⚠️ Hidden Cost of Growth: Why Business Owners Fall Behind on Retirement
Building your business has given you purpose, freedom, and income…
But here’s the truth most won’t say out loud:
Many business owners still don’t have a retirement plan.
Even after a decade or more in practice.
Why? Because every dollar gets reinvested:
- Overhead
- Debt
- Payroll
- Taxes
💸 Without a proactive plan, those dollars never start working for you.
🧱 The Problem with Traditional Retirement Options
If you show high income on paper, your options shrink fast and these are some factors to consider:
🚫 Contribution limits
🚫 Market volatility
🚫 IRS withdrawal penalties
🚫 Tax inefficiencies in retirement
And once you’re 10–15 years from retirement, the window to fix it starts closing.
🎯 What Most Business Owners or High Income Earners Need:
A plan that is:
✅ Tax-advantaged during retirement
✅ Protected from market losses
✅ Liquid — no IRS penalties, no red tape
📚 Case Study: Medical Practice Business Owner
This client owned a successful integrative medicine practice — but had no exit strategy and was losing six figures a year to taxes.
We helped her redirect those IRS-bound dollars into a private retirement plan using a Section 162 Executive Bonus Strategy — without giving up:
✅ Liquidity
✅ Asset protection
✅ Control over her income
💡 The result? A projected $1.84 million in lifetime tax savings — and $3 Million+ in tax-free income stream that didn’t rely on the market or 401(k) rules.
Client Case Study Scenario
Business Revenue: $400,000+/year
Years in Private Practice: 9+ years
Profession: Chiropractor & Nurse Practitioner
Business Expenses: $120,000/year ($10,000/month)
Personal Lifestyle Expenses: $84,000/year ($7,000/month)
Net Business Income: $280,000/year
Financial Concern
After nearly a decade of running a successful private healthcare practice, this business owner found herself in a familiar but dangerous position:
- She had been overpaying in taxes for years, lacking a proactive tax strategy
- Her focus on growing the practice meant she hadn’t prioritized retirement
- At 58, she realized she was running out of time to build long-term financial freedom
- Traditional plans like IRAs and SIMPLEs were too limited and exposed her to market risk
Estimated Annual Tax Burden (New Jersey)
With $280,000 in taxable income after expenses:
Tax Category | Estimated Rate | Estimated Amount Owed |
Federal Income Tax | ~29% effective | ~$81,200 |
State Income Tax (NJ) | ~7% average | ~$19,600 |
Self-Employment Tax | ~2–3% (S-Corp optimized) | ~$7,000 |
👉 Total Estimated Annual Tax Liability: ~$107,800+That means over 1 in every 3 dollars she earns is going to taxes — money that could be redirected into her own private, tax-free retirement plan instead of the IRS.
Concerns as Business Owner Near Retirement
This business owner needed a strategy that could:
- Reduce her immediate tax liability
- Allow her to save aggressively for retirement
- Avoid taxable income during retirement
- Protect her savings from market downturns
- Convert business dollars into personal, tax-free wealth
Traditional Path Considered: SIMPLE IRA
Feature | SIMPLE IRA |
Max Contribution (Age 58+) | $25,500/year |
Tax Treatment | Contributions are deductible, but taxable in retirement |
Investment Risk | Subject to market volatility |
RMDs | Begin at age 73 |
Tax Cost (30% Tax Bracket) | Pay $109,942 in retirement taxes after growth |
Net Tax Burden | - $76,942 paid in taxes |
“Yes, you save taxes now — but you’ll pay significantly more later.”
🎯 Alternative Strategy: Executive Bonus Plan (Double Funding)
This strategy uses IRC Section 162, which allows a business to bonus an employee or owner to fund a life insurance policy — in this case, a Permanent High Cash Value Life Insurance Policy — with massive tax deductions all while building her future tax-free income stream.
Plan Structure
- Total Bonus Paid to Employee: $184,615/year
- Annual Premium Outlay (Paid by Business): $120,000
- Tax on Bonus: $64,615/year (reimbursed through bonus structure)
- Contribution Duration: 13 years (ages 58–70)
- Total Deductible Contributions: $1,846,150
- Employee Ownership: 100% of policy & cash value
📊 Accumulation Phase Snapshot (Ages 58–70)
💸 Distribution Phase: Tax-Free Income Withdrawals (Ages 71–85)
💡 The result? A projected $3.1 Million projected tax-free income stream from age 71 through 85. Or $209k yearly tax-free income from age 71 through 85 with $238k leftover in her account.
⚖️ IRS Compliance & Business Eligibility
- Business taxed as an S-Corp
- Owner paid through W-2 compensation
- Bonus is reasonable and documented
- Fully deductible under IRC §162 as compensation
- No ERISA compliance required
🚀 Final Takeaways
✅ Converts wasted tax dollars into a private appreciating asset
✅ Removes market risk & income tax exposure in retirement
✅ Keeps full liquidity, control, and long-term death benefit
💡 This isn’t just a retirement plan — it’s a business-funded tax shelter with legacy built in.