Entrepreneurs: How to Talk to Advisors About Retirement Plans

Entrepreneurs: How to Talk to Advisors About Retirement Plans

Being an entrepreneur can be as difficult as spelling entrepreneur. Apart from the financial risk involved, there are a lot of decisions to be made when starting your own business, including product offering, marketing strategy, entity type, compensation arrangements, and other factors. Plus, unless you plan to work forever, you’ll need to decide on a retirement plan. Choosing a retirement plan is one area that self-starting entrepreneurs might not want to go at alone; it will be complicated and can get more complicated if you have employees. To avoid costly mistakes and liability, we recommend working with a professional. Here, we will provide a foundation for the discussion that you should have with your advisor.

Popular small business retirement plans include SEP IRAs, SIMPLE IRAs, Solo 401(k)s, traditional 401(k)s, and defined benefit plans. The optimal plan will depend on a number of factors, including the amount and stability of extra cash flow that can be used to contribute to the plan and to maintain the plan (both now and in the future), your age, the age of your employees, employee turnover, and your general disposition toward generosity (certain plans require you to save on behalf of your employees, while others do not.) 

In 2017, the maximum contribution limit for SEP IRAs, Solo 401(k)s, and traditional 401(k)s is $54,000, which might be reduced based on income and includes contributions made by the employer and the employee, where applicable. Defined benefit plan contributions might be much higher. Unlike SEP IRAs and 401(k)s, defined benefit plans do not have a contribution limit. Instead, they have a maximum benefit amount. Contributions can be made up to an amount that is expected to provide the maximum allowable benefit of $215,000 in retirement (2017). Professional actuaries determine required annual funding amounts for defined benefit plans. (We told you it would be complicated.) 

Know that establishing certain retirement plans can be as simple as filling out an adoption agreement and completing an application through your brokerage firm. Although it’s easy, you might find that your brokerage company is not fully equipped to help with plan-related questions or requests that might arise down the road. Instead, we recommend hiring a third-party administrator (TPA) to help with choosing a plan, drafting the plan document, preparing necessary tax filings, and managing plan requests, such as loans, rollovers, and distributions. It will be money well spent. 

Making $ense of Tax-Deductible

A term used to describe the tax treatment of certain expenses or savings plan contributions.  Amounts spent on allowable expenses or contributed to certain retirement plans may reduce the amount of income subject to taxation. Common tax-deductible expenses include mortgage interest and property taxes paid. Popular tax-deductible retirement plan contributions include those made to 401(k) plans and traditional IRAs. 

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China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

China's Push Toward Excellence Delivers a Global Robotics Investment Opportunity

Written by: Jeremie Capron

China is on a mission to change its reputation from a manufacturer of cheap, mass-produced goods to a world leader in high quality manufacturing. If that surprises you, you’re not the only one.

For decades, China has been synonymous with the word cheap. But times are changing, and much of that change is reliant on the adoption of robotics, automation, and artificial intelligence, or RAAI (pronounced “ray”). For investors, this shift is driving a major opportunity to capture growth and returns rooted in China’s rapidly increasing demand for RAAI technologies.

You may have heard of ‘Made in China 2025,’ the strategy announced in 2015 by the central government aimed at remaking its industrial sector into a global leader in high-technology products and advanced manufacturing techniques. Unlike some public relations announcements, this one is much more than just a marketing tagline. Heavily subsidized by the Chinese government, the program is focused on generating major investments in automated manufacturing processes, also referred to as Industry 4.0 technologies, in an effort to drive a massive transformation across every sector of manufacturing. The program aims to overhaul the infrastructure of China’s manufacturing industry by not only driving down costs, but also—and perhaps most importantly—by improving the quality of everything it manufactures, from textiles to automobiles to electronic components.

Already, China has become what is arguably the most exciting robotics market in the world. The numbers speak for themselves. In 2016 alone, more than 87,000 robots were sold in the country, representing a year-over-year increase of 27%, according to the International Federation of Robotics. Last month’s World Robot Conference 2017 in Beijing brought together nearly 300 artificial intelligence (AI) specialists and representatives of over 150 robotics enterprises, making it one of the world’s largest robotics-focused conference in the world to date. That’s quite a transition for a country that wasn’t even on the map in the area of robotics only a decade ago.

As impressive as that may be, what’s even more exciting for anyone with an eye on the robotics industry is the fact that this growth represents only a tiny fraction of the potential for robotics penetration across China’s manufacturing facilities—and for investors in the companies that are delivering or are poised to deliver on the promise of RAAI-driven manufacturing advancements.

Despite its commitment to leverage the power of robotics, automation and AI to meet its aggressive ‘Made in China 2025’ goals, at the moment China has only 1 robot in place for every 250 manufacturing workers. Compare that to countries like Germany and Japan, where manufacturers utilize an average of one robot for every 30 human workers. Even if China were simply trying to catch up to other countries’ use of robotics, those numbers would signal immense near-term growth. But China is on a mission to do much more than achieve the status quo. The result? According to a recent report by the International Federation of Robotics (IFR), in 2019 as much as 40% of the worldwide market volume of industrial robots could be sold in China alone.

To understand how the country can support such grand growth, just take a look at where and why robotics is being applied today. While the automotive sector has historically been the largest buyer of robots, China’s strategy reaches far and wide to include a wide variety of future-oriented manufacturing processes and industries.

Related: Smooth Tomorrow's Market Volatility With a Smart Approach to Robotics & AI

Electronics is a key example. In fact, the electrical and electronics industry surpassed the automotive industry as the top buyer of robotics in 2016, with sales up 75% to almost 30,000 units. Assemblers such as Foxconn rely on thousands of workers to assemble today’s new iPhones. Until recently, the assembly of these highly delicate components required a level of human dexterity that robots simply could not match, as well as human vision to help ensure accuracy and quality. But recent advancements in robotics are changing all that. Industrial robots already have the ability to handle many of the miniature components in today’s smart phones. Very soon, these robots are expected to have the skills to bolster the human workforce, significantly increasing manufacturing capacity. Newer, more dexterous industrial robots are expected to significantly reduce human error during the assembly process of even the most fragile components, including the recently announced OLED (organic light-emitting diode) screens that Samsung and Apple introduced on their latest mobile devices including the iPhone X. Advancements in computer vision are transforming how critical quality checks are performed on these and many other electronic devices. All of these innovations are coming together at just the right time for a country that is striving to create the world’s most advanced manufacturing climate.

Clearly, China’s trajectory in the area of RAAI is in hyper drive. For investors who are seeking a tool to leverage this opportunity in an intelligent and perhaps unexpected way, the ROBO Global Robotics & Automation Index may help. The ROBO Index already offers a vast exposure to China’s potential growth due to the depth and breadth of the robotics and automation supply chain. As China continues to improve its manufacturing processes to meet its 2025 initiative, every supplier across China’s far-reaching supply chains will benefit. Wherever they are located, suppliers of RAAI-related components—reduction gears, sensors, linear motion systems, controllers, and so much more—are bracing for spikes in demand as China pushes to turn its dream into a reality.

Today, around 13% of the revenues generated by the ROBO Global Index members are driven by China’s investments in robotics and automation. Tomorrow? It’s hard to say. But one thing is for certain: China’s commitment to improving the quality and cost-efficiency of its manufacturing facilities is showing no signs of slowing down—and its reliance on robotics, automation, and artificial intelligence is vital to its success.

Want all the details? Download the ROBO Global Investment Report - Summer Brings Best ROBO Earnings in Six Years or visit us here.

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ROBO Global LLC is the creator of the ROBO Global® Robotics and Automation Index series, which provides comprehensive, transparent and diversified benchmarks representing the ... Click for full bio