Since the advent of the “dual income with children” generation, employer-sponsored flexible benefit plans have become very popular with employees who appreciate the opportunity to choose options addressing their specific needs and budgets. Employees are able to select, within certain limitations, a variety of benefits without duplicating existing coverages and to tailor options to their cash flow constraints. With the Internal Revenue Act of 1978, employers are able to attract and retain employees with a cost-effective method called Section 125 cafeteria plans.

Because individual and family needs are so diverse today, as a business owner, it is imperative that all available options are reviewed with a qualified professional to determine, based on your census of eligible employees, which items you should include on your menu. Among the choices usually offered are:

1. Medical and dental insurance at various premium costs and coverages

2. Spending accounts for unreimbursed medical benefits and dependent care

3. Savings accounts

4. 401(k) retirement plans, including deferred profit sharing and stock bonus plans

The employee’s portion of the cost of benefits is typically made with pre-tax dollars in the form of a salary reduction. This type of arrangement additionally benefits employees by reducing their taxable income, because costs associated with cafeteria plans are not considered wages. However, you may decide to “bonus” the employee’s portion of the cost rather than use a salary reduction plan.

Employee’s Added Value

Employees often consider cafeteria plans a big plus because an employee covered under a spouse’s health plan with another employer will not need health insurance and may choose another benefit in its place. On the other hand, a single employee might not select the same options as an employee who is married with children. In addition, younger and older age groups have different goals and lifestyles.

Employer’s Added Value

Employers equally benefit from cafeteria plans because the reduction in payroll associated with such plans may also substantially reduce FICA (Federal Insurance Contributions Act) and FUTA (Federal Unemployment Tax Act) taxes. Taxation is avoided as long as plan participants make their selection of qualified benefits before any cash benefit can be received.

A Win-Win Situation

Some employees may lack a complete knowledge of insurance and retirement plans. Offering your employees a Section 125 cafeteria plan may provide you with an opportunity to help your employees become better educated to make wise selections, as well as communicate to them the dollar value you are providing with the plan. You might wish to consider acquiring the services of an employee benefit specialist to counsel your workers, discuss the options available, assist in the enrollment process, and continue to walk with you while the plan is in force at your business.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Small Biz owners should conduct an annual assessment of their personal finances. Owners of small businesses have much the same concerns as everyone else, except they are personally responsible for the fortunes of their enterprise. In a sense, a small business is like a family. And these are important families in American economic life. After all, small business is vital to the U.S. economy, employing half of private-sector workers and creating two-thirds of net new jobs, according to federal data.

Here are 10 tips to follow in weighing a small business owner’s financial plan:

Budget/Saving. The general financial planning rule is that you should save AT LEAST 10% of your income on an annual basis. You should also review short-term and long-term goals to ensure you are saving enough to meet your objectives. 

Maximize Contributions to Retirement Plans. Depending on the size of the company and number of employees, there are many different methods to save for retirement. On an annual basis, business owners should work with their advisors to determine the most appropriate savings vehicle. Retirement plans include: 401(k)s, individual 401(k)s, individual retirement accounts, Simplified Employee Pension (SEP) IRAs, Roth IRAs, defined benefit and defined contribution plans. This will not only help achieve the goal of saving 10% of your income, but it also can help minimize taxes.

Create/Review Estate Planning Documents. It is important to create wills, living wills, medical and financial power of attorney documents. These documents should be reviewed annually as your personal goals and estate laws change.

Life Insurance. Various types of life insurance are available, including whole life, variable life, universal life, universal variable life and term policies. They provide a death benefit when the owner of the policy passes away. It is important to review your policies yearly to ensure the coverage is adequate to protect your loved ones. Also, financial situations may change, and you may no longer need the full amount or type of coverage you own.

Disability Insurance. Statistically, you have a greater chance of premature disability than premature death. Therefore, it is very important to own adequate coverage to provide for you and your dependents if you are not able to work. Annually, you should review your policy for the type and amount of coverage. 

Business Insurance. As a business owner, it is important to own insurance that will allow your company to run if you are unable to actively participate in its daily operations. This insurance may be used to hire a person to substitute for you or to replace income from your business if the company no longer exists.

Long-Term Care Insurance. Due to the increasing costs of health care, long-term care insurance policies are evolving to deal with them. Many older policies have become more expensive to maintain or no longer provide enough coverage to meet long-term care expenses.  Each year, review the costs and necessity of these policies.

Education Planning: 529, Coverdell, Uniform Gift to Minors Act (UGMA), Uniform Transfer to Minors Act (UTMA) Plans. Much like health care costs, college education expenses have increased well beyond average inflation levels throughout the past decade.  Several college savings vehicles are available to provide tax advantages and an array of investment options for college saving. These savings plans require thorough annual review of performance and expense levels. 

Tax Planning. Annually, you should meet with your accountant to discuss tax-planning strategies. Tax laws frequently change. In addition, there may be changes to your business that could affect your taxes both at the business and individual level.

Investment Allocation. Review your entire investment portfolio to ensure it is allocated to meet your current and future goals. As your goals and needs change, your portfolio allocation should be readjusted accordingly.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Sometimes it’s hard to tell if you need professional help for a problem or if you can handle it yourself. Whether it’s taking care of a common cold, fixing the sink, changing the oil in your car or doing your own taxes. The same question often arises about finances.

It happens all the time - financial questions pop up that you consider silly or stupid so you feel like you must handle alone and you don’t seek help. This is not the best course. As happens often in life, not reaching out to a professional can delay you reaching your goals and cause you to incur more out-of-pocket expenses and lots of headaches.

Here is the thing: there are no stupid questions when it comes to your finances. Don’t ever sit on the sidelines and fear asking a question or think you’re unqualified to go to a planner. Solid and respectable planners let you know if they can’t help you and refer a professional who can. They also let you know if they think you can plan your finances yourself.

Here are signs you may need a financial planner:

You recently married

To merge or not to merge finances is a huge question: emotions to contend with, forms to update, cash flow to track, debts to pay down, goals to lay out and spending habits and needs to reorganize and prioritize.

Communication during this transition helps you navigate possible questions about taxes, investment allocation updates, selecting benefits, joint roles in management of the household, deciding whether to maintain separate bank accounts and more.

You own a business

Whether considering starting your own business or a long-term entrepreneur, you likely need to know how to prioritize goals, pay yourself while keeping the operation running and the best way to manage cash flow on an income that fluctuates monthly.

Not to mention saving for retirement, obtaining health insurance and protecting you and your family against a loss in income from death or disability.

You want to make a big purchase

Simple budgeting often enables you to handle large purchases. If you look to buy a first home or make another sizeable investment, understanding the overall effect on your cash flow, lifestyle and future goals looms large.

How much home can you afford? What’s your budget for home maintenance? What other goals go on the back burner? What about your future savings?

You make a career change

Job or career transitions also bring changes in income and benefits. Make sure you maximize your company benefits, leave no retirement accounts behind and ignored, plan appropriately for income fluctuations, take into account future job growth or career prospects and consider the transition’s overall influence on your lifestyle.

Your family’s growing

A baby comes with a slew of considerations: ensuring you have an emergency fund of three to six months’ expenses adjusting your spending for child care, groceries and medical costs and updating your estate plan and insurance coverage in case something happens to you, among many other needed updates.

At the End of the Day

The first step in asking for help always seems the hardest. The assistance and feedback may surprise you when you open up to the idea that you need not handle all financial questions solo.

And it makes the experience much more enjoyable.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.