September 25, 2025 • 40 mins
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Episode Summary:
As your practice grows and profits increase, one of the most powerful tax and retirement planning tools available to optometry practice owners is profit sharing within your 401(k) plan. But what exactly is profit sharing, and how can you optimize it for both you and your employees?
In this episode, Evon welcomes back Matt Ruttenberg of Life Inc. Retirement Services to break down everything optometrists need to know about profit sharing contributions. They discuss how profit sharing works, the different methods of calculating contributions, and how practice owners can use this strategy to maximize retirement savings while managing taxes.
Whether you’re new to 401(k) plans or you’re ready to level up your retirement savings strategy, this conversation will give you clarity on how to align your plan design with your goals.
What You’ll Learn in This Episode:
- What profit sharing in a 401(k) plan actually is and why it matters for practice owners
- The “three-tier wedding cake” framework of retirement plan contributions
- Different methods of profit sharing:
- Pro Rata (the simple but costly method)
- New Comparability (targeted, strategic contributions that benefit owners most)
- How factors like employee demographics, age, and owner wages impact profit sharing efficiency
- Why your Safe Harbor match choice (match vs. non-elective) matters when layering on profit sharing
- How profit sharing integrates with cash balance plans to supercharge retirement savings
- Key deadlines practice owners need to keep in mind before year-end
Resources & Links:
- Learn more about Matt Ruttenberg and his team: 401k.expert
- The Optometry Money Podcast Ep 111: 2024 Mid-Year Retirement Plan Updates and Deadlines Practice Owners Need to Know with Matt Ruttenberg
- The Optometry Money Podcast Ep 64: How to Invest Six Digits A Year Into Your Practice Retirement Plans with Matt Ruttenberg
- The Optometry Money Podcast Ep 63: Choosing A Retirement Plan for Your Optometry Practice with Matt Ruttenberg
Work With Us:
Thinking about working with a financial planning firm that specializes in optometry? At Optometry Wealth Advisors, we help ODs nationwide align their practice and personal finances for growth, tax efficiency, and long-term wealth.
👉 Schedule a free, no-pressure intro call here: optometrywealth.com
The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evon (00:04):
Hey everybody.
Welcome back to the OptometryMoney Podcast.
Where we're helping ODs all overthe country make better and
better decisions around theirmoney, their careers, and their
practices.
I am your host, Evon Mendrin,Certified Financial Planner(TM)
practitioner, and owner ofOptometry Wealth Advisors an
independent financial planningfirm just for optometrists
nationwide.
(00:24):
And thank you so much forlistening.
Really appreciate your time andyour attention today.
And on this episode, I welcomeback to the podcast Matt
Ruttenberg with Life Inc.
Retirement Services.
Matt is a qualified retirementplan ninja and magician for
Optometry practices, and we diveinto profit sharing for 401k
(00:45):
plans in the practice.
And we talk about what in theworld profit sharing is.
The different ways that you cancalculate profit sharing
contributions depending on yourgoal, whether it's to provide a
broad benefit for all employees,whether it's to skew that
contribution as a tax planninglever for the owner, whatever it
is.
We talk about ways to optimizethat profit sharing calculation
(01:07):
for that goal.
We talk about how your 401kmatch factors into the cost and
the math for the profit sharing.
And then lastly, how a cashbalance plan fits and integrates
together with that profitsharing contribution.
I think you're gonna get a lotoutta this episode.
I will put all of Matt's contactinformation and our prior
episodes in the show notes,which you can find by just
(01:28):
scrolling down in whichever appyou're using.
Uh, or you can find that at ourwebsite, optometrywealth.com, at
the Education Hub over there.
If you have any questions atall, reach out to me.
At podcast@optometrywealth.comand if you'd like to.
And if you're thinking aboutthese things and you're curious
(01:49):
about what it's like to workwith a financial planning firm
that specializes in Optometryand Optometry practice owners,
reach out.
I'll put a link in the shownotes to our website.
You can schedule a nocommitment, no pressure
introductory call.
We can talk about what's on yourmind financially and how we help
ODs all over the countrynavigate those same decisions
and more.
And without further ado, here ismy episode with Matt Ruttenberg.
(02:17):
Welcome back to the OptometryMoney Podcast.
I am your host, Evon Mendrin,and I am excited to be joined
once again by Matt Ruttenbergwith Life Inc.
Retirement Services.
Matt, thanks for coming back on.
Matt (02:27):
Yeah, Evon, thank you so much for having me on.
Always a pleasure speaking withyou.
Evon (02:31):
Yeah, we're at least, what, three or four times
already?
So are you, I think you'reofficially a friend of the
podcast.
Is that kind of how it works?
Matt (02:38):
Yeah, I got my, my official button,
Evon (02:40):
There you go.
Matt (02:41):
I appreciate it.
Evon (02:42):
There you go.
Yeah.
There we go.
Well, I, I'm excited to chatabout, What I think is a really
important planning lever forpractice owners, especially as
they get out of the Cold Startor recent purchase phase,
they're seeing cash flow improvein the practice and they're
wondering, okay, what can we doto not only save for our own
(03:02):
financial independence andretirement, but also plan
practically for taxes?
And that is profit sharing in401k plans.
And I see, I tend to see there'sa, a, a.
Pretty good size gap ofeducation when it comes to
profit sharing and 401k plans.
in terms of what it is and howit works and how it's all
calculated and, very often forme.
(03:24):
I know you've described it,Matt, as, these retirement plans
as sort of this upside down cakewith, with different layers.
most people are familiar withthe employee contribution
amounts and 401k plans and theamount that each person,
including the owners, can put inas an employee.
In, in there, which is$23,500.
If you're under 50, there's anadditional bump if you're over
(03:46):
50.
But there's, there's not alwaysa good understanding of that
next layer of the cake, which isprofit sharing.
Matt (03:54):
Mm-hmm.
Evon (03:55):
describe for the listener what, what is profit sharing in
a 401k plan?
Matt (04:00):
Yeah, great, great question.
Very in depth.
lots of variables, lots ofwheels turning.
but let's go back to that upsidedown three tiered wedding cake
that you, you brought up, andit's an upside down three tiered
wedding cake or, or a pyramid,if you will.
The bottom layer is that 401(K),which is considered employee
contributions or deferrals.
So if you've had a 401(k) in thepast through a day job or
(04:21):
something, and you submit, Iwant to do 10%, I wanna do 5%,
that's a deferral.
And it's withheld outta your,your pay your paycheck, right?
Your W2.
the next level up on thatpyramid is employer
contributions and profit sharingis a portion of that.
The other portion is the match,like the employee match.
Now there's various differenttypes.
(04:44):
sharing.
it there, the most basic form iscalled pro rata.
and then there's other advancedthat we're gonna dive into here
today, but this is the portionthat comes directly from the
employer, the employer account.
So it does not pass throughpayroll.
It comes outta the profits ofthe business.
And then it's a, identifiedamount that goes to.
(05:05):
employees.
but hopefully the goal is to getmost to the employer to where
they're having, most of thosecontributions.
that goes up to something calleda 415 limit.
Okay?
So the 415 limit, let's go backto that upside down three tiered
wedding cake, right?
bottom layer, that's 23 5.
$23,500 that you mentioned for2025, and then you go up that
(05:27):
next step.
Those two layers together, it'scalled the 415 limit tax code
415, and that can get you up to$70,000.
So technically you don't, you'renot stuck at that 23 5 plus a
match.
You can go all the way up to$70,000 doing both those layers
in that pyramid.
Evon (05:47):
Gotcha.
$70,000 is the total combinedamount you, each individual can
get into their 401k plan,regardless of which of these
sources it comes from.
And, one of my recent episodeson the podcast, and I'll, I'll
throw link to this in the shownotes, was.
key tax levers you can pullwhen, when doing tax planning
and looking at, the tax returnor, or if we're looking
(06:09):
proactively at a tax projectionand saying, what are the key
parts of that return we canimpact or influence to have
really good results, reallyhigh, high impact results and.
These profit sharingcontributions, depending on the
demographic demographics of thepractice, depending on how
strategic we are with theowner's wage.
these profit sharingcontributions are really
(06:32):
Impactful way to, to hit thoseplanning levers.
And so that's one of the thingsI mentioned in that episode.
And so for those of you who arelistening, potentially thinking
about how can we improve our owntax planning, listen closely
here.
I, I think this is gonna be areally helpful conversation for
you.
And so, Matt, as you talk aboutthat, you mentioned there's a
couple ways to calculate howexactly these profit sharing
(06:53):
contributions work, because itdoes need to go into all
employee accounts.
it's not just something for theowners.
The, the golden rule here is youcan't discriminate in favor of
only the owners or the highlycompensated employees.
So how does that work?
You know, the, let's say theowner wants to talk to you, they
want to think about doing theseprofit sharing contributions.
(07:16):
What are the different ways theycan calculate those?
Matt (07:21):
So let's kind of go back to that most basic version.
I called it pro rata, and that'swhat most people, most business
owners, consider as their onlyoption, right?
So whatever you give yourself,which is up to 25% of your
salary, assuming you're an Scorp.
is what you can give to yourselfabove and beyond that 23 abo and
beyond the, the bottom layer ofthe, upside down retirement plan
(07:44):
stack.
pro rata is you have to giveyour employees that 25%.
It's basically the most simpleform of employer contributions,
which I, I don't remember thelast time we've done that.
And the reason we is the goalonce a, once you go above and
beyond the match, 99% ofbusiness businesses out there.
(08:04):
Are looking to now say, I wantto maximize my own
contributions.
Evon (08:08):
Yeah.
Matt (08:08):
everything, I'm, I'm being fair to my employees.
I'm giving'em a match.
I'm giving'em the 401k.
There's a Roth component.
The investments were fantastic,but the most basic form is prota
And Most of the, I guess, theonline direct to consumer,
programs that are out there,they're more boilerplate
versions.
I would, is what I call'em.
those are mostly gonna be the,the pro-rata and it's not
(08:33):
something that's favorable tothe owner.
It's very favorable to youremployees.
Evon (08:37):
And that's, that's something I was mentioning to
you, Matt before we startedrecording, was that very often
with new clients they'll have, a401k plan from x, y, z
tech-based platform, and thenpro rata profit sharing and not
really sure what that means orwhy that was selected, why
that's the case.
And so.
I think there's a lot of roomfor education to just ask, okay,
(08:58):
what is the goal here?
If you do do profit sharing,what, what's the goal for that
profit sharing?
What do you wanna get out of it?
And let's make sure that, youhave the, the type or the method
of profit sharing that makes themost sense for that goal.
And so, pro rat, it seems likeit's the, it's the simplest,
the, the very basic, it's thesame percentage essentially
across all employees that you'regonna give to yourself as the
(09:19):
owner, right?
And, Drawbacks are that it'sexpensive because you need to
apply that same percentageacross the board to to all
employees.
And so I guess if your goal isto do that, if that's what you
want out of profit sharing, thenthat will accomplish that.
But very often, like youmentioned, we're trying to use
that as a tax planning and sayan investing tool for, for the
(09:40):
owners very often, or at leastthe, the associates as well.
And so outside of that verybasic pro rata method, what are
some of the other calculationsthat they might consider?
Matt (09:51):
Yeah.
And, and I'm gonna, I'm gonnakind of lump all of those into
one overarching category, andit's called New Comparability.
Evon (09:59):
Okay.
Matt (09:59):
new comparability has many, many, variables that we
can work off of.
And the, the whole point is, istargeting, that's the key word,
is targeting.
we still go through your annualtesting.
like you mentioned,non-discrimination issues.
We, we, we can't.
We can't cut out, for the mostpart, any employees inside of a
(10:21):
qualified plan.
So this is a qualified plan.
Profit sharing, 401(k).
It's considered qualified.
once we get to this point, andwe always ask our clients two,
two questions.
Number one, what is your numberone priority?
That's absolutely number one.
And the question, the answer ismultiple choice.
Is it you?
As the owner, like are youtrying to stockpile into
retirement and tax save or is itfor your employees, or is it
(10:43):
both?
And if someone says, myemployees are my number one
priority, we might go with thepro rata route, but 99% of the
time the answer's gonna bemyself.
I'm doing this for taxes.
I've put in a lot of blood,sweat, and tears in this
business.
It's my baby.
Now I want to reap some of therewards off of my profits that
have now shown up and my taxbill used.
(11:04):
Right?
So.
The overall concept is we wantthe owners to get that money and
we run off of these efficiencyratings.
But, out of the, let's say aclient says, Hey, I got a$50,000
that I need to get off the booksbecause my CPA is telling me
that I have a, a, a tax bill Ineed to get rid of, or a hundred
thousand or$200,000.
And, the goal is to get most ofthat money in the hands of the
(11:27):
business owner, the variablesinvolved.
All these different kinds ofcalculations.
We run'em from all thesedifferent angles.
Age is a big factor in this,age, age weighted.
So the closer your employees areto, closer to retirement, the
more they're gonna get.
And then also at the same time,tenure with the company, that's,
(11:50):
that goes into the, thecategory.
So let's say you are the oldestperson in the room.
For example, so you as the ownerare the oldest person in the
entire company.
That is phenomenal.
We're able to get youabsolutely.
The mass majority, we'reshooting for maybe 80%
efficiency rating where 80% ofthe money goes to you and 20%
goes to the employees.
(12:10):
however, on the other end of it,let's say you are the youngest
person.
In, in the, in the, in yourcompany and all of your staff is
older than you and they makepretty good money, that's gonna
be more that you're gonna haveto give to them.
So that's one of the variables,but it's a very, very, very
important part of the equationon why and when and what type of
(12:30):
calculation.
But let's say there's a range.
so let's say you're kind ofright in the middle.
Your age is, let's say 40 yearsold, and then you have
60-year-old employees, and thenyou have 20 year employees.
And now we've saiddiscrimination is not part of
the equation with these, but inreality, what we can do is we
(12:51):
can target the youngest personin your company who's also maybe
paid the least.
And then because they're so faraway from retirement, they're
not gonna get as much and evensout.
Evens out the entire, uh,employee pool with their con
contributions.
Evon (13:06):
when you say Target, what does that mean?
I, I understand what you mean,but just kind of for the
listener.
Like, what, what does that mean?
Matt (13:11):
Yeah.
And it's kind of, it goesagainst what a lot of people
think of retirement plans is thefairness rule annual, I used to
say this all the time.
Annual testing is fairness.
Like you gotta give something toyour employees for you to give
something outta your, outtayourself or give something to
yourself.
And, when you do newcomparability.
That kind of goes out the door.
(13:34):
You can target individuals andsay, I want to take care of this
person the most
Evon (13:38):
Hmm.
Matt (13:38):
my mission critical key employee.
On paper, on the on thecalculation, and we can change
that year to year.
So every time we do a cal a aprofit sharing calculation, we
can say we want employee numbersix to reap the benefits this
year and next year we wannaswitch it over to employee
number two, because maybe one ofyour older staff fell off, they
(14:00):
quit, they retired, whatever itis.
But we're able to actually say,I want this person to get.
Most of the benefits, but sincethey're the youngest and least
paid, the equation turns out tobe the same as one of the older,
so you can do that.
Evon (14:15):
Interesting.
Matt (14:16):
you can do is quite, quite interesting where let's say you
have a larger company.
You have, we've done, weactually just finished up a
couple plan designs on this one,it was a doctor's group.
Okay.
So this is pretty relevant, tothe podcast where we had a group
of, doctors, medicalprofessionals at the top, and
(14:38):
they were the owners.
then we had some physiciansassistants in the middle.
And then we had a, a big chunkof staff.
were able to remove wholedepartments from eligibility,
from profit sharing.
So where they still get thematch.
Like we, if we're using the SafeHarbor 401k on the bottom layer,
but we are only targeting the,the physician's assistants and
(15:00):
the ownership.
And there's some, there's somedefinite, equations in there
that we want, we'd like to see25 people in that middle group
if we, or in the total,eligibility.
But you're actually able toremove full departments out of
your equation.
get more of those dollars overto the ownership.
Evon (15:21):
So you're able to segment out your employees into
different groups.
I mean, could it even be likeownership group, non od, non
ownership od group, and thenstaff, like can you even segment
it based on roles like that?
Matt (15:33):
Yeah.
So, you know, thinking of,Optometry industry, right?
You have the, the, the doctorsat, they're, most of the time
they're the owners.
Evon (15:41):
Yeah.
Matt (15:42):
they're also considered highly compensated employees,
and that definition is theyeither own 5%, it could be a
spouse, or you pay them over$155,000.
owners and highly
Evon (15:54):
Hmm.
Matt (15:54):
employees are, are a full category.
Okay.
those are easy.
The IRS doesn't care abouthighly compensated employees.
They only care about thenon-high compensated employees
in terms of fairness.
So we would say those are onecategory and then we'd clump, a
bunch of other ones together,which would be the, the, the
physician's assistants or, or,Maybe even like nurse
(16:15):
practitioners in some medicalfields, things like that.
And then the bottom would be,maybe the receptionist desk or,
or back office team, that youcan remove that.
So those tend to need to havelarger, employee pools, maybe 40
to 50.
and then underneath that we'rejust doing the targeting.
if it's a smaller company.
Evon (16:35):
Gotcha.
And, to, to highlight your pointabout why age is important.
In terms of the testing offairness, in, in whichever way
you need to do that, whetherit's targeting, for example,
part of the reason that age isimportant there is because as
you mentioned.
A younger employee, or just likea younger optometrist, has a
much longer time to save andinvest towards the retirement
(16:56):
goal.
And you would need to put in,let's say hypothetically, the OD
is trying to invest towards agoal.
Well, if you have more time,you, you, you can put in less
dollars into the account eachand every month.
And still reach that goal.
Someone that's much older isgoing to need to put in much
more over a shorter amount oftime in order to reach that same
(17:16):
goal.
And so that same sort of, we'llcall it time value of money math
is essentially that same conceptis working here for the benefit
of the older doctors or theolder owners.
Right.
Matt (17:29):
Yeah,
Evon (17:29):
Uh.
Matt (17:30):
similar with that.
With that new comparably, newcomparability, age-based, it's,
it's like, yeah, the older youare, the more you can put into
it when you're targeting andthings like that.
so very, very similar equation.
Just a little bit more on thebackend when, when you're going
to the defined benefit side ofit.
Evon (17:46):
Gotcha.
Gotcha.
Okay.
This is helpful.
And again, this is if we aretrying to skew that profit
sharing contribution as much aspossible, if that's the goal, to
the accounts of the owners.
As we're using this as a taxplanning lever and an investment
lever for the owners, this isone really great way to do that.
And how does the, the wage ofthe owners fit into this too?
Matt (18:09):
Yeah, very important actually.
So we, it has to do with yourentity structure.
Okay.
Evon (18:15):
Yep.
Matt (18:16):
LLC, are you follow as an S corp?
Are you falling as a C corp andS-corp is very, very important.
and we generally have incomeplanning meetings before the end
of the year everything.
Is based on your W2 if you filesan S corp.
if you file an S Corp and youhave, let's say you don't pay
yourself a salary at all, justtaking distributions.
(18:39):
There is no income to calculateany of these con You can't do
the bottom layer with a 401k andyou certainly can't do any
profit sharing, contributionseither when you are operating as
a schedule or as a S corp,you're operating as, as s an LLC
or, so in a single member LLCscommon or even just a sole
(18:59):
proprietor even.
And, and you know, a lot ofpeople who just outsource their
staff or they use staffingcompanies or things like that.
It's based on your net, your netincome after expenses and things
like that.
And that's what thosecalculations are based on.
So, again, the bottom layer 235, as long as you're paying
yourself$23,500, you can putthat towards the 401k portion.
(19:22):
The profit sharing, let's assumeyou're an S corp, is up to 25%.
So if you are paying yourself.
A hundred thousand dollarssalary, but maybe you have a
$400,000 total profit.
we don't care about the 400, we
Evon (19:36):
Yeah.
Matt (19:36):
about that$100,000.
So you're gonna do 25% of 100$25,000 contribution into your
profit sharing plan is whatyou're allowed to do.
Evon (19:45):
Got it.
And so it's really important totest.
If we're running these profitsharing contributions with the
administrator, for example,Matt's, Matt's business over
there, it's important to testout different wages to see how
that impacts the, these results.
Because there, there's sort ofthis, there's always this
tension here between, keepingthe wages down towards the lower
end of what's sort ofreasonable, reasonable wage for
(20:06):
an S corp for, for tax planningpurposes.
'cause we're trying to limitthose Social Security Medicare
taxes.
But on the other hand, forretirement plan contributions
like profit sharingcontributions.
The, the, the tension's goingThe other way is we may want to
increase those wages to, to getmore of that profit sharing
contribution into the account ofthe owner.
And so it, that's a reallyimportant thing to test and to,
(20:29):
and to see what makes the mostsense.
'cause our, you know, for themost part, the owners are tr I
think, sort of trained at thispoint a lot of the times to pay
as low of a wage as possible.
To their detriment at times.
And when I'm running a taxprojections and working with,
the tax professional, we want tosee if we're, if we get a profit
(20:52):
sharing number from anadministrator, for example, we
want to see if we increase wagesand do this profit sharing
contribution.
What does that do to the taxoutcome, including the extra
FICA taxes, but.
It will, it, it, it may stillvery well make sense even if you
have to pay more into Socialsecurity Medicare taxes.
(21:12):
So keep that in mind.
Owners like that, that wage isreally important and there's
that tension there to keep itlower for certain tax planning
reasons, but also to potentiallyincrease it for other retirement
planning reasons.
And you want to make sure you'renot holding on too, too hard or
too strongly to an artificiallylow wage when it doesn't make
sense to you.
(21:32):
But I, I'm really glad youbrought that up.
Or you're able to, shed morelight on that.
I think that's really important.
And so the age, it seems, isreally important.
The, the wage is reallyimportant'cause it's, it's
limited to that 25% of wages.
The, though in hearing you talkabout the targeting, you know,
(21:53):
trying to target a, a, maybe a,a younger employee, it does
sound like even if the ownerisn't substantially older than
the average of the otheremployees, it it's, it does
still seem like the math canfavor that owner in a new
comparability.
Like, do you see, like, do yousee, or do you have like general
(22:14):
guidelines to say like.
If you're not X amount of yearsolder than the average, you
know, like what?
Do you have anything to add tojust sort of how young the owner
can be to where it still oftenmakes sense or doesn't make
sense?
Or is it just based on eachindividual demographic?
Matt (22:31):
So every, and this is something that I'm, I'm trying
to get out, out there, into the,into the world is, is every
business is completelydifferent.
Evon (22:38):
Yeah.
Matt (22:39):
design should be different.
And that's why you don't wannado these boilerplate because
you're not.
Cost ends up being a major partof the equation.
Just like anything when you're,when you're searching for
payroll or you're searching forbookkeeping, you're like, what's
the overall cost?
What's the cost?
but a lot of times they'relooking at like the
administration fee and therecord keeping fee and they're
like, okay, what is that there?
(23:00):
There's a huge part of thatequation that is often lost in.
How much, obviously taxstrategy, right?
How much, what is your net taxeslike you said earlier.
you know, you increase yoursalary so you can do
contributions or vice versa?
It's this big balance andeverything has a cost and
everything is, are you in theblack, you in the red.
That's everything that'sbusiness in, in, in a nutshell.
(23:22):
But, at the end of the day.
You have to give too much moneyto your employees.
That's an additional cost I'veseen very much where, I've had
business owners who are workingwith somebody and that upside
down three tiered wedding cakethat we brought up a few times.
Every layer needs to be designeda certain way, and we'll get in
that a little bit more here in aminute in order to maximize a
(23:42):
layer above it.
But if you don't, if you don't,If you don't make that design as
efficient as possible, you'rethrowing, I've seen upwards of
$50,000 too much to theiremployees because they didn't
have the proper bottom safeharbor version
Evon (23:57):
Mm-hmm.
Matt (23:58):
they're giving a match versus a non-elective to
contribution, which we'll talkabout here in a minute, but.
That's very, very important.
but going back to your questionon, you know, what is a good
ballpark age?
I'll give you an example.
this was a dentist groupactually.
And and, one of these, gentlemenheard me on a podcast, and they
wanted to do their profitsharing contributions and.
(24:19):
They owned a few buildings andthey were in their thirties, I
think it was.
but they had some staff in theirlike mid sixties and that just
didn't work.
In order for him to get to thatseven, that,$70,000 415 limit
that we mentioned earlier, theyhad to give$55,000 to their
employees.
That's clearly not efficient.
That's
Evon (24:39):
Right.
Matt (24:39):
the red.
And we, they, they said, don'tdo that.
What we helped them identify isthey owned the building, so they
did some sort of costsegregation studies to help
offset taxes instead.
But, what you, what you didthere was you, you said, okay,
I'm the youngest person in theroom.
That's not gonna work.
Evon (24:54):
Hmm.
Matt (24:55):
times outta 10, that's not gonna work if you're the
Evon (24:56):
Yeah.
Matt (24:57):
person in the room.
if you have one person aboveyou, even in, let's say you're
40 years old and you have a60-year-old, but everybody else
is around your age or younger,maybe just a year or two older,
that's fine.
That will most certainly workout.
it's so if, if we have somebodyto target, somebody else, a non
highly compensated employee totarget, other than the
(25:19):
65-year-old staff member.
Then the numbers most likelywill work out, and it's
Evon (25:24):
Gotcha.
Matt (25:25):
the efficiency rating.
Are we in the red or in theblack?
If you're in
Evon (25:28):
Gotcha.
Matt (25:29):
it works.
If you're not, you just don't doit.
Evon (25:31):
Gotcha.
Okay.
That makes sense.
That definitely makes sense.
And short of firing allemployees and only hiring
employees that are much youngerthan you, it really just depends
on the demographics of every, ofevery practice individually and
the, and strategic planning onthe wages to see what's possible
and how we can make the U themost use of that 401k plan,
(25:53):
depending on the goals of theowner.
And you mentioned something I, Iwant to get into this.
You mentioned deciding onwhether you do a match or
something different.
And most often, again, goingback to like basic programming
or.
A lot of the onboarding sessionswith a lot of these, these tech
providers on the 401k side, mostowners tend to skew towards
(26:14):
picking a match, with theunderstanding that it might be
lower cost or incent, itincentivizes employees to also
contribute.
There's a lot of good reasons tohave a match.
But you mentioned that sometimesit may not make the most sense
if the owner's going to be dodoing consistent profit sharing.
Can you talk about that?
What, what's the issue here?
Matt (26:32):
Yeah.
And, and again, this kind ofgoes to those two, I I mentioned
the first question that we askedin the beginning.
It's, you know, what is thegoal?
Who's the, what's the priority,I should say, owner, is it the
employees?
And the second question is, howmuch do you wanna allocate
towards this?
And if we know that they want tomax out as much as possible,
(26:53):
we're going to design it oneway.
If we are not sure we're gonnadesign it another way.
And a lot of people, I thinkit's due to maybe, a lack of
education from the provider
Evon (27:04):
Yeah.
Matt (27:05):
it's match versus a contribution.
When does that make sense?
When does it not?
and the other part of thatequation is have you pulled your
employee pool?
If you offer a 401k, are theygonna contribute too?
Industry is a big part of thisequation too.
you know, whether they're gonnacontribute or not.
And, you know, sometimes if theysay, I, no one's gonna
(27:26):
contribute, then we'll go withthe match.
Because if no one'scontributing, there's no match,
right?
No less out of pocket.
But, most of the time in themedical field, we're gonna get a
larger contribution rate theemployees.
So.
At that bottom layer that we'vetalked about a couple times now,
when you add profit sharing ontop and the profit sharing is
(27:49):
discretionary from year to year,right?
You don't, if you have a greatyear, you use it.
If you don't, you don't have touse it.
But let's say you wannaconsistently use it'cause you
have good profits every year.
And, what we're gonna do iswe're going to, there's a,
there's a gateway.
Between bottom layer and the toplayer.
So what I mean by that isthere's a 5% gateway.
(28:11):
Once you start targetingindividuals using the new
comparability, which 95% of thetime we're doing new
comparability, we're not doing,Pro rata.
Evon (28:19):
Yeah.
Matt (28:19):
You're going to have to give everybody the bare minimum
of a 5% contribution from your,from the employer.
Okay?
Bare minimum.
And then everybody might get alittle bit more.
Okay?
So.
Certain types of safe Harbor401(k)s on that bottom layer go
towards that 5%.
So it's called a new, excuse me,it's called a non-elective safe
(28:41):
harbor.
And it's a 3% that you give toeverybody whether they
participate or not.
It's just like a bonus that yougive to everybody.
they can put in 20% contributionor zero.
Everybody gets the same 3%, butthat 3% goes towards.
5% minimum on profit sharing.
So now you only have to give'eman extra 2% if you do a match
(29:05):
versus the non-elective you'restacking, let's say it's a 3%
match or a 4% match, you'restacking it on top of the five,
and now you gotta give'em eightor 9% of their annual salary
instead of just five.
So that's just a really goodexample of what we need to do to
make sure and really understandwhat the goal is.
(29:26):
And that's something you canchange and amend from year to
year because maybe your profitwent went higher, you're not in
growth mode, you're in, you'rein now more a stable company and
you're just trying to getprofits instead of maybe expand
into other offices or somethinglike that.
That's very important tounderstand what those goals are,
through those questions that weask.
but it is very, very importantthat.
(29:48):
If you're gonna do profitsharing every year, a match is
probably not the best way to doit.
A non-elective contribution goestowards the profit sharing
calculations, which means lessto the employees and a higher
efficiency rating that goes tothe employer.
Evon (30:03):
Yeah, I mean that's, that is a great overview of this and.
Very often it's thought of the3%, non-elective contribution
where you're depositing toeveryone's accounts.
The business, I should say isdepositing, regardless of
whether employees contribute ornot.
Very often that's seen as themore expensive option, right?
Because you may have employeesthat aren't contributing or are
(30:25):
not contributing 3%, and thenyou're still doing that.
However, as you mentioned, likeif your goal then is to
consistently use profit sharing,that may be the lower cost
option.
If your goal is to use thatprofit sharing contribution
consistently, and so thatdecision of we are going to use
profit sharing on a, on an offand on, or just on a regular
(30:46):
basis, we have the cash flow todo it.
That's an instant trigger totalk to your administrator and
say, okay, which matching styleor which contribution style and
the safe harbor plan makes themost sense.
And I think that step is missedVery often it is just talking
with the administrator or havingan administrator to talk to in
the first place.
And figuring out, okay, I know Iwant to do profit sharing, which
(31:08):
style of profit sharing makesthe most sense, but also let's
review this match and make surethat my safe harbor match or the
3% is the best fit for mypractice, knowing what I wanna
do.
Great, great overview.
Important for each listener tojust review that for yourself,
to make sure that you're gettingthe most outta your 401k plan.
Ultimately, that's what this isall about, based on what you're,
(31:30):
you're trying to use it for.
So we have that 5% minimumcontribution gateway rule.
Really important.
We've talked about the differentmethods.
one final thing I just wouldkind of want to hear from you
is, yeah, let's say we have amore mature practice now.
we have very consistent cashflow.
We've gone through the$70,000already for the, the profit
(31:50):
sharing side, in the 401k side.
You know, that owner or a groupof owners may be wondering,
okay, what's next?
Like, what, what can we do?
What's next?
Maybe they're preparing for aneventual exit of one of the
owners, coming up soon.
So maybe there's a particularbig tax planning goal coming up.
tell us about a cash balanceplan and, and how that might fit
(32:12):
in with the profit sharing.
Matt (32:15):
Yeah, that's, so this is where the efficiency I, I've
been saying the efficiencyrating a few times, efficiency
rating, just to kind of sum thatup, is how much do we have to
give to the employees and howmuch does the owner get to take
home with them?
And when you start adding thatthird layer, this is that third
layer on the on the retirementplan stack.
The efficiency rating goesthrough the roof.
(32:35):
Okay.
I'm talking 90% or more.
Okay.
the, the, the one plan designwhere we were able to segment
out, for example, this is a, agreat case study.
Very, very efficient.
where we were able to put amillion dollars total into the
plan per year, and we only hadto give$70,000 to the employees.
That's
Evon (32:54):
1 million.
Matt (32:55):
1 million.
Yeah.
Evon (32:56):
million.
Okay.
Matt (32:57):
up to 3 million, but,
Evon (32:59):
Let's not be greedy here.
Come on one.
I think one million's Good,right?
Matt (33:02):
1 million into the plant, but there's, there was five
owners here, so it was just, itwas, it was able to get that,
and
Evon (33:07):
Yeah.
Matt (33:07):
multiple, locations and things like that, but a million
dollars in and 70 went to theemployees.
so that's a 93% efficiencyrating, which, you know, that's,
that's a almost a$500,000 taxsavings right there, your net.
Net out the, the contributionsyou had to give to your
employees and you are way aheadof schedule.
Evon (33:24):
Right.
Matt (33:25):
So, again, this is a define that top layer is
considered a defined benefitplan.
There's actually differentversions in there.
so an old school pension that,you know, Ford and GM used to
have before they boughteverybody out.
That's a more of a formalversion.
the cash balance plan is reallya more Casual version really
(33:45):
built for small businesses.
Evon (33:47):
Hmm.
It's
Matt (33:47):
calculated the same as a pension.
Whereas you're shooting for thatfuture benefit, like it's,
you're not gonna pay yourself anincome, we're just, we're just
calculating based on the income.
and then you shut it down whenyou're done.
So the instance of where, maybewe have a partnership and some
of the older partners arelooking to retire and within the
(34:08):
next five years, but they wannastart taking out some more of
the, of the, equity in thecompany or, or cash flow and
they want to put it into A taxsavings tool.
the Cash balance band isfantastic'cause you only really
need it for about three years.
and then you can shut it downand it just rolls right over
into your 401k when you're done.
And so it's again, a much moreflexible version of a pension
(34:29):
plan.
we've had clients where they'vehad to pause because there's
been some sort of industryissue, where there's been a big
change in the industry.
They had a big drop in theirincome and we needed to pause
for a year.
Freeze it for a year and thenturn it back on the next year.
And you're okay doing that sothat you get the flexibility of
the defined contribution plans,which is 401k and profit
(34:52):
sharing, but you get the, themaximum.
These, the, and I'm talking sixdigit contributions
Evon (34:58):
Yeah.
Matt (34:58):
you get into this level, you're the, the older you are,
the more you're able to put in.
So if you're in your forties,you're gonna be able to put in
close to$200,000 or maybe alittle bit more per year when
you're doing all three stacks ontop of each other.
When you get into the, theolder, maybe 60, 65 age, you're
(35:20):
looking at$350,000 or more intothese plans.
And there's ways to get it aboveand beyond that, even with
strategies.
But there's, it, it really comesdown to what is the goal, what
are you trying to do?
What does your tax bill looklike?
Is that what you're trying tofix?
And understand what you'retrying to do with that money.
And then, then you'll be ableto, adjust and pivot and evolve
(35:41):
and add layers as your companybecomes more and more successful
and more profitable.
And those are conversations thatwe have.
Evon (35:47):
I mean, that's really cool, for, for those established
practices that are very mature,consistent cash flow on a, on a
regular basis, meaning therearen't any unanticipated, shocks
to Optometry or COVID likeevents.
Again, probably plan on threeyears though for that cash
balance plan.
To make, to make sure it'srunning, running alongside the
rules.
(36:08):
But after that, you have theflexibility to, to pause it or
freeze it or to, or to shut itdown.
So, really it could be a threeyear temporary, huge
contribution to these plans.
And that's, that's prettysubstantial.
I mean, for, for one tax year,man, that's, that's pretty
substantial there.
okay.
I, I appreciate that.
So we, we've gone over a lot.
We've gone over different profitsharing contribution methods.
(36:29):
We've talked about that 5%minimum contributions and the
importance of reviewing thematch and making sure that's the
most appropriate.
We've talked about adding thatthird layer of the, the cash
balance plan.
Anything else you wanna leavewith the listener in terms of,
reviewing their plans related tothe, to all this, or maybe
deadlines they have to keep inmind now that we're in
September.
Matt (36:49):
deadlines are big.
That's what that was.
You read my mind actually, Evon.
So as we record this, right,we're, we're, we already passed
the, the extension, for, For anS-corp, which is 9/15, that is
also the same deadline forcontributions for previous
years.
For ca cash balance plans,whether you're an S-corp,
whether you're a single member,LLC doesn't matter.
(37:10):
It's always September 15th.
But, that bottom layer, the$23,500, that is.
up by 1231.
Those contributions need to bedone for the most part, by, by,
December 31st.
Okay.
those top two layers, those donot need to be implemented or
(37:31):
contributed towards until theday you file, including
extensions.
again, we just passed the 9/15deadline As we record this, we
Evon (37:41):
2024,
Matt (37:42):
For 2024, Thank
Evon (37:43):
Yes.
Yes.
Matt (37:44):
2024, we just finished implementing a bunch of 2024,
plans where those contributionswere able to offset.
So as long as you file yourextensions, you have all, all
the way up until September 15thto do both the profit sharing
and cash balance plan, and, andcontributions.
Now, it does take.
A few months to get thingsgoing.
(38:05):
You gotta, there's a ramp up, anonboarding phase, so you, you
don't wanna wait till September1st to get'em going.
takes about 60 days to get thosedone.
but those are the deadlines.
So just because we passed thesedeadlines for, you know, October
1st as a safe Harborimplementation, there's ways to
get around that.
It's all about just having theconversation saying, this is
(38:25):
what I need, this is what Iwanna do, and then you create
the plan around it, and then thefollowing year you pivot, make
amendments to whatever you haveto do.
We have a lot of people who missdeadlines.
We have a lot of people who missdeadlines just'cause they waited
just a little bit too long.
Or, you know, when you're abusiness owner, you're.
head is down and you're runningyour business, and then all of a
sudden you look up, you're like,my tax bill is what, and that's,
(38:47):
you gotta have thoseconversations ahead of time if
you can.
We have conversations for yearsbefore just so you know what is
available to you.
And then you have this idea ofwhen do I flip to switch to add
it to my retirement plan stack.
okay just to have thoseconversations earlier.
there's no pressure to havethat.
It's just to understand it.
And it's kind of hard to have todo the research on your own to
(39:10):
figure out what's what, becauseclearly there's a lot that goes
into these equations.
There's a lot of deadlines forevery layer.
And what do you do this and howmuch do you have to give?
It's all about just havingconversations ahead of time.
otherwise you, you might getbehind the eight ball and miss a
major deadline.
Evon (39:25):
Couldn't agree more.
That's, I think that's a greatway to wrap this up here, Matt.
how can people find you and, andfollow you and learn more about
what you're doing?
Matt (39:33):
just over to 401k.expert.
That's our, our landing page.
it gets you some, some casestudies, some analysis on what
you can and can't do, but alsojust gets you right in, in touch
with one of the experts at our,at our company.
so 401k.expert is the, is thelanding page that takes you
right there.
Evon (39:50):
Gotcha.
We'll put all of that into theshow notes as well as our, past
episodes here.
So we'll get that all in theshow notes.
you can reach out to Matt if youhave questions.
You can reach out to me if youhave questions, but for the
listener, really appreciate yourtime and your attention today.
We will catch you on the nextepisode.
In the meantime, take care.
Hey everybody.
Welcome back to the OptometryMoney Podcast.
Where we're helping ODs all overthe country make better and
better decisions around theirmoney, their careers, and their
practices.
I am your host, Evon Mendrin,Certified Financial Planner(TM)
practitioner, and owner ofOptometry Wealth Advisors an
independent financial planningfirm just for optometrists
nationwide.
(00:24):
And thank you so much forlistening.
Really appreciate your time andyour attention today.
And on this episode, I welcomeback to the podcast Matt
Ruttenberg with Life Inc.
Retirement Services.
Matt is a qualified retirementplan ninja and magician for
Optometry practices, and we diveinto profit sharing for 401k
(00:45):
plans in the practice.
And we talk about what in theworld profit sharing is.
The different ways that you cancalculate profit sharing
contributions depending on yourgoal, whether it's to provide a
broad benefit for all employees,whether it's to skew that
contribution as a tax planninglever for the owner, whatever it
is.
We talk about ways to optimizethat profit sharing calculation
(01:07):
for that goal.
We talk about how your 401kmatch factors into the cost and
the math for the profit sharing.
And then lastly, how a cashbalance plan fits and integrates
together with that profitsharing contribution.
I think you're gonna get a lotoutta this episode.
I will put all of Matt's contactinformation and our prior
episodes in the show notes,which you can find by just
(01:28):
scrolling down in whichever appyou're using.
Uh, or you can find that at ourwebsite, optometrywealth.com, at
the Education Hub over there.
If you have any questions atall, reach out to me.
At podcast@optometrywealth.comand if you'd like to.
And if you're thinking aboutthese things and you're curious
(01:49):
about what it's like to workwith a financial planning firm
that specializes in Optometryand Optometry practice owners,
reach out.
I'll put a link in the shownotes to our website.
You can schedule a nocommitment, no pressure
introductory call.
We can talk about what's on yourmind financially and how we help
ODs all over the countrynavigate those same decisions
and more.
And without further ado, here ismy episode with Matt Ruttenberg.
(02:17):
Welcome back to the OptometryMoney Podcast.
I am your host, Evon Mendrin,and I am excited to be joined
once again by Matt Ruttenbergwith Life Inc.
Retirement Services.
Matt, thanks for coming back on.
Matt (02:27):
Yeah, Evon, thank you so much for having me on.
Always a pleasure speaking withyou.
Evon (02:31):
Yeah, we're at least, what, three or four times
already?
So are you, I think you'reofficially a friend of the
podcast.
Is that kind of how it works?
Matt (02:38):
Yeah, I got my, my official button,
Evon (02:40):
There you go.
Matt (02:41):
I appreciate it.
Evon (02:42):
There you go.
Yeah.
There we go.
Well, I, I'm excited to chatabout, What I think is a really
important planning lever forpractice owners, especially as
they get out of the Cold Startor recent purchase phase,
they're seeing cash flow improvein the practice and they're
wondering, okay, what can we doto not only save for our own
(03:02):
financial independence andretirement, but also plan
practically for taxes?
And that is profit sharing in401k plans.
And I see, I tend to see there'sa, a, a.
Pretty good size gap ofeducation when it comes to
profit sharing and 401k plans.
in terms of what it is and howit works and how it's all
calculated and, very often forme.
(03:24):
I know you've described it,Matt, as, these retirement plans
as sort of this upside down cakewith, with different layers.
most people are familiar withthe employee contribution
amounts and 401k plans and theamount that each person,
including the owners, can put inas an employee.
In, in there, which is$23,500.
If you're under 50, there's anadditional bump if you're over
(03:46):
50.
But there's, there's not alwaysa good understanding of that
next layer of the cake, which isprofit sharing.
Matt (03:54):
Mm-hmm.
Evon (03:55):
describe for the listener what, what is profit sharing in
a 401k plan?
Matt (04:00):
Yeah, great, great question.
Very in depth.
lots of variables, lots ofwheels turning.
but let's go back to that upsidedown three tiered wedding cake
that you, you brought up, andit's an upside down three tiered
wedding cake or, or a pyramid,if you will.
The bottom layer is that 401(K),which is considered employee
contributions or deferrals.
So if you've had a 401(k) in thepast through a day job or
(04:21):
something, and you submit, Iwant to do 10%, I wanna do 5%,
that's a deferral.
And it's withheld outta your,your pay your paycheck, right?
Your W2.
the next level up on thatpyramid is employer
contributions and profit sharingis a portion of that.
The other portion is the match,like the employee match.
Now there's various differenttypes.
(04:44):
sharing.
it there, the most basic form iscalled pro rata.
and then there's other advancedthat we're gonna dive into here
today, but this is the portionthat comes directly from the
employer, the employer account.
So it does not pass throughpayroll.
It comes outta the profits ofthe business.
And then it's a, identifiedamount that goes to.
(05:05):
employees.
but hopefully the goal is to getmost to the employer to where
they're having, most of thosecontributions.
that goes up to something calleda 415 limit.
Okay?
So the 415 limit, let's go backto that upside down three tiered
wedding cake, right?
bottom layer, that's 23 5.
$23,500 that you mentioned for2025, and then you go up that
(05:27):
next step.
Those two layers together, it'scalled the 415 limit tax code
415, and that can get you up to$70,000.
So technically you don't, you'renot stuck at that 23 5 plus a
match.
You can go all the way up to$70,000 doing both those layers
in that pyramid.
Evon (05:47):
Gotcha.
$70,000 is the total combinedamount you, each individual can
get into their 401k plan,regardless of which of these
sources it comes from.
And, one of my recent episodeson the podcast, and I'll, I'll
throw link to this in the shownotes, was.
key tax levers you can pullwhen, when doing tax planning
and looking at, the tax returnor, or if we're looking
(06:09):
proactively at a tax projectionand saying, what are the key
parts of that return we canimpact or influence to have
really good results, reallyhigh, high impact results and.
These profit sharingcontributions, depending on the
demographic demographics of thepractice, depending on how
strategic we are with theowner's wage.
these profit sharingcontributions are really
(06:32):
Impactful way to, to hit thoseplanning levers.
And so that's one of the thingsI mentioned in that episode.
And so for those of you who arelistening, potentially thinking
about how can we improve our owntax planning, listen closely
here.
I, I think this is gonna be areally helpful conversation for
you.
And so, Matt, as you talk aboutthat, you mentioned there's a
couple ways to calculate howexactly these profit sharing
(06:53):
contributions work, because itdoes need to go into all
employee accounts.
it's not just something for theowners.
The, the golden rule here is youcan't discriminate in favor of
only the owners or the highlycompensated employees.
So how does that work?
You know, the, let's say theowner wants to talk to you, they
want to think about doing theseprofit sharing contributions.
(07:16):
What are the different ways theycan calculate those?
Matt (07:21):
So let's kind of go back to that most basic version.
I called it pro rata, and that'swhat most people, most business
owners, consider as their onlyoption, right?
So whatever you give yourself,which is up to 25% of your
salary, assuming you're an Scorp.
is what you can give to yourselfabove and beyond that 23 abo and
beyond the, the bottom layer ofthe, upside down retirement plan
(07:44):
stack.
pro rata is you have to giveyour employees that 25%.
It's basically the most simpleform of employer contributions,
which I, I don't remember thelast time we've done that.
And the reason we is the goalonce a, once you go above and
beyond the match, 99% ofbusiness businesses out there.
(08:04):
Are looking to now say, I wantto maximize my own
contributions.
Evon (08:08):
Yeah.
Matt (08:08):
everything, I'm, I'm being fair to my employees.
I'm giving'em a match.
I'm giving'em the 401k.
There's a Roth component.
The investments were fantastic,but the most basic form is prota
And Most of the, I guess, theonline direct to consumer,
programs that are out there,they're more boilerplate
versions.
I would, is what I call'em.
those are mostly gonna be the,the pro-rata and it's not
(08:33):
something that's favorable tothe owner.
It's very favorable to youremployees.
Evon (08:37):
And that's, that's something I was mentioning to
you, Matt before we startedrecording, was that very often
with new clients they'll have, a401k plan from x, y, z
tech-based platform, and thenpro rata profit sharing and not
really sure what that means orwhy that was selected, why
that's the case.
And so.
I think there's a lot of roomfor education to just ask, okay,
(08:58):
what is the goal here?
If you do do profit sharing,what, what's the goal for that
profit sharing?
What do you wanna get out of it?
And let's make sure that, youhave the, the type or the method
of profit sharing that makes themost sense for that goal.
And so, pro rat, it seems likeit's the, it's the simplest,
the, the very basic, it's thesame percentage essentially
across all employees that you'regonna give to yourself as the
(09:19):
owner, right?
And, Drawbacks are that it'sexpensive because you need to
apply that same percentageacross the board to to all
employees.
And so I guess if your goal isto do that, if that's what you
want out of profit sharing, thenthat will accomplish that.
But very often, like youmentioned, we're trying to use
that as a tax planning and sayan investing tool for, for the
(09:40):
owners very often, or at leastthe, the associates as well.
And so outside of that verybasic pro rata method, what are
some of the other calculationsthat they might consider?
Matt (09:51):
Yeah.
And, and I'm gonna, I'm gonnakind of lump all of those into
one overarching category, andit's called New Comparability.
Evon (09:59):
Okay.
Matt (09:59):
new comparability has many, many, variables that we
can work off of.
And the, the whole point is, istargeting, that's the key word,
is targeting.
we still go through your annualtesting.
like you mentioned,non-discrimination issues.
We, we, we can't.
We can't cut out, for the mostpart, any employees inside of a
(10:21):
qualified plan.
So this is a qualified plan.
Profit sharing, 401(k).
It's considered qualified.
once we get to this point, andwe always ask our clients two,
two questions.
Number one, what is your numberone priority?
That's absolutely number one.
And the question, the answer ismultiple choice.
Is it you?
As the owner, like are youtrying to stockpile into
retirement and tax save or is itfor your employees, or is it
(10:43):
both?
And if someone says, myemployees are my number one
priority, we might go with thepro rata route, but 99% of the
time the answer's gonna bemyself.
I'm doing this for taxes.
I've put in a lot of blood,sweat, and tears in this
business.
It's my baby.
Now I want to reap some of therewards off of my profits that
have now shown up and my taxbill used.
(11:04):
Right?
So.
The overall concept is we wantthe owners to get that money and
we run off of these efficiencyratings.
But, out of the, let's say aclient says, Hey, I got a$50,000
that I need to get off the booksbecause my CPA is telling me
that I have a, a, a tax bill Ineed to get rid of, or a hundred
thousand or$200,000.
And, the goal is to get most ofthat money in the hands of the
(11:27):
business owner, the variablesinvolved.
All these different kinds ofcalculations.
We run'em from all thesedifferent angles.
Age is a big factor in this,age, age weighted.
So the closer your employees areto, closer to retirement, the
more they're gonna get.
And then also at the same time,tenure with the company, that's,
(11:50):
that goes into the, thecategory.
So let's say you are the oldestperson in the room.
For example, so you as the ownerare the oldest person in the
entire company.
That is phenomenal.
We're able to get youabsolutely.
The mass majority, we'reshooting for maybe 80%
efficiency rating where 80% ofthe money goes to you and 20%
goes to the employees.
(12:10):
however, on the other end of it,let's say you are the youngest
person.
In, in the, in the, in yourcompany and all of your staff is
older than you and they makepretty good money, that's gonna
be more that you're gonna haveto give to them.
So that's one of the variables,but it's a very, very, very
important part of the equationon why and when and what type of
(12:30):
calculation.
But let's say there's a range.
so let's say you're kind ofright in the middle.
Your age is, let's say 40 yearsold, and then you have
60-year-old employees, and thenyou have 20 year employees.
And now we've saiddiscrimination is not part of
the equation with these, but inreality, what we can do is we
(12:51):
can target the youngest personin your company who's also maybe
paid the least.
And then because they're so faraway from retirement, they're
not gonna get as much and evensout.
Evens out the entire, uh,employee pool with their con
contributions.
Evon (13:06):
when you say Target, what does that mean?
I, I understand what you mean,but just kind of for the
listener.
Like, what, what does that mean?
Matt (13:11):
Yeah.
And it's kind of, it goesagainst what a lot of people
think of retirement plans is thefairness rule annual, I used to
say this all the time.
Annual testing is fairness.
Like you gotta give something toyour employees for you to give
something outta your, outtayourself or give something to
yourself.
And, when you do newcomparability.
That kind of goes out the door.
(13:34):
You can target individuals andsay, I want to take care of this
person the most
Evon (13:38):
Hmm.
Matt (13:38):
my mission critical key employee.
On paper, on the on thecalculation, and we can change
that year to year.
So every time we do a cal a aprofit sharing calculation, we
can say we want employee numbersix to reap the benefits this
year and next year we wannaswitch it over to employee
number two, because maybe one ofyour older staff fell off, they
(14:00):
quit, they retired, whatever itis.
But we're able to actually say,I want this person to get.
Most of the benefits, but sincethey're the youngest and least
paid, the equation turns out tobe the same as one of the older,
so you can do that.
Evon (14:15):
Interesting.
Matt (14:16):
you can do is quite, quite interesting where let's say you
have a larger company.
You have, we've done, weactually just finished up a
couple plan designs on this one,it was a doctor's group.
Okay.
So this is pretty relevant, tothe podcast where we had a group
of, doctors, medicalprofessionals at the top, and
(14:38):
they were the owners.
then we had some physiciansassistants in the middle.
And then we had a, a big chunkof staff.
were able to remove wholedepartments from eligibility,
from profit sharing.
So where they still get thematch.
Like we, if we're using the SafeHarbor 401k on the bottom layer,
but we are only targeting the,the physician's assistants and
(15:00):
the ownership.
And there's some, there's somedefinite, equations in there
that we want, we'd like to see25 people in that middle group
if we, or in the total,eligibility.
But you're actually able toremove full departments out of
your equation.
get more of those dollars overto the ownership.
Evon (15:21):
So you're able to segment out your employees into
different groups.
I mean, could it even be likeownership group, non od, non
ownership od group, and thenstaff, like can you even segment
it based on roles like that?
Matt (15:33):
Yeah.
So, you know, thinking of,Optometry industry, right?
You have the, the, the doctorsat, they're, most of the time
they're the owners.
Evon (15:41):
Yeah.
Matt (15:42):
they're also considered highly compensated employees,
and that definition is theyeither own 5%, it could be a
spouse, or you pay them over$155,000.
owners and highly
Evon (15:54):
Hmm.
Matt (15:54):
employees are, are a full category.
Okay.
those are easy.
The IRS doesn't care abouthighly compensated employees.
They only care about thenon-high compensated employees
in terms of fairness.
So we would say those are onecategory and then we'd clump, a
bunch of other ones together,which would be the, the, the
physician's assistants or, or,Maybe even like nurse
(16:15):
practitioners in some medicalfields, things like that.
And then the bottom would be,maybe the receptionist desk or,
or back office team, that youcan remove that.
So those tend to need to havelarger, employee pools, maybe 40
to 50.
and then underneath that we'rejust doing the targeting.
if it's a smaller company.
Evon (16:35):
Gotcha.
And, to, to highlight your pointabout why age is important.
In terms of the testing offairness, in, in whichever way
you need to do that, whetherit's targeting, for example,
part of the reason that age isimportant there is because as
you mentioned.
A younger employee, or just likea younger optometrist, has a
much longer time to save andinvest towards the retirement
(16:56):
goal.
And you would need to put in,let's say hypothetically, the OD
is trying to invest towards agoal.
Well, if you have more time,you, you, you can put in less
dollars into the account eachand every month.
And still reach that goal.
Someone that's much older isgoing to need to put in much
more over a shorter amount oftime in order to reach that same
(17:16):
goal.
And so that same sort of, we'llcall it time value of money math
is essentially that same conceptis working here for the benefit
of the older doctors or theolder owners.
Right.
Matt (17:29):
Yeah,
Evon (17:29):
Uh.
Matt (17:30):
similar with that.
With that new comparably, newcomparability, age-based, it's,
it's like, yeah, the older youare, the more you can put into
it when you're targeting andthings like that.
so very, very similar equation.
Just a little bit more on thebackend when, when you're going
to the defined benefit side ofit.
Evon (17:46):
Gotcha.
Gotcha.
Okay.
This is helpful.
And again, this is if we aretrying to skew that profit
sharing contribution as much aspossible, if that's the goal, to
the accounts of the owners.
As we're using this as a taxplanning lever and an investment
lever for the owners, this isone really great way to do that.
And how does the, the wage ofthe owners fit into this too?
Matt (18:09):
Yeah, very important actually.
So we, it has to do with yourentity structure.
Okay.
Evon (18:15):
Yep.
Matt (18:16):
LLC, are you follow as an S corp?
Are you falling as a C corp andS-corp is very, very important.
and we generally have incomeplanning meetings before the end
of the year everything.
Is based on your W2 if you filesan S corp.
if you file an S Corp and youhave, let's say you don't pay
yourself a salary at all, justtaking distributions.
(18:39):
There is no income to calculateany of these con You can't do
the bottom layer with a 401k andyou certainly can't do any
profit sharing, contributionseither when you are operating as
a schedule or as a S corp,you're operating as, as s an LLC
or, so in a single member LLCscommon or even just a sole
(18:59):
proprietor even.
And, and you know, a lot ofpeople who just outsource their
staff or they use staffingcompanies or things like that.
It's based on your net, your netincome after expenses and things
like that.
And that's what thosecalculations are based on.
So, again, the bottom layer 235, as long as you're paying
yourself$23,500, you can putthat towards the 401k portion.
(19:22):
The profit sharing, let's assumeyou're an S corp, is up to 25%.
So if you are paying yourself.
A hundred thousand dollarssalary, but maybe you have a
$400,000 total profit.
we don't care about the 400, we
Evon (19:36):
Yeah.
Matt (19:36):
about that$100,000.
So you're gonna do 25% of 100$25,000 contribution into your
profit sharing plan is whatyou're allowed to do.
Evon (19:45):
Got it.
And so it's really important totest.
If we're running these profitsharing contributions with the
administrator, for example,Matt's, Matt's business over
there, it's important to testout different wages to see how
that impacts the, these results.
Because there, there's sort ofthis, there's always this
tension here between, keepingthe wages down towards the lower
end of what's sort ofreasonable, reasonable wage for
(20:06):
an S corp for, for tax planningpurposes.
'cause we're trying to limitthose Social Security Medicare
taxes.
But on the other hand, forretirement plan contributions
like profit sharingcontributions.
The, the, the tension's goingThe other way is we may want to
increase those wages to, to getmore of that profit sharing
contribution into the account ofthe owner.
And so it, that's a reallyimportant thing to test and to,
(20:29):
and to see what makes the mostsense.
'cause our, you know, for themost part, the owners are tr I
think, sort of trained at thispoint a lot of the times to pay
as low of a wage as possible.
To their detriment at times.
And when I'm running a taxprojections and working with,
the tax professional, we want tosee if we're, if we get a profit
(20:52):
sharing number from anadministrator, for example, we
want to see if we increase wagesand do this profit sharing
contribution.
What does that do to the taxoutcome, including the extra
FICA taxes, but.
It will, it, it, it may stillvery well make sense even if you
have to pay more into Socialsecurity Medicare taxes.
(21:12):
So keep that in mind.
Owners like that, that wage isreally important and there's
that tension there to keep itlower for certain tax planning
reasons, but also to potentiallyincrease it for other retirement
planning reasons.
And you want to make sure you'renot holding on too, too hard or
too strongly to an artificiallylow wage when it doesn't make
sense to you.
(21:32):
But I, I'm really glad youbrought that up.
Or you're able to, shed morelight on that.
I think that's really important.
And so the age, it seems, isreally important.
The, the wage is reallyimportant'cause it's, it's
limited to that 25% of wages.
The, though in hearing you talkabout the targeting, you know,
(21:53):
trying to target a, a, maybe a,a younger employee, it does
sound like even if the ownerisn't substantially older than
the average of the otheremployees, it it's, it does
still seem like the math canfavor that owner in a new
comparability.
Like, do you see, like, do yousee, or do you have like general
(22:14):
guidelines to say like.
If you're not X amount of yearsolder than the average, you
know, like what?
Do you have anything to add tojust sort of how young the owner
can be to where it still oftenmakes sense or doesn't make
sense?
Or is it just based on eachindividual demographic?
Matt (22:31):
So every, and this is something that I'm, I'm trying
to get out, out there, into the,into the world is, is every
business is completelydifferent.
Evon (22:38):
Yeah.
Matt (22:39):
design should be different.
And that's why you don't wannado these boilerplate because
you're not.
Cost ends up being a major partof the equation.
Just like anything when you're,when you're searching for
payroll or you're searching forbookkeeping, you're like, what's
the overall cost?
What's the cost?
but a lot of times they'relooking at like the
administration fee and therecord keeping fee and they're
like, okay, what is that there?
(23:00):
There's a huge part of thatequation that is often lost in.
How much, obviously taxstrategy, right?
How much, what is your net taxeslike you said earlier.
you know, you increase yoursalary so you can do
contributions or vice versa?
It's this big balance andeverything has a cost and
everything is, are you in theblack, you in the red.
That's everything that'sbusiness in, in, in a nutshell.
(23:22):
But, at the end of the day.
You have to give too much moneyto your employees.
That's an additional cost I'veseen very much where, I've had
business owners who are workingwith somebody and that upside
down three tiered wedding cakethat we brought up a few times.
Every layer needs to be designeda certain way, and we'll get in
that a little bit more here in aminute in order to maximize a
(23:42):
layer above it.
But if you don't, if you don't,If you don't make that design as
efficient as possible, you'rethrowing, I've seen upwards of
$50,000 too much to theiremployees because they didn't
have the proper bottom safeharbor version
Evon (23:57):
Mm-hmm.
Matt (23:58):
they're giving a match versus a non-elective to
contribution, which we'll talkabout here in a minute, but.
That's very, very important.
but going back to your questionon, you know, what is a good
ballpark age?
I'll give you an example.
this was a dentist groupactually.
And and, one of these, gentlemenheard me on a podcast, and they
wanted to do their profitsharing contributions and.
(24:19):
They owned a few buildings andthey were in their thirties, I
think it was.
but they had some staff in theirlike mid sixties and that just
didn't work.
In order for him to get to thatseven, that,$70,000 415 limit
that we mentioned earlier, theyhad to give$55,000 to their
employees.
That's clearly not efficient.
That's
Evon (24:39):
Right.
Matt (24:39):
the red.
And we, they, they said, don'tdo that.
What we helped them identify isthey owned the building, so they
did some sort of costsegregation studies to help
offset taxes instead.
But, what you, what you didthere was you, you said, okay,
I'm the youngest person in theroom.
That's not gonna work.
Evon (24:54):
Hmm.
Matt (24:55):
times outta 10, that's not gonna work if you're the
Evon (24:56):
Yeah.
Matt (24:57):
person in the room.
if you have one person aboveyou, even in, let's say you're
40 years old and you have a60-year-old, but everybody else
is around your age or younger,maybe just a year or two older,
that's fine.
That will most certainly workout.
it's so if, if we have somebodyto target, somebody else, a non
highly compensated employee totarget, other than the
(25:19):
65-year-old staff member.
Then the numbers most likelywill work out, and it's
Evon (25:24):
Gotcha.
Matt (25:25):
the efficiency rating.
Are we in the red or in theblack?
If you're in
Evon (25:28):
Gotcha.
Matt (25:29):
it works.
If you're not, you just don't doit.
Evon (25:31):
Gotcha.
Okay.
That makes sense.
That definitely makes sense.
And short of firing allemployees and only hiring
employees that are much youngerthan you, it really just depends
on the demographics of every, ofevery practice individually and
the, and strategic planning onthe wages to see what's possible
and how we can make the U themost use of that 401k plan,
(25:53):
depending on the goals of theowner.
And you mentioned something I, Iwant to get into this.
You mentioned deciding onwhether you do a match or
something different.
And most often, again, goingback to like basic programming
or.
A lot of the onboarding sessionswith a lot of these, these tech
providers on the 401k side, mostowners tend to skew towards
(26:14):
picking a match, with theunderstanding that it might be
lower cost or incent, itincentivizes employees to also
contribute.
There's a lot of good reasons tohave a match.
But you mentioned that sometimesit may not make the most sense
if the owner's going to be dodoing consistent profit sharing.
Can you talk about that?
What, what's the issue here?
Matt (26:32):
Yeah.
And, and again, this kind ofgoes to those two, I I mentioned
the first question that we askedin the beginning.
It's, you know, what is thegoal?
Who's the, what's the priority,I should say, owner, is it the
employees?
And the second question is, howmuch do you wanna allocate
towards this?
And if we know that they want tomax out as much as possible,
(26:53):
we're going to design it oneway.
If we are not sure we're gonnadesign it another way.
And a lot of people, I thinkit's due to maybe, a lack of
education from the provider
Evon (27:04):
Yeah.
Matt (27:05):
it's match versus a contribution.
When does that make sense?
When does it not?
and the other part of thatequation is have you pulled your
employee pool?
If you offer a 401k, are theygonna contribute too?
Industry is a big part of thisequation too.
you know, whether they're gonnacontribute or not.
And, you know, sometimes if theysay, I, no one's gonna
(27:26):
contribute, then we'll go withthe match.
Because if no one'scontributing, there's no match,
right?
No less out of pocket.
But, most of the time in themedical field, we're gonna get a
larger contribution rate theemployees.
So.
At that bottom layer that we'vetalked about a couple times now,
when you add profit sharing ontop and the profit sharing is
(27:49):
discretionary from year to year,right?
You don't, if you have a greatyear, you use it.
If you don't, you don't have touse it.
But let's say you wannaconsistently use it'cause you
have good profits every year.
And, what we're gonna do iswe're going to, there's a,
there's a gateway.
Between bottom layer and the toplayer.
So what I mean by that isthere's a 5% gateway.
(28:11):
Once you start targetingindividuals using the new
comparability, which 95% of thetime we're doing new
comparability, we're not doing,Pro rata.
Evon (28:19):
Yeah.
Matt (28:19):
You're going to have to give everybody the bare minimum
of a 5% contribution from your,from the employer.
Okay?
Bare minimum.
And then everybody might get alittle bit more.
Okay?
So.
Certain types of safe Harbor401(k)s on that bottom layer go
towards that 5%.
So it's called a new, excuse me,it's called a non-elective safe
(28:41):
harbor.
And it's a 3% that you give toeverybody whether they
participate or not.
It's just like a bonus that yougive to everybody.
they can put in 20% contributionor zero.
Everybody gets the same 3%, butthat 3% goes towards.
5% minimum on profit sharing.
So now you only have to give'eman extra 2% if you do a match
(29:05):
versus the non-elective you'restacking, let's say it's a 3%
match or a 4% match, you'restacking it on top of the five,
and now you gotta give'em eightor 9% of their annual salary
instead of just five.
So that's just a really goodexample of what we need to do to
make sure and really understandwhat the goal is.
(29:26):
And that's something you canchange and amend from year to
year because maybe your profitwent went higher, you're not in
growth mode, you're in, you'rein now more a stable company and
you're just trying to getprofits instead of maybe expand
into other offices or somethinglike that.
That's very important tounderstand what those goals are,
through those questions that weask.
but it is very, very importantthat.
(29:48):
If you're gonna do profitsharing every year, a match is
probably not the best way to doit.
A non-elective contribution goestowards the profit sharing
calculations, which means lessto the employees and a higher
efficiency rating that goes tothe employer.
Evon (30:03):
Yeah, I mean that's, that is a great overview of this and.
Very often it's thought of the3%, non-elective contribution
where you're depositing toeveryone's accounts.
The business, I should say isdepositing, regardless of
whether employees contribute ornot.
Very often that's seen as themore expensive option, right?
Because you may have employeesthat aren't contributing or are
(30:25):
not contributing 3%, and thenyou're still doing that.
However, as you mentioned, likeif your goal then is to
consistently use profit sharing,that may be the lower cost
option.
If your goal is to use thatprofit sharing contribution
consistently, and so thatdecision of we are going to use
profit sharing on a, on an offand on, or just on a regular
(30:46):
basis, we have the cash flow todo it.
That's an instant trigger totalk to your administrator and
say, okay, which matching styleor which contribution style and
the safe harbor plan makes themost sense.
And I think that step is missedVery often it is just talking
with the administrator or havingan administrator to talk to in
the first place.
And figuring out, okay, I know Iwant to do profit sharing, which
(31:08):
style of profit sharing makesthe most sense, but also let's
review this match and make surethat my safe harbor match or the
3% is the best fit for mypractice, knowing what I wanna
do.
Great, great overview.
Important for each listener tojust review that for yourself,
to make sure that you're gettingthe most outta your 401k plan.
Ultimately, that's what this isall about, based on what you're,
(31:30):
you're trying to use it for.
So we have that 5% minimumcontribution gateway rule.
Really important.
We've talked about the differentmethods.
one final thing I just wouldkind of want to hear from you
is, yeah, let's say we have amore mature practice now.
we have very consistent cashflow.
We've gone through the$70,000already for the, the profit
(31:50):
sharing side, in the 401k side.
You know, that owner or a groupof owners may be wondering,
okay, what's next?
Like, what, what can we do?
What's next?
Maybe they're preparing for aneventual exit of one of the
owners, coming up soon.
So maybe there's a particularbig tax planning goal coming up.
tell us about a cash balanceplan and, and how that might fit
(32:12):
in with the profit sharing.
Matt (32:15):
Yeah, that's, so this is where the efficiency I, I've
been saying the efficiencyrating a few times, efficiency
rating, just to kind of sum thatup, is how much do we have to
give to the employees and howmuch does the owner get to take
home with them?
And when you start adding thatthird layer, this is that third
layer on the on the retirementplan stack.
The efficiency rating goesthrough the roof.
(32:35):
Okay.
I'm talking 90% or more.
Okay.
the, the, the one plan designwhere we were able to segment
out, for example, this is a, agreat case study.
Very, very efficient.
where we were able to put amillion dollars total into the
plan per year, and we only hadto give$70,000 to the employees.
That's
Evon (32:54):
1 million.
Matt (32:55):
1 million.
Yeah.
Evon (32:56):
million.
Okay.
Matt (32:57):
up to 3 million, but,
Evon (32:59):
Let's not be greedy here.
Come on one.
I think one million's Good,right?
Matt (33:02):
1 million into the plant, but there's, there was five
owners here, so it was just, itwas, it was able to get that,
and
Evon (33:07):
Yeah.
Matt (33:07):
multiple, locations and things like that, but a million
dollars in and 70 went to theemployees.
so that's a 93% efficiencyrating, which, you know, that's,
that's a almost a$500,000 taxsavings right there, your net.
Net out the, the contributionsyou had to give to your
employees and you are way aheadof schedule.
Evon (33:24):
Right.
Matt (33:25):
So, again, this is a define that top layer is
considered a defined benefitplan.
There's actually differentversions in there.
so an old school pension that,you know, Ford and GM used to
have before they boughteverybody out.
That's a more of a formalversion.
the cash balance plan is reallya more Casual version really
(33:45):
built for small businesses.
Evon (33:47):
Hmm.
It's
Matt (33:47):
calculated the same as a pension.
Whereas you're shooting for thatfuture benefit, like it's,
you're not gonna pay yourself anincome, we're just, we're just
calculating based on the income.
and then you shut it down whenyou're done.
So the instance of where, maybewe have a partnership and some
of the older partners arelooking to retire and within the
(34:08):
next five years, but they wannastart taking out some more of
the, of the, equity in thecompany or, or cash flow and
they want to put it into A taxsavings tool.
the Cash balance band isfantastic'cause you only really
need it for about three years.
and then you can shut it downand it just rolls right over
into your 401k when you're done.
And so it's again, a much moreflexible version of a pension
(34:29):
plan.
we've had clients where they'vehad to pause because there's
been some sort of industryissue, where there's been a big
change in the industry.
They had a big drop in theirincome and we needed to pause
for a year.
Freeze it for a year and thenturn it back on the next year.
And you're okay doing that sothat you get the flexibility of
the defined contribution plans,which is 401k and profit
(34:52):
sharing, but you get the, themaximum.
These, the, and I'm talking sixdigit contributions
Evon (34:58):
Yeah.
Matt (34:58):
you get into this level, you're the, the older you are,
the more you're able to put in.
So if you're in your forties,you're gonna be able to put in
close to$200,000 or maybe alittle bit more per year when
you're doing all three stacks ontop of each other.
When you get into the, theolder, maybe 60, 65 age, you're
(35:20):
looking at$350,000 or more intothese plans.
And there's ways to get it aboveand beyond that, even with
strategies.
But there's, it, it really comesdown to what is the goal, what
are you trying to do?
What does your tax bill looklike?
Is that what you're trying tofix?
And understand what you'retrying to do with that money.
And then, then you'll be ableto, adjust and pivot and evolve
(35:41):
and add layers as your companybecomes more and more successful
and more profitable.
And those are conversations thatwe have.
Evon (35:47):
I mean, that's really cool, for, for those established
practices that are very mature,consistent cash flow on a, on a
regular basis, meaning therearen't any unanticipated, shocks
to Optometry or COVID likeevents.
Again, probably plan on threeyears though for that cash
balance plan.
To make, to make sure it'srunning, running alongside the
rules.
(36:08):
But after that, you have theflexibility to, to pause it or
freeze it or to, or to shut itdown.
So, really it could be a threeyear temporary, huge
contribution to these plans.
And that's, that's prettysubstantial.
I mean, for, for one tax year,man, that's, that's pretty
substantial there.
okay.
I, I appreciate that.
So we, we've gone over a lot.
We've gone over different profitsharing contribution methods.
(36:29):
We've talked about that 5%minimum contributions and the
importance of reviewing thematch and making sure that's the
most appropriate.
We've talked about adding thatthird layer of the, the cash
balance plan.
Anything else you wanna leavewith the listener in terms of,
reviewing their plans related tothe, to all this, or maybe
deadlines they have to keep inmind now that we're in
September.
Matt (36:49):
deadlines are big.
That's what that was.
You read my mind actually, Evon.
So as we record this, right,we're, we're, we already passed
the, the extension, for, For anS-corp, which is 9/15, that is
also the same deadline forcontributions for previous
years.
For ca cash balance plans,whether you're an S-corp,
whether you're a single member,LLC doesn't matter.
(37:10):
It's always September 15th.
But, that bottom layer, the$23,500, that is.
up by 1231.
Those contributions need to bedone for the most part, by, by,
December 31st.
Okay.
those top two layers, those donot need to be implemented or
(37:31):
contributed towards until theday you file, including
extensions.
again, we just passed the 9/15deadline As we record this, we
Evon (37:41):
2024,
Matt (37:42):
For 2024, Thank
Evon (37:43):
Yes.
Yes.
Matt (37:44):
2024, we just finished implementing a bunch of 2024,
plans where those contributionswere able to offset.
So as long as you file yourextensions, you have all, all
the way up until September 15thto do both the profit sharing
and cash balance plan, and, andcontributions.
Now, it does take.
A few months to get thingsgoing.
(38:05):
You gotta, there's a ramp up, anonboarding phase, so you, you
don't wanna wait till September1st to get'em going.
takes about 60 days to get thosedone.
but those are the deadlines.
So just because we passed thesedeadlines for, you know, October
1st as a safe Harborimplementation, there's ways to
get around that.
It's all about just having theconversation saying, this is
(38:25):
what I need, this is what Iwanna do, and then you create
the plan around it, and then thefollowing year you pivot, make
amendments to whatever you haveto do.
We have a lot of people who missdeadlines.
We have a lot of people who missdeadlines just'cause they waited
just a little bit too long.
Or, you know, when you're abusiness owner, you're.
head is down and you're runningyour business, and then all of a
sudden you look up, you're like,my tax bill is what, and that's,
(38:47):
you gotta have thoseconversations ahead of time if
you can.
We have conversations for yearsbefore just so you know what is
available to you.
And then you have this idea ofwhen do I flip to switch to add
it to my retirement plan stack.
okay just to have thoseconversations earlier.
there's no pressure to havethat.
It's just to understand it.
And it's kind of hard to have todo the research on your own to
(39:10):
figure out what's what, becauseclearly there's a lot that goes
into these equations.
There's a lot of deadlines forevery layer.
And what do you do this and howmuch do you have to give?
It's all about just havingconversations ahead of time.
otherwise you, you might getbehind the eight ball and miss a
major deadline.
Evon (39:25):
Couldn't agree more.
That's, I think that's a greatway to wrap this up here, Matt.
how can people find you and, andfollow you and learn more about
what you're doing?
Matt (39:33):
just over to 401k.expert.
That's our, our landing page.
it gets you some, some casestudies, some analysis on what
you can and can't do, but alsojust gets you right in, in touch
with one of the experts at our,at our company.
so 401k.expert is the, is thelanding page that takes you
right there.
Evon (39:50):
Gotcha.
We'll put all of that into theshow notes as well as our, past
episodes here.
So we'll get that all in theshow notes.
you can reach out to Matt if youhave questions.
You can reach out to me if youhave questions, but for the
listener, really appreciate yourtime and your attention today.
We will catch you on the nextepisode.
In the meantime, take care.
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