ox·y·mo·ron - contradictory meaning
The Affordable Care Act (ACA or Obamacare) is an oxymoron.
Obamacare has cost employers and employees more in healthcare premiums while exposing them to greater out of pocket costs.
Employee Benefit Network has a strategy to change this effect. Watch our short video below to see how we changed healthcare insurance rates and coverage back to the pre-Obamacare days, providing better coverage at a price point offered two years prior through good old American innovation!
Our client, Paul Rasor*, is 40 years old, married and files taxes jointly with his wife. Paul earns $60,000 per year and wishes to save 10% of his earnings for retirement. Using the combined effective tax rate for Federal and State of 19.4%, Paul and Michelle’s net cost of saving is: $6,000 x 19.4% = $1,164, or rounding up, $1,170.
It costs Paul and Michelle $4,830 to save $6,000 before taxes, and over Paul’s remaining 25 working years, Paul and Michelle will see a tax savings of $29,250 ($1,170 x 25 years).
[As a side note: $6,000 invested annually at a rate of 7.2% per year - the historical return for the S&P 500 since 1929 – would generate $403,457.26 in your account after 25 years.]
Fast-forward 25 years: When Paul retires, he decides to draw a $40,000 income annually from his retirement savings. At the current combined effective Federal and State withholding tax rate of 23.5%, Paul and Michelle will pay $40,000 x 23.5% = $9400 on their annual distribution. At this rate, Paul and Michelle will negate their so-called tax savings in just a few years.
Can you see how the current low-tax scenario is flawed?
The tax advantage myth is to defer working years’ taxes to retirement, anticipating being in a lower tax bracket, therefore paying less net taxes. Do you see tax rates going down in the future?
So let’s see how much Paul and Michelle will pay in taxes if they decided to draw $20,000, $30,000 or $40,000 each year and what the total would be at the five-year retirement mark:
Duration/ Paul’s Age $20,000 $30,000 $40,000
1 year/ age 66 $4,700 $7,050 $9,400
5 years/ age 70 $23,500 $35,250 $47,000
Paul plans hopes to live past 82, and he has essentially paid back to the government his “tax savings” by age 70 with 12 more potential years left of distribution. Paul and Michelle will be paying more in taxes during his retirement than they did during working years. That’s money they will need to live on!
Now the Employee Benefits Network Method:
Invested EBN’s way, Paul’s tax obligation would have been satisfied, allowing him to live off his contribution and its growth tax free! Paul and Michele are able to control their own destiny; they don’t have to wish for a favorable tax climate before Paul can retire.
Update your 401k plan today! It’s simple. Just contact Employee Benefit Network. 401K Help
You may be asking yourself, “If this simple update was missed, what other land mines are out there? Why wasn’t this explained years ago? Where was our broker on this?”
Your broker should be providing you with regular education, timely updates and due diligence of your 401k plan. You deserve that after all your years of saving.
Education can also reduce potential liability of plan sponsors if retiring employees financial conditions don’t meet expectations.
Contact Employee Benefit Network now! 401K Help (248) 362-8108
Get retirement ready!
*Not the client’s real name
For business owners, one of the greatest points of frustration is determining how to provide the most comprehensive health care coverage for employees at a feasible cost while protecting the business’ bottom line. In order to attract the best and the brightest staff, employers want to offer a great employee benefits package that includes medical, dental, vision and disability, but become concerned with how coverage costs will impact company profits.
The latest research shows that 75% of employed Americans spent less than $1,000 per year on health care, yet their employers were spending, on average, $3,800 per employee for group coverage!
Professional organizations and associations can help alleviate benefits coverage costs. In addition to providing networking and business building opportunities, a professional organization, generally, can offer its members better health care coverage with better service and at more predictable costs for the business owner. State, regional and national professional organizations and associations often offer member benefits and health plan coverage through nationally recognized insurance companies, and members can share dedicated service teams that provided consistent service, help with complex benefit structures, and work to optimize programs. Benefits vary by organization, but many offer flexible service plans with a variety of portfolio offerings tailored to the profession and work style and a broad network of physicians and health care professionals from which to choose.
Working with a professional association or organization can make it easier for business owners to offer affordable, comprehensive benefit plans to employees. In most cases, both employers and employees can choose a health insurance plan that fits their needs and budgets.
There is such an association plan available for Engineers and Architects. Visit the Employee Benefit Network website for more information.
To date, our most celebrated case saved a client $130,000 of annual health care costs while insuring 43 employees and maintaining continuity of coverage.
The Employee Benefit Network, through its insurance resources and proven market strategies, strives to provide “Benefits that really are” for the business community, individuals and families.