
The best way to explain this plan is to think about this scenario: if you were given the task of writing legislation to come up with another tax deductible investment plan, what language would you have in it? I would write a plan that allows contributions to be tax-deducted, grow tax-deferred and then when withdrawals are taken, they come out tax-free. I would also have the plan participate in market growth with no downside and I would want this investment to be protected from creditors. In addition, I would want the cash available to me without having to wait until age 59½ and there would be no 70½ rule that mandates withdrawals from this account. Finally, I would want a plan that allows flexibility on choosing the degree in which employees can participate. All this sounds too good to be true, right? Well, believe it or not, this type of plan has already been written into the tax code. There are different requirements and restrictions in place, but for the most part, the good outweighs the bad.
If you do not have a qualified tax professional, our firm has developed strategic relationships with community members and we would be happy to assist you in locating a tax advisor to talk this type of plan over. If your tax advisor is not familiar with this type of plan, we would be happy to go over the details in greater length with you personally. FBN