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DeNoble Financial Services

Retirement plans for Business Owners and Executives

For many business owners and highly compensated employees, the qualified retirement plan, 401K for most, isn’t adequate to meet the retirement income desired. You max it out and you just don’t see how you can come close to retaining your income in retirement. I can assure you that there aren’t going to be any big changes to the rules for the retirement accounts, but there are options for you.


There are both additional qualified plans and non-qualified plans available to individuals and the business. The difference is in taxation.

Executive bonus plans are a qualified plan, as long as it follows IRS rules. The plan is paid for by the business and the deduction belongs to the business. The money used is a bonus to the employee or owner and is therefore included in their income. If a cash value insurance policy is used for this plan, the employee can take money from the cash value to pay the tax on the income paid through the bonus. The amount of each employee’s bonus and which employees receive the bonus is at the discretion of the business management.


Using a life insurance policy as the “investment” choice can have some significant benefits. Unknown to most people is how the cash value can grow. We can tweak policies to provide rapid growth of cash value giving the policy a large amount when retirement comes. The policy works like a pension in that it is funded to reach a certain benefit and doesn’t change. As long as the policy was written with a real life insurance benefit needed/desired, the income at retirement can be TAX FREE. Yes, you could set a policy up to provide thousands of dollars a month of tax free money. The business gets a tax deduction, you pay the tax on the bonus with cash value from the policy and then take income tax free in retirement. It is hard to believe the same government approves this plan, while limiting what you can do with a different plan.


Non-qualified plans are just what it says, not qualified as a retirement plan by the IRS. There are still rules that need to be followed, but they remove the means testing that traditional plans require. That said, they can be very good for retirement plans for high income people within the company. Again, life insurance policies offer pension like plans that are designed to provide a known income at retirement.


Why use life insurance for these plans?


  1.  Death benefit if the person were to die before retirement
  2.  Advanced Death Benefit can work to provide money in the event of disability from accident or illness. It can be used to provide income   in the event of critical or terminal illness. Tax free income as opposed to tax deferred income when the plans are properly designed.
  3. The policy can provide tax free income when the plan is structured properly
  4.  Qualified plan, Executive Benefit, is tax deductible to the business.
  5.  Provides a means of retaining key employees



Call us to find out more about how you can reach your retirement goals. For companies with only a few employees, there are other, and even better plans available.



DeNoble Financial Services                                    Covering the Houston metro area                                                                             281-638-4094