Wealth from Wisdom

From Tax Efficiency to Retirement: Financial Planning for Small Business Owners

August 31, 2019
Wealth from Wisdom
From Tax Efficiency to Retirement: Financial Planning for Small Business Owners
Chapters
Wealth from Wisdom
From Tax Efficiency to Retirement: Financial Planning for Small Business Owners
Aug 31, 2019
Carson Wealth
On this episode of Wealth From Wisdom, we’re going to discuss financial planning for small business owners.
Show Notes Transcript

You’re a business owner. You had a dream and with your own two hands made it into a reality. People depend on you – to support the economy, create jobs, to keep vital gears of society turning. 

Your own financial needs can sometimes drift to the back-burner. Taking care of others’ livelihoods can draw you away from planning for your own. And your needs are unique — you signed paychecks instead of receiving them, you structured benefit plans rather than simply benefitting. 

On this episode of Wealth From Wisdom, we’re going to discuss financial planning for small business owners.



Speaker 1:
0:00
Okay, and here's the legal Mumbo jumbo. The opinions voiced in wealth from wisdom with Ron Carson or for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consulted, qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assure success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time. Records as much as $10 billion in social security benefits go unclaimed every single year. Federal Reserve announced that they will raise interest rates by 250 skyrocketing cost of healthcare and retirement could now run 350,000 words hard and save for retirement. That's great, but it's what you do with that money that really matters. Welcome to wealth from wisdom with Carson wealth. Carson wealth is a Barron's hall of fame adviser at recognize by Forbes magazine as one of America's top wealth advisors and they're right here in Omaha. This is where you can count on straightforward and objective advice that can help you make the most out of every dollar you've saved for retirement. Welcome to wealth from wisdom with Carson wealth. You're a business, this
Speaker 3:
1:15
owner, and you had a dream, the dream of that with your own two hands, you can make something into reality that dream, how you could change the world, a dream, how you can help people. But what happens is when you're a business owner, a lot of people depend on you just support them to support the economy, to create jobs, and to keep the vital gears of society turning. I mean, we always talk about this, that small businesses are really the lifeblood of the U s economy. And, uh, we always talk about things called the American dream. And so today I had a well from wisdom, we're going to talk about being a business owner. Or maybe you've thought about being a business owner, uh, or maybe you've got a friend or family who's told you about a restaurant they've opened or something else that we're going to talk through the complexities.
Speaker 3:
2:03
Hey, even if you're not one you've experienced ones or today we're going to share maybe a little bit of the insight and wisdom, but also the roadblocks that are presented in being a business owner. So no better person to have than our vice president of planning. Aaron Wood to join me here on today's show. Aaron, welcome. Thanks for having me again. Yeah. So I know you work here at the Carson Group, but you too have been a business owner. I have. Yeah. So you want to tell our audience about that for a moment? Sure. So I am in my 16th year of being a financial planner. In the first 10 of that I owned a financial planning firm that was mine. So I did the whole a solo practitioner and had employees just like a many of the business owners we work with today. Yeah, I mean and a lot of people have to go through a myriad of choices on what to do and how to approach it.
Speaker 3:
2:49
And so we're going to talk about a lot of the different things. And I think one of the things we want to talk about is a three step process about, you know, one, how do you protect the business? Uh, two, how do you plan and three, how do you project? Because hey, at the end of the day, we all have these great ideals on what we wanted to do. We have that vision, we have that Aha moment. But turning it into reality is hard. It's really hard. If it was easy, everybody would be doing it, right? Like a lot of things in life. But it's, it's not easy. The easy part actually is having the dream. Oh yes. The hard part is turning it into reality. So let's talk about part number one here. So let's talk about how do you protect it? So the first point is how do you protect it in terms of how do you establish it?
Speaker 3:
3:36
What, what is it that you're creating? And there's a lot of different, I'm going to call it entity formations. Should you set up a sole proprietor to, if I can say that word. Thank you very much, proprietorship, don't you? We all have words that we can't say very well. Yes. And then we stumble you. Oh, I don't know right now, but I have a lot. All right. Well and my household is like words like proprietorships. I guess I have to wear jewelry. I don't even though Courtney thinks I can't say jewelry because that means I don't have to buy it if I don't say it right. It's a good plan. I guess if that's I came up, can you say the word diamond? A? I'm sorry. What'd you say? You are the two drew out for a second there. Uh, but w when you're a business owner, what people do is they automatically think they should form something.
Speaker 3:
4:19
Whether it's an LLC or there's all of these fancy terms like s corp's versus c Corp's. There's this minor thing that's not minors. Actually major is called the one 99 a that came out of our tax law recently that I think people are glossing over and looking at what you're on. What do you see? I mean, you've worked with and we here at the Carson group, we work with a lot of business owners. I mean, for me personally, I'm very passionate about this. I've worked with a lot of business owners. What I call it is this w if the, if they become successful in creating a business, they build wealth. But at some point they're going to have to convert the currency of their wealth from their business to liquidity. Yes. Sell or transfer, whatever that looks like. And you need somebody to guide you through the process, not just at the end.
Speaker 3:
5:05
You sold your business and you got x amount of dollars, uh, someone's gotta help you structure it. And one of the biggest reasons why is the t word taxes. Yes. Well, and I think you hit something on the head a few minutes ago, is how do you structure it from the beginning? Most people come into owning a business because there's something they like to do. Uh, it could be you're the person who, you know, is the best cake Baker out there and you love doing that. And so you created a business around something you love and you wanted to be able to share that. But what no one thought about is how do those taxes, how does that business ownership, what does that structure really need to look like? And what is your longterm plan? Is the plan really to franchise that and build it into a, uh, you know, a huge organization or is it to stay small and work with your local neighborhood?
Speaker 3:
5:52
And those are two very different ways of looking at it. And so once you have that figured out, then it's easier say, okay, yes, this is the kind of structure I want. And then these are the, the tax benefits, uh, that apply to that type of business. Yeah. Um, and there's so many different types of businesses, um, that are out there. Whether what'd you say? Cake. Yes. Cake. I'm just going with cake today. All right, well I guess that was on my mind cause last weekend it was, uh, my birthday and Courtney made me a Piñata cake, which was the coolest picture I've ever seen. I didn't know this. You dig out the middle of it and then pretend and re it, but you filled it with all of this candy. And so of course everyone was on a massive sugar high. Uh, I love my little nieces as well because they, I certainly enjoyed the surprise, but so you have a cake business, you have a dream, you, you want to get it set up.
Speaker 3:
6:41
But ne of the decisions you're going to have to make is the structure. So the structure then means who owns it and now you're going to get into big, big decisions. Who owns how much? Correct. And while you at the beginning are not concerned about it, this may be ne of the biggest decisions you make in your entire life. I really, I really, there are so many people like, oh well Aaron, if I'm the business owner and I'm creating, and I'm like, oh, Aaron's consulting me along the way. So for Aaron consulted me along the way, I'm going to give her a en percent ownership stake in my company. So what did Aaron give me in exchange for me to give out my ownership as a business owner, somebody needs to give me something in exchange. So the easiest way to do it is Erin pays me money and therefore she gets part of my business because she gave me money that I use then to hopefully grow her investment to grow that.
Speaker 3:
7:36
But sometimes people give up what I call it is consulting equity or sweat equity is another nickname for it. This is very common in the tech industry. You see it all the time with, you know, these companies that started off really small and the people work there for very little pay and got stocks that were worth nothing and eventually turned them into Amazon. Now that is the rare it of course, but we hear about it more frequently in that industry than a lot of the other ones. Yeah, we do. I mean, and I think, um, a lot of time business owners too hard who are in the process of forming a business. I'm working with ne right now, Aaron. And this individual has a really creative idea that, um, it's hard. It's super hard cause it's dealing with multiple industries, is dealing with pharmaceutical, it's dealing with medical, it's dealing with people.
Speaker 3:
8:26
Um, and it's a really cool idea, but it's hard and as challenging. And I think people are starting to see vision and the idea. So everybody wants, uh, had to attempt to gain equity and they're all offering their free consulting advice. But Hey, just for giving you some advice, can you just give me a little bit like ne percent or wo percent of your company? Um, and I could see how people who, this is a complex scenario. This is where you need to be working with professionals. Like, so for us as financial planners, again, being fiduciaries, we're going to give you the best advice possible. It's different than going maybe to a non-fiduciary or going to a bank or a financial institution who just wants to get your accounts and those types of things. It's a very different construct, but you need it. You need it. You need a planner on your team.
Speaker 3:
9:12
You need a tax professional on your team. Uh, you need a legal professional on your team. So I'm going to tell you right now, here's a mistake we see all day long. So utilizing a legal professional that has experience in working with business owners like you. Yeah, I can't, it's so easy to say, hey, I know Aaron Aaron's and attorney, oh, Aaron and I play golf together. Aaron and I go to the same church, therefore I like Aaron. Therefore Aaron should be by attorney. Yup, this is wrong. And that attorney happens to be, you know, and in the medical area where they're dealing with medical issues, not creating businesses like that, that's unfortunately what we see in those situations. Or they can help, but it's not their core area of expertise. So then they give you a stock agreement that their firms used with other people, but it's not maybe as personalized as it needs to be for you.
Speaker 3:
10:10
Um, and, and I bring this up because if you're sitting this weekend, and by the way, just happy Labor Day to everyone. I hope you have a wonderful weekend right now. It is. You know, you're going to have conversations with people, you know, that own businesses, whether a floral shop or um, a complicated business. Uh, they, they have to have the right trusted team in place. So let's talk about not only getting it established, but once you're established, your team has to help you evolve. And I know we've talked on this show a lot about tax prep versus tax planning, but in your business you did the business prep. So now you set it up, but now you actually have to do business planning. And a lot of you think of business planning is what's my revenue minus my expenses to see how much money I'm making?
Speaker 3:
10:55
Right? You either have to pay, yeah, I'm in the red or the black ne of the wo. But business planning also needs to be carefully thought out on not only again, your structure, but what are you doing? Like, let's talk about this. What benefits do you offer on behalf of your company? So do you have a retirement plan? Does your retirement plan include a 401k provision? What type of retirement plan? If I'm a small business, is it a solo? Kay, is it a simple plan? Is it a set plan? And if you're listening, you're like Paul, too much info. I'm just trying to tell you there is a lot of complexities and it don't assume that your friend down the street, whatever they did is best for you. It's, it's usually not and they each have their own benefits. And having someone who understands those is extremely important.
Speaker 3:
11:42
Uh, using a loophole only works if you understand the loophole. Yeah, and I think we're going to talk about some tax loopholes here, Aaron, shortly. Um, but I think as you're doing your business planning, your business is going to evolve. So let's talk about retirement plans. So maybe you irst set up, if you're a solo company, the Solo Kay is a great way to do that currently. I'm also, if you have a few employees, there's things like the step, the simple plan, by the way, they created their names for a reason. Simplified employee pension for the step, the simple plan. Those are easier to administer, but you don't have as much flexibility with them. Like traditional, most people, no 401k plans. our oh hree B plans, uh, that type of thing. Um, however, when you get bigger, you gotta have more complex plans because that's what your employees are demanding and that's what they're looking for. If you want some help, just talking through what's best in your retirement plan, you can give us a call. We have retirement plan specialist standing by ight eight eight four one nine eighty five thirteen, that's ight, ight ight our ne ine ighty five hirteen. Aaron, we're gonna come back around and talk about some tax loopholes you can avoid in running a business.
Speaker 2:
12:49
Do you own an annuity? Inflated fees and commissions could be costing you an arm and a leg. Get straightforward and objective advice from Carson wealth by calling ight eight eight four one nine eighty five thirteen. Are you caring for an aging parent? Are you concerned about the skyrocketing cost of healthcare and longterm care or do you have questions about how to best manage an inheritance? We can help call Carson wealth today at ight, ight, ight our ne ine ighty five hirteen and now back to wealth from wisdom with Carson wealth, our offer. And
Speaker 3:
13:19
we frequently talk about taxes. We talk about the importance of uh, paying his least as you possibly can. Uh, trying to give you techniques that of course follow the IRS guidelines. Uh, but many of you listening, you have ownership in a business. Um, either you've invested, maybe a family run ownership or limited partnership, uh, or you've got friends. And so a lot of times we want to be educated in what those are. So in this segment we're going to talk about some tax ideas for you is either investors or business owners that can really help you out. Again, I'm Paul last, I'm joined by aron Wood. Uh, so let's talk through, I'm going to call them some tax loopholes. Loopholes, a great word, right? I don't know why. When you say loophole, people get interested. They do. Yeah. Nobody likes being sneaky. Somebody who's going to help me find something that other people aren't doing inside information. Yeah. People say, wait, what happens is what happens to people when you say, Oh, oh, I got something to tell you, but I can't tell you right now. Right? Of course she want to know, you're like following them down the hall. You can't even focus on anything else because you want to know what they're supposed to tell you. Or, oh, I got a secret. Well, irst of all, if people do that just stopped.
Speaker 3:
14:35
That's bad mannerisms. But I share loopholes because w I think loopholes is more, it really should be, um, smart tax things that people aren't doing. Yes, I agree. But if you hear that and you hear tax loopholes, what's gonna catch your mind or what's gonna grab attention? It's talking about tax loopholes. So let's talk about if you're a small business owner, um, you know, ne of the things you have to decide, you know, we already talked about, you got to talk about your entity formation, but now you gotta say, where's our business going to be located and what are we going to do? So how much space do I need? I'm not going to go through all the infrastructure of, you know, laptops and Wifi and power and all those things. Some people irst get started, you're in that position, probably financially, you just have to rent somewhere.
Speaker 3:
15:24
Um, but as you evolve your ability to actually own the property, that where you, how's your business could be ne of the best tax shelters that you have. And I mean, Aaron, I think that's part of our financial planning. People say, should I own or rent my building? Rent obviously is a easier on some items. You have a property manager, they're taking care of it. You don't have to call when the cable goes out or the power or you don't have to refresh it or fix the bathrooms when they're overflowing and there's a plumbing issue. Well that would definitely not be my, that's not your area of expertise. Uh, but it's, it's going to cost you the most. Um, and there's really no tax benefits go with it. But you may have the opportunity, uh, assuming you own your property or buy ne, that this could actually give you better tax shelter on a tax deductible type mortgage on the path of your business.
Speaker 3:
16:20
So do you see very many business owners do this? So initially you don't initially you see, most business owners are renting, especially in the sense that so many business owners are self employed or, or solo practitioners frequently. Uh, you know, a lot of that the neighborhood type things where you see someone owns a construction company initially you frequently see those doing, um, from their house or running it from, you know, their outbuilding that they have similar. But as a business grows is where this becomes much more common and there becomes a point where the tax efficiency is much better for them as they grow to own it versus, uh, you know, renting a place or, or just running it out of their home. Especially with the changes to the tax lot now, now we're not going to get into it today cause it's way too complicated.
Speaker 3:
17:04
But the ne inety nine a ha has some big benefits for people who are owning properties versus renting. Yeah, I mean it's huge. And again, I appreciate you saying that. I don't want to lose our audience for getting too technical on ne inety eight I'm talking about QBI or qualified business income. Again, this isn't going to be a full tech show, but we want you to know that these complexities or something need to be looked at. And I have to say say it's something you don't want a glance over. I shared several weeks ago here on wealth from wisdom. I gave a shout out and thank you to aron Wood for uh, being politely persistent, making sure I took care of my property and casualty insurance. By the way. I've had wo other people come up and tell me they heard that on the show and did the same and ne saved ive hundred and the other ne was almost a thousand.
Speaker 3:
17:52
Wow. See, you're changing people's lives and, but they were probably in the same boat as me. They just kept kicking that can down the road. Yeah. And I would say the same for you. If you're a business owner and you haven't explored that ne inety nine a deduction. If you're on your iPad right now or whatever device you're on, send us an email. It's really easy info at Carson, ealth Dot Com c a r s o n wealth. Should I spell that? W E a l t hdot com. All right. Yeah, I'm sure I'm nodding my head yes, cause our producer must not how to spell it. So thanks Jamie for sharing that with me. Uh, if you want help, just write in ne inety nine a we'll send you some information. We'll help talk through that with you. Let's talk about some other tax loopholes. So when you set up a business and many of you as individual business owners, you have to decide how much to pay in salary versus how much to pay in bonus or dividends on behalf of your company.
Speaker 3:
18:45
So ne of the things to look at is most people want to pay as little of salary as possible because if they've paid dividends, they get paid at that are taxed at that rate. Um, and it can make sense for you, but I would tell you ne of the tax loopholes we see is people do too much of that and it creates an IRS red flag number ne. But number wo, actually increasing your w wo wages can help you from a tax perspective. And I think you have to look at the risk reward trade off inside of their well and to be able to take advantage of these employer provided benefits where the, you know, you're looking at the 401ks there can be a lot of money put aside into those and that's the kind of money they can help push someone into a lower tax bracket.
Speaker 3:
19:26
And that's where that a short sightedness of I just, you know, want to pay myself this way or I want to take a bonus. They really miss out on those opportunities to put some big dollars away. 401K me a maximum this year is ifty six thousand dollars. That's a pretty big chunk of change that you could put away in since most businesses again are, you know, family owned, you could do the same for your spouse. That's a lot of money to be able to lower it you to a different tax bracket. Yeah. And so I'm going to, I'm going to take it up a level here. So when you set up your business is because you had a dream, you had it probably a goal or multiple goals. ne of it was probably to be successful. I mean a lot of people just, they want, I'm going to call it the emotional feeling of being successful.
Speaker 3:
20:08
It's like in sports is winning the game often or doing your personal best. Like you know, if you're in cross country, you want to run your personal best time, you're in golf, you want to shoot your personal best score. Um, my business, you often just want to do your personal best. You want to be successful and successful is very different for everybody. Success can be financial success. So some people just make as much money as possible for others. It can be changing the world of setting up a business to change the world or I'm trying to solve a problem that's annoying to people. A great example I give of this. And of course now it's become a super popular for profit business. Uh, but earlier this year we had a chance to meet Michael Dubin. Michael is the founder of Dollar Shave Club. Yeah. His story is fantastic. Yeah, it's great.
Speaker 3:
20:53
But why did Michael Create his company? He wanted to solve a problem. What was the problem he wanted to solve? People are too damn cheap to go back to the store and buy a new razor. So they're going to keep shaving with this dolphin that cuts them. And you're determining this thing for wo reasons. ne, razors are expensive too. You don't want to go back to the store to get them. So He created a model saying, hey, I'll send it to you for less money and they're going to show up directly at your door and then you won't have to stand in the aisle and try and make a choice between hirty different choices. Yeah. Simplifying their lives and especially in today's fast paced moving society so you, some businesses created to solve a problem or make something easier for people. So other businesses are created is like, I want to do this so I can then sell it and then I can retire.
Speaker 3:
21:44
So tax loophole, our tax strategy you have to evoke is finding the best retirement plan that meets your objective. Case in point, not only can you defer a lot of money into a retirement plan, so everyone thinks about, so we're what in wenty nineteen our annual contribution limit into a 401k plan is ineteen thousand a but if you're ifty and older, it's actually ix thousand more. So it's wenty five thousand total. But actually you can in small businesses contribute into cash balance and other type of plans that can actually get you to a much higher level on an annual basis. So on those types of plans, you're able to make your individual contribution as the employee and you're able to make a contribution as the employer. And so that's where you can start looking at those much bigger numbers on 401ks at ifty six thousand and then, you know, defined benefit plans, pension, some of those other items.
Speaker 3:
22:41
So you said ifty six thousand. Yes, ifty. So I thought it was ineteen, ineteen is your individual contribution as an employee and then you can make the rest as an employer contribution. So I think that's a critical point as a business owner and it's so many of them miss it. We see them come in and they have small, um, small is a bad term. They're, you know, they have not the optimal amount of tax deferral available because they just get stuck in a traditional plan or um, I don't want this to sound bad, but they go to a less sophisticated financial planner sets them up with a mutual fund retirement plan that that's not in their best interest. I mean, you need to go to a fiduciary who can let you look at this entire holistic process. Your job should be a designing the best plan possible with lowest cost investments with maximum flexibility for you and your participants.
Speaker 3:
23:30
Now, you can't always get all of them, but those should be your hree primary goals. And if your situation doesn't allow it, at least figure out what the right combination is for you. Absolutely. Agree, and I'm going to add to this that most CPAs don't know the ins and outs of all these types of retirement plans. So as we've talked about, most of them are filing taxes as a historical view. Uh, most of them are not doing planning around the future. And what types of plans someone should be looking at. Yeah, I mean we see it all the time. For those of you that don't own a business, so you work for an employer today and you're contributing money to your 401k or your Roth 401k, um, and maybe you make too much money to contribute to a rough outside of your retirement plan or to, you can't deduct an IRA.
Speaker 3:
24:17
Uh, I'm still amazed how many times we're here as financial planners and we don't see recommendations to contribute to non deductible IRAs and then convert them over to Roths if, if, if possible, it makes tax then. So that's why when we were talking about loophole is build the right retirement plan for you. So not only decide you know what's best for renting versus buying, figuring out how much w wo income that you want versus dividend can, but also figure out what is the re right retirement vehicle. If you're smart about those hree things, I'm going to tell you you're probably going to be successful in your business because if you set it up correctly for me as a planner that tells me if you're awesome at setting things up, that probably means you're going to be awesome at looking at the details of your business to be successful. If you want help figuring out if these tax loopholes can work for you, give us a hout at Info at Carson Wealth Dot com we're trying to go digital on all request to help you out. We'll also share them ere at the Air Info at Carson Wealth Dot com
Speaker 2:
25:12
you're listening to wealth from wisdom. Any major decision in life is worth getting a econd opinion and financial planning is no exception. Let's talk about how you could make your money go further in retirement than you ever thought possible. Call Carson wealth. Just schedule your free initial analysis. Now at ight eight eight four one nine eighty five thirteen do you have a lot of assets but are short on cash? Learn how you could leverage your assets to free up cash with Carson wealth by calling ight eight eight four one nine eighty five thirteen and now back to wealth from wisdom with Carson wealth. Hey, welcome back to wealth wisdom.
Speaker 3:
25:48
We're talking about how you avoid pitfalls as being a small business owner but also how to protect yourself, how to plan for the future. But also what if you're an employee in ne of these businesses? So let's talk about that in our next segment. Hey, I'm joined again by aron Wood. So Aaron, I'm going to go work for a small business. I'm excited. I've probably bought into the key ownership team's passion, their belief, their story, their vision on what's going to happen. But the end of the day I need a couple things. I need ne, how much money are you going to pay me? And he wanted to know slightly cause I need to put food on my table, I want roof over my head, those types of things. But also as a small business owner, what are those benefits that are going to be available to me to make it worthwhile?
Speaker 3:
26:38
And a lot of times people talk about benefits. They think about mega companies. Think about fortune ive hundred companies. Uh, I feel very fortunate. Look where we live in Omaha, ebraska. Just how many fortune ive hundred companies we have in a, in a city our size. So if you're an employee in a business, um, and a small business especially, or you're a business owner, let's talk about what are the, some of those benefits that you can make available. Now, obviously retirement plan is probably the irst ne you're always going to think of. Or insurance. I think people go to insurance very quickly. Yes. So let's call them ne a and ne B. They're, they're both, to me, they're connected. Like, Hey, I've got to have both. If anybody's even gonna consider coming to me and as employee. So I talked through those wo items and the next question, employees or perspective employees probably gonna ask me goes, all right, so what's your a vacation program?
Speaker 3:
27:29
Yeah. Right? So what do you do? Is this you on that ne before I started? I don't remember that part of the conversation. I got past ne and wo, then we got to that part. Um, so, uh, you know, this is a tough ne. This is, you're going to have to figure out what you want your culture to be. I mean, and uh, I've shared this before. I had a chance earlier this year, um, I gotta go do a event, um, with other CEOs across the country and I got a chance to hear from the former c o o chief operating officer of Netflix and she made this great comment that you want the culture of your company to be. It's a great place to be from not to but from. So let's think about your, your company's a great place to be from. That means everybody that's hired somebody from you has been very thankful and appreciative of the type of quality of people that you've turned out.
Speaker 3:
28:28
And for me, that's the c word of culture and what you want to create. So all of the benefits you create help with culture. It doesn't mean that it establishes the culture. It's still has a lot to do with. I gave you a great example. I was down visiting, um, a client, our firm in Lincoln, um, and I was walking through the hallways and I came back here. You've probably heard it from your Aaron. I was fired up because I was like, it was ne of the best cultural experiences event. Everybody I walked past in the hallway, none of them knew me. Hi. Hi. Nice to meet you. My name's So-and-so. Hey, nice to meet you. Hey. They all had a smile on their face. They made you feel special. They made you feel good. And I'm like, I want that type of culture. I want you, we've all been there where you walked down the hallway and nobody looks at you and they put their head down.
Speaker 3:
29:15
And that is not the culture here. No, I know. It's not the culture here at Carson. We wouldn't allow that. No. And nor do we want that. I don't want a place where I don't feel like I can say hi again. You don't have to be best friends with everyone, but you should, you still need to be cordial and you need to operate an environment where you feel, uh, confident but also secure. Um, so as you think about your benefits, paid time off is, is a debate you're going to have, uh, I'll, I'll, I can give you guidance. Is, is do what you feel is best. Um, there is a trend, uh, moving towards unlimited time off. Yeah, there is. And you're like, what? Especially if you're old school, what, what do you mean there's unlimited time off? Uh, well, um, what, what you're trying to say is, is take the time you need. Don't operate under the stressor of, I gotta go in today when you maybe have a health issue or a child issue, you're just sick, but you don't want to give up ne of Your Aka vacation days. And then you, uh, unfortunately, you know, get other people sick or you're not, you're most productive.
Speaker 4:
30:19
The trend has changed. I mean, my husband works for a city and so they are still that very much. They have sick time and PTO time and they accrual both and he can have hundreds of hours of sick time. Well, for him, he, if our daughter is sick, he's got, like I said, hundreds of hours. He just takes whatever he needs. Most places have PTO time now where they've combined that sick time and vacation time into ne. So every time someone is sick, it's in their mind taking away from their vacation. It's not a sick day. It's a vacation day. And so every time a kid is sick or you're not feeling good, you don't want to give up ne of your vacation days. Now, most, um, employers have added to those numbers. But I think in people's heads, that's ne of the downsides of combining them.
Speaker 3:
31:03
Yeah. And as a business owner, you just need to think through what's works best for you. Um, I'm not gonna make a blanket recommendation because it depends on what type of culture you want to create. And especially in today's mobile and digital world, uh, we all know we get the shakes if we don't have our cell phone on us for greater than ive minutes. Uh, so people are connected at all different times of the day. And I think I certainly see it now in my wenty plus years. And this is like, you just need to be flexible. There's plenty of people that are checking their email at ix in the morning. By the way, there's, there's wo when checking your email and being engaged in your email, just to be crystal clear. So don't tell me you're checking your email when you just looked at him, you didn't actually respond or want to do anything with it. So let's talk about another benefit and I want to talk about it, and I know you love these as well, is ne of the things I think you should look at doing is health savings accounts for your employees or as we call them stakeholders. Why, why are they so important? Aaron,
Speaker 4:
31:56
that is my number ne favorite. And I know we've talked about it a lot. A health savings accounts right now are that, um, triple tax advantage do you get to take the benefit of a tax deduction? When you put the money in, they grow tax deferred and when you pull that money out for health related expenses, they come out tax free. So you have the ability to basically save that money. If you have excess cashflow and you don't need it, you can put the maximum in for the year. And you know, let's say you put in the, you put in ive thousand that's not the maximum, but you put in ive thousand and you don't need to use that. So then you just save it and next year you put another ive thousand so now you have en thousand sitting in this account. Well at some point we, our health bills when we get to retirement are going to be more costly. And so at some point we will need that money. But in the meantime, you got to take a tax deduction every single year. Let that money grow. A lot of the HSA is, are now starting to offer investments so you can invest that money. And it's a great vehicle for us. That's what we've been doing for the last few years, especially if you can't qualify for a Roth. It's a great way to put money in that tax bucket without having to, uh, you know, do some of the other odd things that could be done.
Speaker 3:
33:10
Yeah, I mean, I had fun the other day. Um, I went in and looked at our HSA. We have here at the Carson Group, and I'm pretty religious about this. I hope most people are, is even if I didn't need it this year. And so maybe I'm above, irst of all, I would tell everyone if your HSA limit or limit, obviously is there, is there, but if your maximum out of pocket is like, say ive thousand dollars, and if you have the ability to put enough in your HSA, plus like we to have a corporate match. So our company matches money and your HSA to encourage your additional savings, they do. So, um, but if I go above ive thousand dollars on my balance, I don't know why next year, even though I have enough to hit my out of pocket, why I wouldn't keep contributing. Is there any reason why I shouldn't know, especially if you're saving
Speaker 4:
34:02
what your expenses are bent. And so for example, what I do is at the end of every year, I go into our health insurance and I plant pronounced the report that says here was all of my expenses for the year. Uh, all health insurance companies have it. So there's my total and I just keep a running total every year of what I've spent. I can pay myself back at any time. So I've been saving these, you know, for the last ive years. And I, I get instead some type of issue where I need some emergency money, I can go look at the last ive years and pay myself back all at once.
Speaker 3:
34:31
Yeah. Well, and here's my belief to Aaron. So for some reason, if I'm somewhere and I had a loss of job or I retire a bit, the Medicare benefits aren't going to kick in or they don't look right. I'd rather have tens of thousands of dollars saved up that I could use tax-free. So I put it away tax-free. It's growing tax free and I get to utilize the tax free. Thank you. Call that the triple. Yes. Earlier. All right. So why wouldn't, I mean I hope you're listening today. Don't stop contributing just because you went over your out of pocket. Now if you have to use the money for other purposes, but here's what's going to happen. Once you start doing that, you're probably never going to restart it again. Cause it's so funny how everybody just has a bucket of money getting, don't worry about the dollar amounts, but once you start putting it into other buckets, it rarely comes back. Is that mental accounting? Yeah, for sure. And I know you know that a lot from, so I mean there's a lot of Pete things people need to think about as business owners and as employees of business owners. On what benefits are important. If you have questions, especially about like healthcare savings accounts, which we call HSHS, you can email us nfo at wealth dot com or if you'd rather call our zero two three three zero zero eight zero eight again, nfo at Carson Wealth Dot com you're listening to wealth from wisdom.
Speaker 2:
35:50
Have you ever wondered how do other people get away with paying fewer taxes than everyone else? Learn how you could save thousands of dollars in taxes by calling Carson well at ight eight eight four one nine eighty five thirteen social security risk, taxes and healthcare. This is where you can count on straightforward and objective advice on the biggest challenges with investing for retirement. And now back to wealth from wisdom with Carson wealth. Everybody welcome back, back
Speaker 3:
36:18
to wealth and wisdom. This is aul West joined today by aron Wood. Hey Aaron, I've really enjoyed talking about, uh, business ownership or being an employee of a small business. So now let's talk about something people are afraid to talk about. What if something happens to the lead business owner? Oh yeah, yeah. It's a big concern. Yeah. Well, again, everybody tries to ignore it, right? We as human beings, we tend to ignore topics that are scary or create fear. But let's be realistic, ladies and gentlemen, sometimes life happens, either a health issue, a death of family member, uh, a litigation, whatever. And so, um, a business doesn't become viable anymore and it can be unwound. And unfortunately, we all know the stats related to the small businesses, the head, it's greater than ifty percent don't succeed because it's hard. It's not easy to disrupt and what to do.
Speaker 3:
37:18
Uh, so, but ne of the things you have to look at, again looking at, especially if your business becomes successful, is what is your succession plan and how are you and your partners and your family members going to protect your assets? Well, and on that with the family part of it, I've seen this work really well and I've seen this go really badly. You know, you end up with a business owner and they have wo or hree children and uh, they have ne child who is really interested in the business and the other wo aren't. And so how do you pass on a business to ne child and leave wo children out? Or the other scenario is none of them want anything do you do with your business? And so now you're grooming and growing somebody internal or you're looking to sell that business as a way to transition into retirement.
Speaker 3:
38:09
Those are our wo very different things to be considering. You know, if you're going to give part of your business to a next generation or are you going to sell? And when you sell a, there's different plans out there. We were talking about retirement earlier. There's things like Aesop's, you can take a note, you can do all sorts of things, but there's very specific directions a person needs to think through before they just randomly do nothing. Yeah. So I'll give you an example. Um, and this is from last year, wenty eighteen in April. And I think it's probably gonna be similar if I was going to guesstimate, but eventy three percent of financial advisors and many of them I would say our small business owners don't have a written succession plan. Yeah. So that's really scary. Like eventy. Disappointing. Yeah, right. It's like when your parents say there, they're mad at you, but when they say they're disappointed, that even feels worst.
Speaker 3:
38:59
Right? It's like that or hates that too. She's ive. I'm disappointed in the profession. Or there's that, um, even point three out of en of you don't have a plan or worse yet. That probably means those of you listening over ifty percent of you are working with an advisor that if they weren't here tomorrow, there's just no ne to pick up the pieces. And I'm like, I, I couldn't put the trust for my family into a person or firm. I, I'm starting to hear it more and more now. We're fortunate due to us being a fiduciary, a top en rank from the country. Um, we have plenty of advisors. We work as a team. Uh, families have more comfort that there's a lot of people involved. But if Scott or Sally or Jessica or Jamie or whoever is your person and they are the person, what are they going to retire? And so what happens when they retire? Are you, who are you going to work with? You're going to have to switch then at some standpoint or are they going to put you in touch with some wenty three year old that doesn't have a lot of experience, uh, to approach it. So let's move away from the financial services, but like you own your cake company, another segment. Uh, what happens if you pass away? What happens to your employees who've put their trust in you and their family and you, yeah,
Speaker 4:
40:19
or your spouse or whoever depends on you for income. There are many things that business owners should be looking at. There are things out there like key man insurance, so that if something happens to not just the owner, a business, but maybe you own a business where you have a key employee, a key man insurance is there in case something would happen to that individual, uh, to help, uh, provide, uh, dollars so that you have a way to either sell the business, go on, find a new person, whatever it will be. Uh, there's also things, you know, like, um, making sure that you have that written succession plan. So if you're going to sell the business or who that person is going to be, and what is every single detail of that succession plan is rolled out in that document.
Speaker 3:
41:03
Yeah. So here's what's going to happen. You're a business owner and you're going to agree. So you're hearing me and you're going to say to yourself, I need insurance to cover in case I die, or I need a buy sell in place because there's wo of us in our, and if I die, they need some way to buy me out because they don't have enough cash in the bank to buy me out.
Speaker 4:
41:24
And that, that buy sell frequently happens when you have a spouse too. Uh, so that is there to pay your spouse out.
Speaker 3:
41:31
For sure. That's the simplest way to do it. But here's what they're gonna do. They're gonna call up an insurance person. [inaudible] so what's the insurance person going to do? They're just going to pick a number out of the air and not really know how I am. I'm putting my hands together, getting all excited. I'm smiling. I got a sale coming up. I can sell you something. Stop Ladies and gentlemen, go meet either with a trusted attorney or go meet with the fiduciary financial planner, like a Carson type group who will help give you fiduciary advice on helping you figure out what's in your best interest, laying all those things out there. Otherwise, if you go to all of these insurance companies who get compensated to sell you the maximum amount because they're again, for profit and they don't have a fiduciary standard. If that's the case of that firm, I'd rather go sit down with someone who's going to say, here are your ix options.
Speaker 3:
42:25
Let's evaluate your ix options and then let's come up with the best for you and said, Oh, you need a buy sell. We need to maximize the amount of insurance you have, so let's apply for as much as humanly possible. Yes. That doesn't sound like that's in my best interest. No. And they don't really have a good way to do the evaluation to find out what those dollars really are typically either. And so working with your CPA, your attorneys, they have the better idea of how to evaluate the business profitability and, and what those dollars really should be. Yeah. Um, I know that they shared on the show, I know they posted on social media, um, you know, couple of weeks ago, probably a month ago, I got listed in an Investco pds, top ne hundred best advisors in the country and most influential, thank you. I'm not doing that to brag, but I'm doing it.
Speaker 3:
43:07
I was looking through the list. It was all advisors similarly situated to myself and Ron and our team that work for Ras. I didn't go through the list and see, Oh, here's the dump a bunch of people with Northwestern mutual and Wells Fargo and all of these other non-fiduciary type places. Um, and that to me is again a sign the world's starting to evolve. So insurance is ne way to protect your succession plan, the right legal document, a from a buy sell, but also are you really just backing up everything? I mean, that's ne of those interesting things. I had a business owner come in last week. Aaron, I don't think I've shared this story with you. And they still keep manual books and records. Wow. I mean it's wo. It's wo thousand nineteen. That's the irst. I've heard of that in a long time. I know, but it's, I'm sure it's not the only ne. Um, and what happens?
Speaker 3:
43:59
Somebody, their main bookkeeper got sick. So now I said, oh, well do you have a updated monthly statement? A we do from the beginning of the irst quarter of this year. It's August. So now there's ix to even months behind in their books. Uh, so you need a succession plan too, just for your financials. And that's why, I mean, outsourcing your accounting work is actually ne of the easiest things you can do. Um, I have another friend that runs wo businesses here in town, and when I talk with him, he's often, oh, it's ine o'clock. I'm tired. I'm doing book work tonight. I'm like, you, you pay your other employees, why aren't you paying whatever the number is? wenty thirty orty thousand dollars a year to an outsourced service just to do your bookkeeping. They can do it for you. It's not complicated. Yeah, and bookkeeping typically isn't that expensive.
Speaker 3:
44:48
I mean, you see, not just people need to be smart. So I would tell you is like we talk about business owners having the right succession plan in place for your financials, for your insurance, but more importantly, protect your family. Protect, protect your family. Don't delay because if you're not here on the surf and you're looking out from above and you didn't do this, you're forever ever, ever going to be mad at yourself. If you want help or guidance on this, you can send us a note nfo at Carson Wealth Dot com hey, Erin, have a joy to talk with you today. Thanks to everybody for listening to wealth from wisdom
Speaker 2:
45:20
risks, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson.
Speaker 1:
45:33
Okay. And here's the legal Mumbo jumbo. The opinions voiced in wealth from wisdom with Ron Carson or for general information only, and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consulted, qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.
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