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Janine Bolon: Welcome to today’s 3-minute money tip, I am Janine Bolon and I have a guest, his name is Tom Perrone. He is with the New England Consulting Group of Guilford, which was organized in 1985. He is running a financial planning business since 1970. So this man is the man who can help clients hold on to their wealth, avoid those horrible financial landmines and lower your taxes. He is known for his one-page solution which is designed to help business owners, basically eliminate the what-ifs in their business as well as their personal life.
I also recommend you go out and buy his book “Business DNA”. It is not only a book, it is a program that helps you with business growth and transition planning. It helps you increase your company’s profits, create a sound planning platform, and contributes to eliminating the stress of your life as a business owner.
Tom, thank you so much for being on our show today.
Tom Perrone: Thank you for inviting me Janine, it is a pleasure.
Janine: So today you are talking to us about using your company to leverage your wealth. So, you have got 3 minutes, my friend. Go!
Tom: Yeah, a lot of business owners do not realize that because of their structure of their business. It is possible to set up compensation plans that are not regulated so you do not have to include everybody. So, a lot of these companies will put in a profit-sharing plan because the owner wants it but that $10,000 deposit, only a small part gets to them. And the employees get the rest and spread out. Well, they can actually have what they call a non-regulated plan which is usually funded by insurance contracts where they could put in play that same $10,000 and use it just for them, they do not have to include other people, there is no government filing and they can do it in such a way that their cost is nominal, basically, maybe 1% of the contribution in a tax. But when they grabbed the insurance policy out of the plan when they retire, they will have a bunch of money that has been growing tax-deferred and can create a tax-free income costing them very little.
So, for an example, I just finished the case. We had $10,000 of premium going in, it is going to cost the person out of pocket $6,600 over 20 years, and at the end of 20 years that $6,600 would have yield 438,000 of present interest value giving them $25,000 a year tax-free for 20 years. So that $6,600 had to earn 40% to do that in a regular market. And it is the leveraging of the tax code, the insurance code, and the fact that you own a business that allows you to do that. So, if you are a sole proprietor, a partnership, a corporation, a C-corp, you can do these things, you should be doing with someone who knows how to use these executive compensation plans the right way. But the nice thing is they are not government-regulated, you do not have to include everybody, you do not have to file with the IRS and you can create a lot of wealth, growing tax-free at nominal cost and coming out tax-free. Not a bad deal.
Janine: Not a bad deal at all. Thank you so much, Tom and that is today’s 3-minute money tip using your company to leverage your wealth. And if you have no idea what Tom was talking about in these 3 minutes, please visit his website and I highly recommend that you go and get his book, “Building and Protecting your Business Worth” podcast, that is the program and his book “Unlocking your Business’ DNA”.
That is Tom Perrone and this is Janine Bolon with your 3-minute money tip.
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