Retirement Ready? Financially Prepare Diverse & Low-income Communities.

• Author: Wright, Leonard C.
• Position: Personal financial planning

growing Lip, I often visited my father's childhood home in South Bend, Indiana. When I was 5 years old, I would hear my grandparents discuss how much contempt they had for Studebaker because their friends lost their retirement pensions soon after the plant closed in December 1963, when the company terminated retirement plan for hourly workers.

The company's collapse was the catalyst for the Employee Retirement Income Security Act (ERISA), signed into law by President Gerald Ford. In 1981, 401(k) was added, and defined contributions plans were off and running.

As a 28-year-old CFO for one of America's top jewelry companies in 1988, the first act I implemented was a 401(k) plan. Back then, employees would question if 401 (k) plans were legal, and why the IRS would permit such a deduction. Hard to imagine today. Upon learning that I changed the life of an employee through the company's 401(k) plan and turning around a couple of other companies, I dedicated my life's work to many companies rather than just one.

Flash forward to today, and there's so much on the table for your clients and those who will share the opportunity will attract new clients.

At one plan provider, our office is the top implementer of cash balance plans in the country. Clients get excited when they understand the opportunity around what a cash balance plan is, and how they can create significant tax deductions and savings that are creditor protected.

The fact that cash balance plans help so many low-income, diverse and minority employees get on track for retirement with very little out-of-pocket costs from the owner of the business is also very exciting.

Here are five steps CPAs and financial planners can take to help the aforementioned demographic plan for a stable financial future.

1. DETERMINE IF A CASH BALANCE PLAN IS A POSSIBILITY FOR YOUR CLIENT

   Last summer, it became apparent that what was obvious to me was not in the least bit obvious to an entire industry. Instinctively, as CPAs, we're aware of what bottom-line costs are to a program or activity that our client may engage in. ERISA plans tend to be different. Many lend to focus on top-line cost rather than out-of-pocket.

   FIGURE 1 COLLABORATING FOR BETTER SOLUTIONS THAT FIT YOUR CULTURE[1] COMPENSATION $1.990.209 $1.990.209 $1.990.209 Owner Contributions [1] 534.952 628.360 650.500 Contributions to Employees 291.063 242.325 189.674 Safe Harbor Non Elective 59.706 59.706 59.706 Net Contribution 231.357 182.619 129.968 Increase Taxes at 50% marginal tax rate [2] 115.678 91.309 64.984 Net after taxes 115.679 91.310 64.984 Turnover assuming a 50% cost reduction 57.839 45.655 32.492 Total out of pocket[2] 57.840 45.655...