401(K) Comparison of 10 Important Considerations

 Qualified Plan Alternatives Cannot Compete with Premium Financed Retirement Saving Plans for Earning Power

 Premium Finance Design VS 401 (K)
1. Contributions Deductible for Employer. Employee Contribution Taxable to Employee. 1. Contributions Deductible for Employer. Tax Deferred for Employee.
2. Earnings Tax-Free. Average Plan Cost < 1% Plan only Participates in the Upside Potential of the Market. Plan Guaranteed Not to Lose Money from Market Loses. 2. Cost for Required Plan Updates and Plan Administration Fees. Brokerage Dealer and Investment Management Fees. Transactional Fees some of which are imbedded. All Reduce Investment Retirement Savings. Market Volatility Risks.
3. Distributions Tax-Free. (Resembles a Roth IRA) 3. Distributions Taxed as Ordinary Income. 37% Top Individual Rate.
4. Inherited Benefits Can Be Tax-Free to Family. (Not with Income During Life) 4. Inherited Benefits Subject to Double Tax Inherited Benefits Can Receive Step-Up Basis at Death if Included in Taxable Assets.
5. No ERISA unless Split-Dollar. (Limited to Written Plan Requirement) 5. Full ERISA Compliance. Penalties. Discrimination in Favor of Highly Compensated. Contribution Limited. Distribution Limits & Requirements. Annual Tax Return & Reporting Required. Written Plan Requirements Must Be Updated – Costs.
6. Participant Receives Up To 3 to 1 * Contribution Match on the Entire Amount. Funded By Financing. 6. Employee May Receive 1 to 1 Limited Contribution Match on Part of the Entire Amount. Funded By Employer to a Limit.
 
             *  Studies have disclosed that 74% of successful retirement accounts are due to starting out with more money and 26% are successful due to a rate of return earned from asset  management. For research results American Society of  Pension Professionals & Actuaries. CLICK ON LINK: ASPPA JOURNAL PDF
7. Excess Supplement for KEY EMPLOYEES EXCEEDS 401 (K) NOT LIMITED BY ANY CAP. 7. Contributions Limited By 401(K) Cap.
8. Limited Liquidity and Access Restrictions. (Bank Loan Must Be Repaid First) Better Suited for Long Term Retirement Saving Growth. Guarantee of No Loss from Market Down Swings. 8. Limited Liquidity as per IRS Statutes. Substantial Tax to Access Net Proceeds.
9. No Excess Earnings Limitations. No Payroll Deductions. No FICA Expenses. No Contribution or Benefit Limits. 9. Enforced IRS Penalties on Limitations. Age Requirements to access Funds.
10. Earnings from 3:1 Contribution Match, permit Tax-Free Distributions from Account Balance. Below see Bar Graph Comparison. 10. Earnings Fully Taxable. Tax Reduces the Amount Invested. Part of the Earnings From the Investment May Qualify For Long Term Capital Gains Rates. Max. 23.8%. The rest is Ordinary Income. Rate Up to 40.8% on the rest. (37% + 3.8% Net Investment Income Tax)

Compare Plan Two (Kai-Zen) Premium Finance to What You Could Afford Using Your Own Money

As you can see from the chart below, the addition of bank funding gives you new money at a 3:1 leveraged boost. This new money allows for the potential to significantly amplify the funds available to be used for client benefits, and for a supplemental enhanced retirement income.

A COMPARISON EXAMPLE:  SELF FUNDED VS. PLAN TWO PREMIUM FINANCE STRATEGY

* Kai-Zen is registered trademark of NIW Company.  Source NIW Company

                                                                    HOW DOES THE SAVINGS USING SIMPLE MATH FOR AN IRA COMPARE?                                                                    As an example, assume your regular IRA has $1 million in assets. Assume the effective tax rate is 40% as shown for the above 401(k) comparison, and you have an investment strategy that doubles your investment every 10 years. After a decade, the regular IRA doubles in value to $2 million. At a 40% tax rate times $2 million a tax of $800,000 goes to the IRS, leaving your IRA investment with $1.2 million after taxes.

To see how you can start out with more money and outperform an Employer Matching Contribution Plan, Roth, Cash Balance, Defined Benefit or a 401 (K),  read  “RETIRE BETTER THAN YOU LIVE TODAY” and “ARE YOU CURRENTLY SAVING ENOUGH?” section under WHY CHOOSE US.

​California Employers without a Qualified Retirement Savings Plan are now required to either enroll their workers in CalSavers or provide a Qualified Retirement Plan through the private market.

  1. More than 100 employees:  Sept. 30, 2020
  2. More than  50 employees:   June 30, 2021
  3. Five or more employees:     June 30, 2022
  • California Clients eligible for Kai-Zen are Business Owners who have Opted-Out of CalSavers or have less than 5 employees, and for Partnerships or other Business Entities with only Managing Partners.
  • Choose to Put the Minimum Amount into your Qualified Retirement Plans, and Plan your Retirement Without Deferred Tax Distributions. Choose to Benefit instead from Maximized Tax-Free Income Distributions offered by a Premium Finance Plan Option. The Tax-Free Kai-Zen Customized No Collateral Bank Insurance Premium Financing Strategy, is an EXCELLENT OPTION for an INDIVIDUAL CLIENT apart from CalSavers, or their current Qualified Plans, for either a Supplemental Enhanced Tax-Free Income, or as a Leveraged Savings Retirement Plan with Enhanced Tax-Free Income. COMPARE TO TAX-FREE NO COLLATERAL INCOME PLAN ONE.
  • OUT OF STATE BUSINESS OWNER CLIENTS typically use the Kai-Zen No Collateral Customized Bank Financing Strategy for a Primary “Life Insurance Retirement Savings Plan,” with up to an unlimited amount of Eligible Employees, or as an Individual Client, for either a Supplemental Enhanced Tax-Free Income, or as a Retirement Leveraged Savings Plan with an Enhanced Tax-Free Income.