The Woulda, Coulda, Shoulda of retirement tax planning

I was thinking recently about the late Shel Silverstein (September 25, 1932 – May 9, 1999). He was an incredibly talented Chicago guy whose creativity reached across the socio-economic spectrum as a poet, singer-songwriter, musician, composer, cartoonist, screenwriter and author of children’s books.

(And no, dear, it wasn’t about me running out and getting a tattoo like the one pictured here depicted from an illustration in Shel Sllverstein’s classic children’s book, The Giving Tree. The picture itself and others appeared in writer Cheryl Rainfield‘s  blog post, Literary Tattoos

Rather, I was recalling his Woulda-Coulda-Shoulda poem which goes like this:

All the Woulda-Coulda-Shouldas
Layin’ in the sun,
Talkin’ ’bout the things
They woulda coulda shoulda done
But those Woulda-Coulda-Shouldas
All ran away and hid
From one little Did.

Why now? It’s because it’s tax time, and it’s do late to do tax planning – retirement or otherwise – for last year. And for many business owners and plan sponsors, waiting under later in the year to plan for 2010 may be too late. Starting now can make a big difference and perhaps avoid some of the situations we see every December:

  • Not Enough Time To Maximize 401(K) Contributions. Adopting a 401(k) plan in the latter part of the year may not give an employee enough time to maximize his or her own contributions. Remember 401(k) contributions must be elected in advance and withheld by the employer. A December plan adoption only provides December payroll as a basis for employee deferral.
  • Not Enough Compensation. Many owners/employees of S-Corporation minimize W-2 compensation for payroll tax reasons. The balance of their income goes on their K-1s. However, only W-2 compensation can count for retirement plan purposes. Minimizing W-2 income can also minimize retirement benefits.
  • Timely Notice Not Give To Employees. Tax planning is a time-sensitive activity, and sometimes notices to employees must be made in order to achieve desired results. For example, an employer sponsoring a SIMPLE must give its employees notice of the plan provisions and employer contribution levels, including any plan changes, at least 60 days prior to the start of the next calendar year. An employer with a SIMPLE should keep November 1, 2010 in mind if a different plan type is intended in 2011.

So let me leave you with this. It isn’t anywhere close to Woulda-Coulda-Shoulda, but, hey, I’m just a pension guy:

Pension plan procrastination perils proper personal planning.


Link to original post

Avatar

Leave a Reply