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Put Your 401k Plan to Work

Friday, June 19, 2015

Are you making the most of your 401k or profit-sharing plan? And if you were not, would you know it?

Your 401k or profit-sharing plan can be an extremely valuable asset – to both your employees and your own financial security. But if you aren’t aware of the different rules, formulas and options you have, you could lose out on additional savings. 

For example, did you know that in 2015 you could contribute up to $53,000 to your plan – or up to $59,000 if you are over age 50? 

Knowing the changing rules, and reviewing your plan on a regular basis, is the key to maximizing savings. In some instances, being aware of the options can allow business owners to craft a plan that leads to larger contributions for themselves or certain targeted employees. 

Here are some examples of profit-sharing formulas that can dramatically shift your contribution levels:

1. Pro Rata Formula: The most traditional type of plan, this formula requires the same contribution percentage for all employees. So the percentage you give yourself must match the percentage you give to your employees.

2. Age-Weighted Formula: This formula incorporates both age and compensation. In this instance, older employees get higher allocations because they have less time to accumulate. 

3. New Comparability: For this formula, plan participants are pided into groups, and the employer sets a contribution level for each group. This is also called a “cross-tested” plan. 

If you are a business owner, contributing the maximum to your own 401k or profit-sharing plan won’t work in every situation. However, it’s important to know your options. Talk to your financial planner about which 401k or profit-sharing formula makes the most sense for your unique situation. 

Need some additional assistance, or a fresh look at your current plan? Beirne Wealth Consulting can help business owners make smart plan decisions.

Contact us to learn more about maximizing your 401k or profit sharing plan. 

About the Author: Matthew Gallagher is Head of Business Development at BWC, responsible for identifying business opportunities, communicating the firm’s unique capabilities and solutions to prospective clients, and cultivating those relationships on an ongoing basis. Matt has more than 25 years of experience in various sales and marketing positions.

About Beirne Wealth Consulting Services, LLC

Beirne Wealth Consulting Services, LLC (“BWC”) is a growing, privately owned, SEC Registered Investment Advisor with about $2 billion in assets under management and over 25 employees in Connecticut, Pennsylvania and Florida. BWC provides independent, fee-based investment management services and customized financial planning solutions. Our institutional business provides consulting expertise to defined benefit and defined contribution plans, endowments, foundations and non-profit organizations. Our private clients include high net-worth individuals and prominent families, many of whom bring complex wealth management challenges and multigenerational planning needs. For more information, please visit www.beirnewealth.com or give us a call today at 888-231-6372.

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