This Retirement Plan Made Sense Once. It Hadn't for Years.
A business owner had been contributing to a retirement plan for years. Their bookkeeper recorded the contributions as an expense every month and moved on. Nobody questioned whether the plan structure still made sense.
When I started doing the books, I could see the contributions flowing through monthly and something didn't sit right. The owner had employees, and the plan type they were using required the same contribution percentage for employees as the owner took personally. As the team grew and wages increased, the cost to fund those contributions was growing and it was eating into the benefit the owner was getting.
Because of my years of experience as a CFP®, I understand how different retirement plan structures work at a level most bookkeepers simply don't. There are plan types that could have allowed this owner a higher personal contribution limit with a lower required employer contribution. The right vehicle depends on the business, the employee count, the income level, and the owner's goals and I have the background to evaluate those factors and identify when a plan no longer fits.
I flagged it and had the owner discuss the options with the broker they were already working with. The combined impact of higher personal contributions, lower employer cost, and improved tax positioning was significant. And it had been sitting in the books for years with nobody raising the question.
The previous bookkeeper saw a contribution, categorized it, and moved on. I saw a contribution and knew enough about how retirement plans are structured to ask whether the vehicle behind it still made sense for where the business is today.
Why This Matters to You
My CFP® training means I understand retirement plan structures and how each one works differently based on the business. I see these numbers in your books every month and I'll raise the flag when something needs a second look. A bookkeeper records the expense. I evaluate whether the strategy behind it still fits.
