Firm:
JMB Financial Managers
Job Title:
President
Biography:
Jack Brkich III is the founder of JMB Financial Managers. Combining over twenty years of investment experience with his expertise in personal financial planning, Jack has established himself as a trusted advisor for individuals, couples, families and business owners. As a Certified Financial Planner, he implements advanced planning strategies by using a broad array of wealth creation and preservation techniques.
JMB Financial Managers, Inc. provides customized investment, tax and retirement planning solutions for independent contractors, family owned businesses and owners of small companies (25 employees or less) that do not have the time, skills or desire to handle the day-to-day details of their personal or business finances. As a result, clients are free to spend more time prospecting, networking, and building relationships, leading to higher incomes.
Securities and advisory services offered through Cetera Advisors LLC, member FINRA,SIPC. Cetera is under separate ownership from any other named entity.
Education:
MBA, Pepperdine University
BS, Civil Engineering, Santa Clara University
Assets Under Management:
$103 million
CRD Number:
2098874
Insurance License:
#6492146
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Meet Jack Brkich III, CFP | JMB Financial Managers, Inc. -
Retirement Planning | JMB Financial Managers Inc. -
The Importance of Investing | JMB Financial Managers, Inc. -
What is Comprehensive Financial Planning?
As a self-employed individual, you may not think of yourself as a business owner per se, but this exactly what you are – and as such, you have several options available to you beyond an IRA that will generate larger tax deductions and more retirement wealth accumulation.
The most simplistic of these options is the SIMPLE-IRA. You may contribute $12,500 as an “employee of your business” to a SIMPLE-IRA, plus you may match your contribution “from the business” on a dollar-for-dollar basis up to 3% of your compensation (or $8,250 whichever is less). At the maximum, that would provide you with a $20,500 tax deduction in 2018. On the downside, SIMPLE-IRA’s are accessible for withdrawals, but there is a higher-than-usual 25% penalty for early withdrawals within the first two years, over and above the income taxes due on the withdrawals.
Another option is the SEP-IRA. You may contribute 25% of your gross profit (20% of your net profit) “from the business” up to a maximum of $55,000 in 2018. (Gross Profit being revenues less all expenses before SEP-IRA contribution; Net Profit being revenues less all expenses including SEP-IRA contribution.) On the downside, SEP-IRA’s are accessible for withdrawals, but there is a 10% penalty for early withdrawals over and above the income taxes due on the withdrawal.
Another option is the 401k + Profit Sharing Plan. You may contribute $18,500 as an “employee of your business” to a 401k + Profit Sharing Plan, plus may contribute 25% of your gross profit (20% of your net profit) “from the business” up to a maximum of $36,500 in 2018, for a total tax deduction of $55,000. (Gross Profit being revenues less all expenses before SEP-IRA contribution; Net Profit being revenues less all expenses including SEP-IRA contribution.) On the downside, only “hardship withdrawals” are allowed from 401k + Profit Sharing Plans, plus there is a 10% penalty for early withdrawals over and above the income taxes due on the withdrawal if permitted. On the other hand, a 401k + Profit Sharing Plan comes with a loan provision, which allows for loans up to $50,000 or 50% of the account balance, whichever is less.
The most advanced (and complicated) option is the Pension Plan. A pension plan is designed to pay you (the employee) a certain percentage of your salary, based upon the number of years you work for your business. First year tax deductions can range from $57,000 for a 30-year old to $255,000 for a 60-year old in 2018 based upon a $220,000 self-employment income. Pension plan contributions are not eligible for withdrawal. However, a pension plan may be terminated and rolled over to an IRA.
The 401k + Profit Sharing Plan may be combined with the Pension Plan if you have the need and wherewithal for large tax deductions and wealth accumulation.
Each of these three options are available to you as a self-employed individual, and each provides you with varying opportunities for tax deductions, wealth accumulation, asset protection and liquidity (access to the funds prior to age 59.5). Each has some inherent limitations as well, so please discuss with a retirement plan specialist before making any decisions.
Best of luck!
Securities and advisory services offered through Cetera Advisors LLC, member FINRA, SIPC.
The single greatest difference between the two plans is the source of contributions:
- A 401(k) is largely funded by the employee.
- Pension plans are largely funded by the employer.
Many employees do offer a matching contribution, while some offer a profit sharing contribution to a 401(k); additionally, some pension plans include employee contributions, as do many union labor or government based pension plans.
Other differences include:
- Maximum employer annual contribution/deduction:
- Pension plan: determined by actuary
- 401(k) plan: 25% of covered payroll excluding deferral, if plan specifies
- Employer contributions required?
- Pension plan: Yes
- 401(k) plan: No
- Employer Contributions discretionary?
- Pension plan: No
- 401(k) plan: Yes, top-heavy minimum employer contribution may be required.
- Voluntary employer matching contributions allowed?
- Pension plan: N/A
- 401(k) plan: Yes
- Maximum participant benefits:
- Pension plan: Lesser of 100% of compensation or $215,000 annually.
- 401(k) plan: N/A
- Maximum participant allocations:
- Pension plan: N/A
- 401(k) plan: Lesser of 100% of compensation or $54,000.
- Catch-up provisions for those age 50 and older:
- Pension plan: N/A
- 401(k) plan: $6,000
- Investments self-directed by participant or can be invested at participant discretion?
- Pension plan: N/A
- 401(k) plan: Yes
- Retirement benefits specified in plan?
- Pension plan: Yes
- 401(k) plan: N/A
- Investment return affects retirement benefits?
- Pension plan: No
- 401(k) plan: Yes
- Benefits guaranteed at retirement?
- Pension plan: Yes
- 401(k) plan: No
Best of luck!
A Stretch IRA’s main purpose is to extend the period of tax-deferral. It is classified as a wealth transfer strategy that strives to extend the period of time that the assets within the IRA continue to grow tax-free.
This strategy is most commonly used by individuals who aren’t in need of the extra income or who plan to pass on a legacy to their heirs in a tax-efficient fashion.
How does it work?
The owner of the IRA must first name a beneficiary, generally, a spouse, child, or grandchild, and then only the legally required minimum distributions are taken from the account each year.
Pros
- Lifelong Income: A stretch IRA could potentially provide a lifetime of income to a beneficiary or beneficiaries.
- Minimized Tax Liability: The total tax paid may be lessened due to taking smaller distributions over an extended period of time rather than as a single lump sum.
- Tax-Deferred Growth: Extending the period of time in which distributions are made lengthens the time in which assets have to grow tax-free and increases the amount that beneficiaries receive.
Cons
- Death of Beneficiary: A beneficiary may not live a normal life expectancy.
- Change in Tax Laws: Changes in laws or regulations could have detrimental effects on the owner or beneficiaries.
- Investment Returns: As with any investment, losses or inflation could eat into the value of future distributions.
Setting up a stretch IRA should be considered carefully and with a financial professional because many different factors need to be evaluated.
Best of luck!
On the surface, it would appear to be attractive to take the joint and survivor pension of $1340 over the $1500 single life pension. The sacrifice is "only" $160 per month to ensure the survivor maintains an equal benefit.
Factors to consider in this decision are (1) other sources of income, (2) the amount of life insurance in place and (3) your retirement savings.
What other sources of income will you have for retirement, other than drawing upon retirement savings? Is there another pension? Or an annuity? Or rental property income? If there is, you might find reasons to take the single life pension; if there isn't, the joint and survivor pension becomes more important.
How much life insurance do you have in place? If there is enough life insurance to replace the single life pension after you leave this earth? (It would take about $500,000 on life insurance at today's interest rates to replace that pension.) If there is, the single life pension becomes a reasonable choice; if there isn't the joint and survivor pension becomes more important.
The final factor to consider is your retirement savings. Are you already drawing upon these savings, and if so, could you "safely" withdraw another $1,500 from them over your survivor's lifetime? If so, the single life pension becomes a reasonable choice; if there isn't the joint and survivor pension becomes more important.
This is not a recommendation for you to take any specific action, because we have not explored the answers to the above and other related questions. Having said that, it would appear to be attractive to take the joint and survivor pension of $1340 over the $1500 single life pension unless you have good answers to the questions asked.
All the best.
Securities and advisory services offered through Cetera Advisors LLC, member FINRA,SIPC.
Risk tolerance is about your comfort level as an investor. Just how much uncertainty are you comfortable with? Risk capacity, on the other hand, is the amount of risk that you must be willing to take in order to incur the returns you want. You risk capacity should reflect the amount you can incur or lose without having to alter your financial goals.
Understanding the difference between risk capacity and risk tolerance is important for all financial decisions, but extremely important to consider during retirement planning.
Best of luck!