July 23, 2019

EXCLUSIVE COMPANY

Exclusive (k) is a creative retirement savings plan than enables self-employed business owners to put away up to $40,000 per year tax deferred.

By Adrianna Mazzotta, California Business Journal.

One of the most attractive retirement investment vehicles for entrepreneurs and self-employed business owners is Exclusive (k), an innovative retirement program that enables businesses owners to put away up to $40,000 of net profits per year.

What makes Exclusive (k) even more enticing is that self-employed business owners can deduct all the contributions to the plan.

Considering all the benefits of Exclusive (k), it’s not only surprising but somewhat remarkable that so few people are still unaware of it.

“It’s too much of a well-kept secret,” says David Gonzales, a financial planner for Waddell & Reed in California. “I’m a strong proponent of this retirement vehicle – I have been for 12 years. Yet it’s amazing to me how few people are familiar with it and how little has been said about in the media.

Businessman Conducting a Meeting with His Staff“But for entrepreneurs and self-employed business owners, this is the ideal retirement plan. It’s a huge benefit for them.”

He’s right. According to Rob Mansfield, a self-employed mortgage specialist in Orange County, California, “Exclusive (k) is a phenomenal savings and investment vehicle for self-employed people. It’s far superior to the traditional IRA and Roth IRA. To me, there’s really no comparison.

“Being a sole proprietor and not having a corporation or a bunch of employees, what Exclusive (k) does for me is allow me to set up a 401 (k) for myself and put money away through my payroll based on the net profit of my sole proprietorship,” he says. “It’s a great investment vehicle for business people wanting to save money for their retirement.”

“When I researched it and realized it was on the up and up, I wondered why I hadn’t heard about it before,” says Maria Costello, a self-employed internet entrepreneur in Orange County. “If you have the opportunity to put away $40,000 a year versus $4,000 in an IRA, who wouldn’t do that? You’d have to be crazy. It’s a phenomenal tax advantage and opportunity.”

Powerful and Effective

Exclusive (k) evolved through the Economic Growth and Tax Relief Reconciliation Act, which increased contribution opportunities with 401 (k) plans. How powerful and effective is Exclusive (k) compared to its competitors? Consider this: if you have a net profit of $175,000, you can contribute $40,000 to the Exclusive (k) account and then deduct the entire amount on your tax return.

With a Simplified Employee Pension Plan, otherwise known as a SEP, or a Keough Plan, the maximum contribution for a sole proprietor is $33,479. With an IRA, the max is $11,848.

“For people who think they’re paying too much in taxes and wish they could put more money away for retirement than the $3,000-$6,000 annually (based on your age) in the Roth IRA, their wish has been answered with the Exclusive (k) plan,” Gonzales says.

The power of tax deferral is quite evident with Exclusive (k), which enables self-employed individuals to defer paying taxes on earnings in the account until money is withdrawn. That enables the funds earned in the plan to compound quicker than it would in a taxable investment plan.

Moreover, investment vehicles for the Exclusive (k) are plentiful. Mansfield, for instance, has his Exclusive (k) plan tied into a mutual fund featuring three sectors: blue chips, utilities and technology.

“You can get any mix you want,” Gonzales says. “And you have the ability and flexibility to move the money around just like a traditional stock account.”

Copyright © 2013 California Business Journal
All Rights Reserved
[California Business Journal]

Waddell & Reed
www.waddell.com
Office locator: http://www.waddell.com/Find.aspx
Phone: 913-236-2000

Lunch Meeting

Latest comments

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  • I’m familiar with the Exclusive K program. It’s an excellent product.

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  • Very interesting article. I did not know about Exclusive (k). I’m going to do more research and talk to my financial adviser about it. Thanks for the story.

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