Does your business-owner client need a SEP or a SIMPLE IRA? Will your clients experience the least tax impact if they harvest capital gains or make Roth conversions? This month’s new flowcharts help clients consider the factors that are critical to making important financial decisions.
Should I Establish A SEP Or A SIMPLE IRA For My Small Business?
When business owners add retirement plans to their menu of employee benefits, there are a lot of options. Frequently the choices narrow to either a SEP or SIMPLE IRA. It’s at this point that your business-owner client will benefit from comparing the plans.
Use this flowchart as a simplified analysis tool that can guide your conversation. We suggest that you:
- Review the full flowchart to identify your client’s needs, and to match them to the right options.
- Weigh the business owner’s objectives and the plan features to determine the best path forward.
- Pair with Should I Set Up A Traditional 401(k) For My Business?
What Will Have The Least Tax Impact: Harvesting Capital Gains Or Roth Conversions?
Use this flowchart when clients have outsized positions attributable to appreciation and large pre-tax retirement accounts. You can guide your client through the decision-making process to choose the optimal balance between Roth conversions and harvesting capital gains. It covers key considerations, including:
- Expected need and future goals for the assets
- Current tax brackets and the effect of increasing income (ordinary or capital gains)
- Projected future income and tax rates
- Collateral impact on Social Security, Medicare, wealth transfer goals, etc.
Read Michael Kitces’s article in Nerd’s Eye View that inspired this flowchart.
Let us know if we can be helpful! You can connect with our team at [email protected].