees a minimum income during his retirement years, while also offering the opportunity for additional growth. After consulting with a financial advisor, he decides to explore the Floor-Offset Plan.

To begin, Mr. Smith calculates his desired income floor, which is the minimum amount he wants to receive annually during retirement, regardless of investment performance. Let’s say he determines his income floor to be $50,000 per year. This means that even if his investments do poorly, he will still receive that amount annually.

To achieve this income floor, Mr. Smith decides to allocate a portion of his retirement savings into a fixed annuity or similar investment vehicle that will generate a guaranteed income stream for life. Let’s assume he allocates $500,000 towards this annuity. The annuity will provide him with $50,000 per year for his remaining life, regardless of how the market performs.

For the remaining portion of his retirement savings, Mr. Smith decides to invest it in a diversified portfolio of stocks, bonds, and other assets, aiming for growth over the long term. This portion, also known as the “offset” portion, is subject to market fluctuations and can potentially provide additional income in the form of dividends, interest, and capital gains.

By combining the guaranteed income from the annuity with the growth potential of the offset portion, Mr. Smith creates a retirement plan that addresses his need for both stability and growth.

One advantage of the Floor-Offset Plan is its ability to provide retirees with a reliable income stream, regardless of market conditions. Even if the investments in the offset portion do poorly, the income floor remains intact. This assures Mr. Smith that he will always have a certain level of income to cover his basic living expenses.

Moreover, the Floor-Offset Plan also offers protection against inflation. As the annuity income is guaranteed for life, it is immune to inflationary pressures. Meanwhile, the offset portion has the potential to grow over time, allowing for increases in income to keep up with inflation.

Just like any retirement plan, the Floor-Offset Plan has some considerations. The annuity allocation may limit liquidity and access to the invested funds. Additionally, the offset portion is subject to market volatility and may experience fluctuations in value.

In conclusion, the Floor-Offset Plan provides retirees with a unique retirement strategy that combines both stability and growth. By structuring the retirement plan with a guaranteed income floor and an offset portion invested in a diversified portfolio, individuals can enjoy a reliable income stream while also having the potential for additional growth. As always, consulting with a financial advisor is recommended to evaluate the suitability of this plan based on individual circumstances.