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In this week’s episode of the Practical Tax Podcast, Steve Moskowitz sits down to discuss Pension Planning with Stephen Dobrow; the President of Primark Benefits. Steve Moskowitz and Stephen Dobrow have served clients of Moskowitz LLP for many years, as part of the Moskowitz tax planning and business services practices. Today, we will discuss why would a business owner, decision maker want to consider retirement plan, changes in law or procedures this year, key deadlines and some common questions.
Listen to the full episode to learn more!
Episode Transcript
Intro:
You’re listening to the Practical Tax podcast with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz LLP, a tax law firm.
Liz Prehn
Hello, welcome to Practical Tax. Today, we are discussing retirement plans with Steven Moskowitz and Stephen Dobrow. Stephen Dobrow is the President of Primark Benefits. A firm that provides pension consulting, plan administration, actuarial services and record keeping. As a retirement plan expert, Stephen regularly meets with Congress, the Treasury Department, the Department of Labor to advise and serve private retire systems. Steve Moskowitz and Stephen Dobrow have served clients of Moskowitz LLP for many years, as part of the Moskowitz tax planning and business services practices. Today, we will discuss why would a business owner, decision maker want to consider retirement plan, changes in law or procedures this year, key deadlines and some common questions.
Steve Moskowitz:
Welcome to all. Thank you for joining us. And Stephen, we’ve worked together so many years and here is a common question I hear all the time. You know what? I’m paying too much in taxes, I know there’s some secret. I see all these big companies making way more than I do and not paying taxes. What’s the secret? And the first thing I start off with is the big four in pensions. And the big fo- I’m gonna ask you to talk about the details in all of them. And the big four are saving taxes, not having to pay taxes on the income until you take it out of the plan. Cash flow, where unlike everything else, almost everything else we have to write the check by December 31st of year two. Here, there’s a way to write the check in year two and still deduct it from year one. And asset protection, where if something bad happens to you, like you get sued, the plaintiff can’t take away your pension. Although I hate to mention his name, the perfect example for this is OJ Simpson. So let’s begin and Stephen, tell us about the pensions and all about the big four.
Stephen Dobrow:
Well, thank you. Primark Benefits has been doing retirement plans for now, 50 years here in the Bay Area, San Francisco Bay Area. And we have 34 employees, about 700 clients at any given time. What we do is take the retirement tax dollars you would normally send to the government and find a way to put it in the retirement plan just like what Steve was saying.
You’ve heard of a 401k plan, you’ve heard of an IRA. Those are actually just two of 24 different types of retirement plans that a planned sponsor and employer can put in. And so the really secret is, and part of the answer to this question is, well, there’s lots of choices and there’s lots of ways that we can help and why would people want to get our help? Well, first of all, this is a lot about recruitment and retention. It’s an employee benefit, you wanna take good care of your employees and you wanna be able to keep them, you wanna be able to get them. And Steve, you’ll remember that just recently, I caterer came to us and he said, “You know, I’m having trouble attracting people to work at my catering business. And I really wanna have something that gets them to here, you know?” The catering business never offers benefits. If I offered benefits, that would be an attractive feature. And so we talked to him and he decided to set up a program where if people put in their money, they got a matching contribution and that matching contribution would be made after the end of the year. So they had to stay working for the catering company all year. And then it was on something called investing schedule. So they’d have to work multiple years to eventually take all the money off to their IRA or to spend in retirement.
And so that’s an example of someone was using a retirement plan to attract employees and then to keep ’em once they got there. Another big reason is, let’s say you’re mandated, you know? There’s this thing called CalSavers in California, where by June 30th, if you don’t have some sort of retirement plan for your company with five employees or more, you’re gonna have to have the plan, the state of California wants you to have. So we have many things that are better than what the state can offer. The other thing is that, you know, employees are better when they are able to build their nest eggs. They have a different view of life eventually, and they’re happy with their employers, but some of those employees are the business owners and are the owners and managers, and we’re able to put together retirement plans that cover all of the employees and help all of them have a nest egg and help employers have enough, now that they’ve put all their blood, sweat and tears in the business, finally get around to putting in a retirement plan so that they can have a nest egg. So those are some of the reasons why a plan sponsor will come to us.
Steve Moskowitz:
And, you know, Stephen is so modest because some of our current and past pension laws are partially based on his testimony to Congress. And he is so familiar with this and does so much for our clients. And Stephen talks about the fancy things. I’m just a simple guy. And when I talk to clients, I give ’em a tough question to answer. And I say, “Do you wanna pay more taxes or less taxes?” And if they want to pay less taxes, we do the pension. If they wanna pay more taxes, we worry about their mental health. And what happens is we say, “Okay, look, you basically have a choice, you have a check to write. Do you wanna write that check to the IRS and your state, if you’re in a state that taxes, or do you wanna write it to yourself?” That’s the first thing. The second thing is Stephen, tell us about what happens when we have earnings? ‘Cause normally if we have earnings, we get taxed on and if you’re in a top tax bracket, basically you’re giving away half of your earnings to the government. What happens if we have earn- well, what happens to the earnings that we have in our pension plan?
Stephen Dobrow:
Well, you know, we have waves of setting up pension plans and retirement plans, IRAs and profit sharing plans, and other kinds of things where the money that is in there grows without any taxes being taken out. Now, if a plan sponsor, if a employer or a gig worker wants to set up one of these programs, they get a tax break for everything they put away. So it’s as if they never earned it or it’s like if they get deductions for car allowances or rent and those kinds of things, pension expense is just another thing that’s on the expense line that they will never have to pay taxes on. But the money goes into a trust and or an IRA and it grows and grows, and grows without any taxes being taken out. Some other people decide that they wanna pay the taxes up front because if you do that, it’s called Roth. You put the money into a plan, it can grow tax-free and forever, you’ll never get taxed on it. But even in the pre-tax environment, you’re gonna be able to defer those taxes for a long period of time and probably never pay the taxes on them even once you get to the estate kind of thing later on.
Steve Moskowitz:
Now, Stephen, most people know that with most things in tax planning, you have to write the check by December 31st year one to deduct it from year one, but with pensions and I use the term, and Stephen’s very generous, but I use the term pensions and retirement accounts interchangeably. There are really some differences, but we’re just gonna continue doing that for the purposes of our discussion here. But the bottom line is, let’s assume somebody is watching this in year two and they say, “Oh no! I could have saved so much money if I only had one of those pension plan. I sure wish I did that last year.” How late in year two, can somebody open this and then fund it and still deduct it from year one?
Stephen Dobrow:
Okay, so like most of the retirement plans out there now, you’re able to establish them now and make them be retroactive to the first of last year. So you have until the time you file your tax return, including extensions in order to fund the plan. So here we are before April 15th, people are gonna start to file and some people in April 15th will make their IRA contributions, other people will go on extension. Some companies, small employers they’ll wait until September before they figure out what kind of profit they had and come to you, and get the taxes done and say, “Okay, well here’s the amount of taxes I have if I don’t put in a contribution and here’s how much lower it is, if I take some of those dollars and put them into a retirement plan.” So there’s lots of room for flexibility, including the extensions.
Steve Moskowitz:
And Stephen, tell us about what happens with the safety of the plans, the protections under ERISA? Somebody gets an automobile accident, or you have a medical doctor that gets sued from malpractice, or somebody gets sued because somebody says you looked at me the wrong way. Tell us about the protections that we have on these plans.
Stephen Dobrow:
Well, the Congress is very much interested in making sure you have a nest egg and that nest egg is there for you when you retire. So they’ve passed very strict laws that say when it is that people can get at this money. First of all, when a money goes into an account and a regular retirement plan, it’s protected from fraud and dishonesty. And in fact, your employer, if you are in a 401k plan, has to literally buy an insurance policy in case somebody takes off to some foreign country with all the money. Not that that could happen, but in case it does, the plan is required to be insured. In addition to that, they require some oversight. People have to report to the government that the plan exists. It’s set up in a separate tax ID number and with a separate trust document. It’s totally separate from the company, from the employer and from you as the employees. So that way, if the employer does go broke, or if you are sued or that kind of thing, the money’s not with your normal assets is in a special category called a Retirement Trust. And that is protected against fraud, is protected against bankruptcy. Even the IRS, if you have tax bill cannot go in and steal your retirement. So that’s there for you to spend.
Steve Moskowitz:
And Stephen, here’s something that comes up, that I bet an awful lot of our listeners don’t know, suppose you have somebody that says, “You know, I’ve worked long and hard for the company and now I’m gonna retire and go off to Pago Pago, and I think I’ll just go ahead and take my pension plan from the company and roll it over into an IRA.” What’s the difference in protections in doing that? Tell us what they give up?
Stephen Dobrow:
Well, it depends on which state you’re in because once you get an IRA, you’re in state law territory. And the first, so much like California million dollars is definitely still gonna be protected. And then depending on whether you’re in federal bankruptcy or that kind of thing, as long as it’s in the risk of qualified plan, in other words, your employers plan or the one with employees in it, then it’s protected forever. But moving into an IRA, you might have a step down in the amount of asset protection you have, but it’s still very good and very hard for those litigating attorneys to get at that money.
Steve Moskowitz:
And Stephen, to get the Nth degree in protection, suppose you had this situation, somebody says, “Well, you know what? They can’t leave it in the employer plan.” And they’re worried that their state doesn’t give ’em as much protection as the Feds under ERISA. How could they go ahead and get an ERISA plan again?
Stephen Dobrow:
Well, a lot of people are gig workers and if you own a company or your spouse owns a company in California, you can establish a retirement plan. And you can reinstate that plan and make sure that you now have a place where there’s money can go into, set up the retirement trust, just like your first employer did. And we have lots of people who take in retirement. They get into a business of managing properties that they own, and that can be a basis. We can set up Moskowitz office sets at the entities to be able to do that. So that employer can sponsor retirement plan and the money can be rolled over and it’s still protected, it’s got that great asset protection forever.
Steve Moskowitz:
And Stephen, what about this situation? Most people say, “Oh yeah, pensions, you have to own a company to set the pension up.” What if you had a situation where you had somebody that was a wage earner or retired, but they’re also an investor. Be the investor in real property, stocks, bonds, what could you do for them?
Stephen Dobrow:
Well, there’s a concept that exists called earned income. And investment income is something they call passive income. And in other words, you don’t have to do very much to sit back and collect dividend checks from a bond or a stock, or something like that. However, if you are actually managing some properties, you’re going out and supervising the people remodeling and collecting the rents, going door to door, and forwarding the contracts and everything. That’s actually sweater the brow kind of work for which we can classify some of the money as earned income. And I know at Moskowitz, they’ve taken quite a few of these people who were property managers and we classified the kind of income from passive to active. So that once it’s active, you can shelter a portion of it into retirement plan.
Steve Moskowitz:
Now, Stephen, we’re all business people and everybody’s looking for the best deal they possibly we can have. And we all see lots of advertisements for big pension companies and supposed to say, “Hey, Stephen, what’s the difference between my just walking over into my bank and setting up a plan there?” Why should I go to you?
Stephen Dobrow:
Well, this I’m so glad you asked this because what’s happening there in the marketplace is that people are really trying to tone it down to just one basic thing, the 401k plan. And you know, there’s an adage I have. If you have a toolbox and the only tool in your toolbox is a hammer, then every problem will look like a nail. Well, if you call a bank or brokerage company, or other people out there right now today, Oh, you want retirement? Then you must want a 401k plan. Now that’s just one of 24 different choices you’d have. And it’s probably not right for everybody, and every plan sponsor needs a tailored plan. They need to fit them in their circumstances that their income, their employee base, what their goals are. You mentioned the person’s gonna run off to Pago Pago or wherever to retire. Well, maybe they can use the retirement plan to be part of the sale of that company and take all that money and put it away for retirement tax-free. The buyers can use tax-free money sometimes to buy you out. And then you don’t pay taxes until you spend it in retirement. So part of that transition plan can be other kinds of plans that aren’t 401k plans. But the thing is that if you are in that business, and you’re just trying to accumulate the assets, you don’t have people like we have at Primark Benefits. You don’t have people with great amount of expertise and professional designations. All our people are trained in a lot of things. And in order to provide good service and be a pension administrator, you gotta be one part of risk council, one part labor lawyer, one part accountant, one part bookkeeper, one part payroll expert, one part HR expert, one part internet expert. And you also need to know something about retirement planning.
Well, none of these organizations are gonna train their people in all those things that would be too expensive. And in fact, they’re gonna make robots. And so they have robots running things, and you can’t ask a question off a robot. And the other thing is that things break once in a while, in life things break and it requires humans to fix them. So if you’re going to some big company who has an 800 number, or by the way, I call them 800 numbers to nowhere, you dial it and press one to be ignored, press two to be ignored longer, press three to be ignored forever. And we’re not like that. We’re people that are gonna answer the phone and dig in and find out what your question is, and give you the right answer the first time because we’re trained in all those areas, because we’re passionate about having everybody in the whole organization be able to save. We’re able to bring a higher level expertise, give you something that’s flexible and designed for you, and maybe includes things other than just a 401k plan and allows you to have the tax break you need, and the nest egg for the owners, nest egg for the employees. And everybody gets much better experience. The plan runs more smoothly and is probably less cost overall in the long run.
Steve Moskowitz:
Stephen, speaking of cost, what’s the deal with that credit where the government will actually pick up some of your fee?
Stephen Dobrow:
Well, yeah, actually, you know, because I’m in Washington, maybe I’m a little happy about this, but right now, if you don’t have a retirement plan and let’s say CalSavers is in the back of your mind and you have to get it register or create something by June 30th, you might wanna establish your retirement plan. And if you do, and you come to a firm like mine, you will end up with a tax break that’s half of my fees up to $5,000 for the first three years. In addition to that, if you add a feature called Automatic Enrollment, you get another $500 from the government. So Congress is so worried and so enthused that the retirement system exists, that they’re doing everything they can to make sure everybody starts to build that nest egg so that they don’t have to take care of you when you get old and gray.
Steve Moskowitz:
You know, Stephen, another thing that comes up with clients all the time when I talk to ’em about a pension pla- I already have a pension plan. And you know what? I already put in the maximum. Tell us about a cash balance plan and how much people can put away especially when they’re a little bit older?
Stephen Dobrow:
Well, okay. So I did say that there’s 24 different types of retirement plans. And retirement plans are America’s savings program. That’s where all the money exists. I know we think that everybody has, you know, your neighbor has this great big insurance policy and somebody else has a whole bunch of money stuck under their mattress or a big bank account. Statistically, the only thing is in the retirement plan, but every different type of retirement plan has a different limit. You can only put $6,000 in an IRA. You can only put 20,500 in a 401k plan, but there’s other kinds of pension plans where limits are really much, much higher. Steve and I worked on a case that’s husband and wife, realtor in San Francisco, who sold a million dollars worth of real estate last year. And they came to us and they said, “Oh my God, we’re gonna get killed with taxes.” And we said, “Well, why don’t you set up this kind of pension plan? And your first year contribution will be $601,000, but it’s flexible, you don’t have to do that next year.” And so it can really change your tax picture if you group together the right tools and put them all together, and have them be tailored for you. And that’s not something that you’re generally gonna get from your bank or read over the internet.
Steve Moskowitz:
Speaking about flexibility. One of the things that I really enjoy that you do is a situation we’re showing just how flexible these plans are. For example, suppose you’re an aviation attorney. And basically, they sit around waiting for a plane to crash and then have a Boku settlement, and they can go years without making any money. But one year, they have a tremendous amount of income and they say, “You know what? Steve, I don’t wanna pay a tremendous amount of taxes. What can you do about that?” Tell us how you can do the multiyear plans in the one county year and offset this Boku income. How’s that work?
Stephen Dobrow:
Yeah, so you can start to establish a retirement plan and many businesses are not steady Eddie. Many of them are , or in the case of, we have actually airplane crash attorneys and other litigators. And they might invest in a case this year and have no income. Investment case in the same case next year have no income. The third year they have millions of dollars in income. So their salary and their compensation is zero, zero millions, zero, zero millions, while the same has to happen with their retirement plan too. And these plans are flexible and you’re able to tweak them and push them in the direction you wanna go. One of the things you might want to do is, if you’re establishing a plan for this year, you get to make it retroactive the first of last year. So that period of contribution is due as well as this year’s period of contribution. And you can make all those contributions right here in this year, assuming you have the cash and it can lead to higher deductions.
Steve Moskowitz:
Now Stephen, when you’re talking about making contributions, a lot of business owners employ their spouses and their kids. How does that work for pensions?
Stephen Dobrow:
Well, you know, it is an employee benefit. Spouses and kids are in a special category in the government, but if you want them to be in a retirement plan, you have to give them earned income, you have to give them a salary or make them owners. And so sometimes spouses do convert with you to a partnership or create something called an S corporation, or just arrange their affairs so that the family members are on payroll. Now, the government is okay with that because they end up getting social security taxes. They otherwise wouldn’t get, so there’s not a really big problem with doing that as long as they’re working in the business. Don’t try and say, “Well, my two-year old is coming in and sweeping and emptying the trash,” that wouldn’t work, but if you really do have a spouse that’s consulting to you about what to do with your business and your kids are really, you know, there, put ’em on payroll and then they can start to have retirement contributions. And if you start someone, when they’re really young and give them a contribution throughout their teens and ’20s, you might be able to fund their whole retirement in that little period of time. And you don’t have to pay a minimum wage ’cause their family members.
Steve Moskowitz:
And you know, Stephen, it’s true that your two-year old shouldn’t be sweeping up the trash and carrying it out. However, suppose you said, you know, I wanna send out a holiday card showing the family and then what happens? You can pay the two-year old the fair market value for services actually performed. So that means if you wanna go to a modeling agency like with diaper ads and other things, and you had to forgive the term, rent-a-kid, what would the modeling agency charge you? I would say that that’s the fair market value. So really your two-year old could get some earnings and could get some pensions. That’s a difference between us and the big companies, they won’t tell you about that. And also, you know, you mentioned S Corporations, although you don’t have to be an entity to set up a lot of these plans. Tell us the extra advantages you can have when you do set up an entity like an S Corp?
Liz Prehn:
Well, first of all, Stephen should talk about the liability difference and asset protection difference if you want.
Stephen Dobrow:
I’d be happy to.
You know, but for retirement plan purposes, you end up some people with S Corps, end up with they want to create a big retirement nest egg for themselves and they have other income on their tax return besides just business income, let’s say they’ve done well in the stock market or they’re trading crypto, or they just have properties with rents, paying rent galore. Some of those folks, I tell ’em, “Well, you can go ahead and pay yourself a reasonable salary out of your S Corp and then provide yourself a reasonable benefit, which may be hundreds and hundreds of thousands of dollars. And so when you do that, the nature of an S Corporation is, when any profits flow through to you as the taxpayer, but also losses flow through to you as a taxpayer. So there’s a way to create losses that are gonna offset a lot of your income. And that’s the advantage of using something like an S Corp is that you can funnel a lot more into your pension plan. And if your corporation eventually makes enough money, you’ll end up with a good situation of current income, with a lot of deferred income in the retirement plan.
Steve Moskowitz:
Stephen, tell us a little more about how we can use a pension to aid a loss? And essentially, you’re really putting the money in account for yourself, that’s just a beautiful thing and then deducting that loss against some other income. Tell us a little more about that.
Stephen Dobrow:
Well, okay. So a retirement plan is, many of them are based on your average salary and an income replacement of that average salary. In a traditional pension plan, you work for many years at a company like a fire department, and then when you retire, you’re gonna get a monthly check from the fire department instead of from the employer. And it’s based on your service and salary at that as a fire person. So we take that concept and we kinda turn it on this year ’cause no one really wants to get a monthly salary in retirement. They want to create a large pool of money they can move over to an IRA. So what we do is we have them work at the S Corp for three years where they take a salary of 250,000 or something like that. And then they have a basis now by which they can fund a retirement fund, that’s gonna pay them $250,000 in retirement. That right now is about $2.9 million. So the corporation can deduct over time if it has its earnings, enough earnings, 2.9 million. If it doesn’t have enough earnings, what you can do is you can loan money to your corporation. Now the corporation has the money to be able to make the contribution with, then the money gets deducted and that it gets deducted. The corporation has a loss and that loss passes through to your personal tax return, where it’s now reducing the amount of income you’re showing for the year.
Steve Moskowitz:
The most beautiful phrase in the English language is positive cash flow, generating a tax loss just brings a tear to the eye. And that’s just part of it. So what’s going on new in the pension world? What should we know about?
Stephen Dobrow:
First of all, there are some deadlines to pay attention to, you wanna establish your new plans really soon for last year. You want to make your IRA contributions by April 15th. You wanna file your extensions on time. If you have pension contributions due, they’re generally due by the time you file your taxes or September 15th, whichever you had first. And so we’re monitoring all those for all of our clients, but also, I’m doing a lot of work in Washington and they’re talking about making changes to the pension laws. One of the big things that happened was that people found out about Roth, and Roth became very popular. It’s where you can put money into an account, whether it be an IRA or some types of 401k, or 403b’s or other programs like that profit sharing and pay taxes on it once, and then never pay taxes on that money ever again. And Roth is very, very powerful and mathematically, it always works out better. So Roth has been pretty popular.
And then since some presidential candidates have taken their whole company stock and put them in the Roth IRA, so they don’t have to pay an income taxes ever again. And so Congress is kinda get mad because anything that’s called a backdoor Roth IRA or has loophole in its name, which is what the marketing people has done with Roth IRAs. They’ve put a red flag on that. So there’s going to be some change in the IRA and plan marketplace having to do with Roth eventually, but it won’t go away entirely because it’s too good of a way for them to raise money when they really need money to spend on other things. So there is gonna be some restriction on Roth. The other thing is we’re trying to increase the tax benefits. One of the things I’m working on that is the most exciting to me is that a lot of the people that we talk to they say, “I can’t possibly save for my retirement, you know, I have this burden of student loans upon me.” And it’s a real thing for lots of people working, especially here in California. And so one idea that’s come up is that, okay, well, it’s a double whammy against you. You’re not only paying off loans,. you’re not saving for your retirement and you don’t get any money from your employer either. So why don’t we do this? Why don’t we count any student loan payments as if they’re 401k referrals for matching purposes? So that way the employer can give you this matching money, whether you’re using the money to saving the retirement or to pay down that debt. So that’s very popular, companies want that. Certainly workers want that, they wanna be able to save for their retirement.
And so that’s one thing that we’re working on pretty hard. There’s other things to enhance the retirement system too. And a lot of ’em are technical in detail, but all of ’em are meant to get bigger tax rates to the workers, bigger tax rates to the employers and make sure the accumulations are higher and bigger, and start earlier. So that’s what the thrust is.
Steve Moskowitz:
Stephen, tell us about that procedure. When you have some business owner who’s grumbling that he has to pay all this money with his estimated taxes. Tell us how having a pension could greatly reduce paying those estimated taxes?
Stephen Dobrow:
Yeah, well, when you pay your estimated taxes, you go to Steve’s firm and they tell you, “Well, this is how much you need to make in your quarterly payments.” And that assumes you’re gonna have your normal amounts of deductions and normal amounts of earnings. Well, you can introduce a retirement plan into there and remember all the money that’s spent to that is not taxable. So you can really change your tax picture. And we have people that we really do change their tax picture, picture by a lot because they’re putting in lots of money. So immediately, if you were paying $200,000 in quarterly tax payments, now you only have to pay a hundred that frees up a hundred thousand in cash four times during the year, you can use that money to fund your pension and it’ll get you a long way towards having good cash flow and not sending so much to the government playing keep away from them and building an nest egg that you’ll feel better about.
Steve Moskowitz:
You know, Stephen talk about positive, wonderful good karma. It’s amazing when you see a client’s face and you say, “You know that check you are getting ready to write the IRS? Guess what? You can write it to yourself instead.” The looks on the faces are just tremendous. Now all of this is so good, but when someone gives you something nice, you still have so much more to offer. Tell us how your work as a financial planner comes in with doing the pension plans?
Stephen Dobrow:
Well, you know, retirement is just one aspect of financial planning and it’s a big one. The questions that normally come up or things like, how do I ensure that I have enough money to retire on and not run out of money? How long do I need to keep working? And during the pandemic, a lot of people have decided to work longer because it’s more convenient to work from home. Other people have decided, you know, I really wanna change jobs, but in the long run, all those factors come into your employment, come into financial planning as well as what kind of things you’re gonna do when you retire. And the newest thing that hit me the last several years was people started saying, “Well, I need to buy another house when I retire, because if I ever wanna see my grandkids, I gotta buy my kids a house that’s close to me because they can’t afford one here.” So financial planning is got many strings, has to do with how much you’re budgeting now, has to do with how much you’re gonna budget in retirement, has to do with going to Steve and getting a state plan, and many other things too. And the retirement plan is the catalyst, is the vehicle when you don’t get money from your employer anymore. You have to balance your social security and retirement withdrawals so that you do all those properly and do it in a plan and organized way.
Steve Moskowitz:
And Stephen, one of the points you just brought up is so good. A lot of times a client will say something like this, that they’re retiring from their corporate job, because maybe the employer is mandating it for a reason. They say, look, I’m healthy, I’m energetic. I wanna go ahead and start my own business, but I’m 90 years old, and is there an upper age limit on my starting a pension plan?
Stephen Dobrow:
Well, that’s one of the things we just got rid of in Congress two years ago. There used to be a limit on when you could start on IRA and now you don’t have to. So there is no limit. So you can start at age 90 if you want. And a pension plan, if you wanna do a pension plan contribution and you have, you know, I have some business owners that shelter a hundred percent of their business income into retirement plans. And so they pay zero taxes and a 92-year old would certainly be a candidate for doing that.
Steve Moskowitz:
And also if you’re doing that, can’t you go ahead and shelter your spouse’s income as well?
Stephen Dobrow:
You know, if you put them on payroll, but remember if you do an entity and go to Steve, and get one of those, you can find a way to increase the pension contributions. So that you have millions for yourself and millions for your spouse, depending on how much cash flow you have.
Steve Moskowitz:
And that’s one of the tremendous differences between going to Stephen and going to some giant firm where when you walk in the door, we see each person as individual like a tailor-made suit. And here’s a bolt of cloth and we’re gonna shape it to you, and it’s gonna look perfect. As opposed to somebody that has one size suit, that’s off the rack. And no matter what size you are, one size does not fit all. And that’s where I see an awful lot of times when clients will come in and they see the difference between Stephen and the one size fits all. Stephen, before we wrap ’cause we’re getting close to running outta time. What else would you like to tell us?
Stephen Dobrow:
Have an open mind, remember that there’s lots of choices in the marketplace, but the best choices are the ones where you meet people with good reputation who have a bigger toolbox than just a hammer and are able to take into account many of the other factors in your life, and in your tax life. So that you could actually play, keep away from the government the longest and the best. So I would say everyone should take a good look. I’m passionate about getting everyone to save and this is just a better way to do it. So let’s get together and let’s talk about your situation.
Steve Moskowitz:
Stephen, thank you so much for appearing with us today. And Liz, can you take us out please?
Liz Prehn
Sure. That was really interesting, you guys, thank you. And thank you to our listeners. Remember to like, and follow our show to be alerted of new episodes. And we’ll be releasing more often in this coming year. And we look forward to meeting you here at Practical Tax.
Outro:
You’ve been listening to the Practical Tax podcast with tax attorney Steve Moskowitz. To hear more podcasts, go to moskowitzllp.com/practical-tax The information contained in this podcast is based on information available as obtained at the date of its release. Moskowitz LLP and its affiliates are under no obligation to update this information as changes occur. Applying this information to your specific situation requires careful consideration of all factors which may be applicable. And any information is not to be considered tax advice or legal advice. Further, this is attorney advertising, and the facts and circumstances displayed in this case are dependent entirely on the facts of that particular case. Please consult your tax advisor before acting on any matters discussed.