How Biden’s retirement plans could save small business workers, , on October 29, 2020 at 12:00 pm

By ILP
On 10/29/2020
Tags:

If Joe Biden wins 401(K) plans could be in for a major shake-up – one that could benefit tens of millions of AmericansThe 401(K) retirement plan has proved an extremely popular – and cost-effective – retirement benefit that’s provided by millions of small business owners around the country to their employees. If Joe Biden wins, they could be in for a major shake-up – one that could benefit tens of millions of Americans.Up until now, the rules were fairly simple: employees could contribute a pre-tax amount of their compensation for their retirement and employers could match that amount up to a total combined contribution of $57,000 per year for people under 50 years old. Small business owners benefit from these plans because not only can their employees put away money for themselves for retirement but the more they save, the more the owners can save.But 401(K) plans have a problem: they favor higher earners. That’s because the more an employee makes, the more of a deduction can be taken. That lowers their taxable income and therefore results in paying less taxes. So if a person is earning $200,000 per year and contributes 10% to a 401(K) plan her earnings would be taxed at $180,000 and that’s a big tax savings. But if a person is only earning $40,000 and contributes the same (which is harder to do given the cost of living) then their taxable income would be $36,000 and the amount of tax savings they would reap would be much less due to the lower brackets. The result is that people with lower income are less incentivized to save for retirement.That’s a problem for small business owners too. Why? Because the less your employees put away for retirement the more risk that, as they get older and remain with your company, they may come back to you for additional help when it’s time to retire because they haven’t saved enough. You can say sorry and turn them away. But – if you’re like many of my clients (and I’ve seen this numerous times) – you will probably need to step up in some way with additional assistance. No one wants to be in that situation.Biden’s plan would turn 401(K)s upside down. Instead of allowing contributions to be deducted from income people would be eligible for a refundable tax credit. The plan isn’t fully fleshed out and the amount of the credit has yet to be determined. But let’s assume it’s 26% of an employee’s contributions – the most recent number thrown around. So if that person contributes $100 during the year she will get a $26 credit against the taxes she owes. If she doesn’t owe that amount she’ll get the cash back. If you do the math (and I recommend you ask your accountant to walk you through this), lower earners at lower tax brackets would be able to save more on their taxes under Biden’s plan due to this credit than the current pre-tax deduction they’re now allowed. The opposite would be the case for higher earners.Biden’s proposal is not without its critics. “You’re disincentivizing those small business owners from having that plan any more,” Brian Graff, the CEO of the American Retirement Association, told FOX Business. “Not only is it unfair to those small business owners, it’s going to reduce the likelihood that they’re going to offer those benefits to their employees. And that’s particularly acute in a challenging time like now.”> People working at small businesses are not saving for their retirement as much as they shouldBut the former vice-president believes the proposal will make things more equitable. “Current tax benefits for retirement savings provide upper-income families with a significant tax break, while providing a limited benefit for low- and middle-income workers,” he says on his website.Regardless of who you believe, the fact is that the current system has a big problem: people working at small businesses are not saving for their retirement as much as they should and small businesses – who employ more than 50% of the country’s workers – are not doing enough to motivate them.Just half of US households have retirement accounts, according to a study from the Federal Reserve and new data from the Employment Benefit Research Institute confirms that “nearly half of employees are concerned with their household’s financial wellbeing, citing saving for retirement and having savings in case of an emergency as top sources of financial stress.” Teresa Ghilarducci, a professor of economics at the University of Notre Dame warns that – despite the many benefits business owners themselves receive from offering 401(K) plans – “just 40% of workers were covered by a retirement plan through their workplace in 2017.”The problem isn’t whether higher earners will save enough. I’m not really worried about them. The real problem is that middle- to lower-income families aren’t thinking of the future. Too many of the employees at my clients ignore their retirement benefits. It’s possible that if Biden’s proposals can be proven to save them even more on their taxes, they would be encouraged to put more money away for the future. Given the current status quo, I think his proposal is worth trying.,

How Biden’s retirement plans could save small business workersIf Joe Biden wins 401(K) plans could be in for a major shake-up – one that could benefit tens of millions of AmericansThe 401(K) retirement plan has proved an extremely popular – and cost-effective – retirement benefit that’s provided by millions of small business owners around the country to their employees. If Joe Biden wins, they could be in for a major shake-up – one that could benefit tens of millions of Americans.Up until now, the rules were fairly simple: employees could contribute a pre-tax amount of their compensation for their retirement and employers could match that amount up to a total combined contribution of $57,000 per year for people under 50 years old. Small business owners benefit from these plans because not only can their employees put away money for themselves for retirement but the more they save, the more the owners can save.But 401(K) plans have a problem: they favor higher earners. That’s because the more an employee makes, the more of a deduction can be taken. That lowers their taxable income and therefore results in paying less taxes. So if a person is earning $200,000 per year and contributes 10% to a 401(K) plan her earnings would be taxed at $180,000 and that’s a big tax savings. But if a person is only earning $40,000 and contributes the same (which is harder to do given the cost of living) then their taxable income would be $36,000 and the amount of tax savings they would reap would be much less due to the lower brackets. The result is that people with lower income are less incentivized to save for retirement.That’s a problem for small business owners too. Why? Because the less your employees put away for retirement the more risk that, as they get older and remain with your company, they may come back to you for additional help when it’s time to retire because they haven’t saved enough. You can say sorry and turn them away. But – if you’re like many of my clients (and I’ve seen this numerous times) – you will probably need to step up in some way with additional assistance. No one wants to be in that situation.Biden’s plan would turn 401(K)s upside down. Instead of allowing contributions to be deducted from income people would be eligible for a refundable tax credit. The plan isn’t fully fleshed out and the amount of the credit has yet to be determined. But let’s assume it’s 26% of an employee’s contributions – the most recent number thrown around. So if that person contributes $100 during the year she will get a $26 credit against the taxes she owes. If she doesn’t owe that amount she’ll get the cash back. If you do the math (and I recommend you ask your accountant to walk you through this), lower earners at lower tax brackets would be able to save more on their taxes under Biden’s plan due to this credit than the current pre-tax deduction they’re now allowed. The opposite would be the case for higher earners.Biden’s proposal is not without its critics. “You’re disincentivizing those small business owners from having that plan any more,” Brian Graff, the CEO of the American Retirement Association, told FOX Business. “Not only is it unfair to those small business owners, it’s going to reduce the likelihood that they’re going to offer those benefits to their employees. And that’s particularly acute in a challenging time like now.”> People working at small businesses are not saving for their retirement as much as they shouldBut the former vice-president believes the proposal will make things more equitable. “Current tax benefits for retirement savings provide upper-income families with a significant tax break, while providing a limited benefit for low- and middle-income workers,” he says on his website.Regardless of who you believe, the fact is that the current system has a big problem: people working at small businesses are not saving for their retirement as much as they should and small businesses – who employ more than 50% of the country’s workers – are not doing enough to motivate them.Just half of US households have retirement accounts, according to a study from the Federal Reserve and new data from the Employment Benefit Research Institute confirms that “nearly half of employees are concerned with their household’s financial wellbeing, citing saving for retirement and having savings in case of an emergency as top sources of financial stress.” Teresa Ghilarducci, a professor of economics at the University of Notre Dame warns that – despite the many benefits business owners themselves receive from offering 401(K) plans – “just 40% of workers were covered by a retirement plan through their workplace in 2017.”The problem isn’t whether higher earners will save enough. I’m not really worried about them. The real problem is that middle- to lower-income families aren’t thinking of the future. Too many of the employees at my clients ignore their retirement benefits. It’s possible that if Biden’s proposals can be proven to save them even more on their taxes, they would be encouraged to put more money away for the future. Given the current status quo, I think his proposal is worth trying.

,

Contact Us

Please use our Instant Quote form to see if you're pre-qualified for a non-recourse stock loan, or if you have any questions or feedback, please email, call or chat with us.

deals@internationalliquiditypartners.com

+44 20 3994 1588

Headquarters: Hunkins Waterfront Plaza, Charlestown, Nevis

Open 24 hours a day / 7 days a week / 365 days a year

 

 

 

Frequently Asked Questions

What Is Securities-Based Lending?
Securities-based lending, or a stock loan, is the practice of using market investments such as stocks, ETF’s, warrants, bonds, or real estate investment trusts as collateral for a loan.
How much money can I get for my securities?
Borrow up to 80% of the value of your pledged investments giving you the capital you need to expand your business, purchase real estate, or tackle a costly project.
What happens if my securities lose value?
With a non-recourse stock loan, you can walk away from your securities at any time and keep the loan money with no negative credit consequences even if the investments lose value.
Is my information safe with ILP?
We pride ourselves on outstanding service and make client confidentiality our top priority. You can always be absolutely certain your information is safe with us.
How long does it take for the disbursement of funds?
Most of the transactions we process take less than 7 days from application to the disbursement of funds giving you cash quickly when you need it most.
What credit score do I need to qualify?
There are no credit checks or personal guarantees necessary with our services. Your pledged securities are the only collateral required for the loan you receive.

Instant Quote

Please fill out your information to see if you are pre-qualified.

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

International Liquidity Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

International Liquidity Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with International Liquidity Partners, LLC’s internal lending policies. International Liquidity Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Nevis Office

Main Street
Hunkins Waterfront Plaza
Charlestown, Nevis

New York Office

Coming Soon!

Market Coverage