David and Heather Smith

(Names and information changed for confidentiality purposes)

Their Personal Circumstances and Goals

David and Heather Smith are both 35 with no children. David left his W2 job to start his small business. Heather is a 1099 contracted employee herself. They have a healthy cash flow. They want to utilize their businesses to benefit them personally, but have a lot of competing priorities:

  • Create a “benefits package” since their jobs don’t provide one automatically- specifically retirement and health insurance
  • Buy their dream home on the water
  • Retire or become “work-optional” around 55 as opposed to the traditional 67
  • David wants to hire employees to free up his time to be able to travel and spend more time with the family
  • They have old retirement accounts from their previous jobs, but want to learn how to most optimally fund their retirement.
  • Lastly they want to learn how to optimize their taxes through because they constantly owe taxes and have never paid quarterly

They decided to hire a financial planner to help them define these goals and develop a plan of action to cover their entire financial life, not just their investments.

The Work We Did Together

Together we were able to make the following changes:

  • David opted into an S. Corps taxation as opposed to Single member LLC which allows him to pay himself a W2 salary but distribute some income as profit distributions which significantly lowered his self-employment/FICA tax, keeping more cash flow in their pocket to use towards their goals
  • Set Up Their “Benefits Plan”
    • Took advantage of federal subsidies offered on Healthcare Marketplace Plans and found a plan that would fit their needs. This also provided them the Premium Tax Credit which lowered their taxes.
    • David set up a SIMPLE IRA through his business to be able to save for their retirement. He can save more than a typical IRA, and match his contributions through the business to create a tax deduction on both their personal and business tax returns. This plan also works great when he has employees
      • Consolidated his old retirement accounts into this new one for simplicity and compound earnings
  • Freed up enough money in taxes to be able to create enough cash flow to hire his first part-time team member
  • Set up a SEP IRA for Heather to pay herself more than a traditional IRA and make it a business tax deduction
  • Set up a taxable investment account and through strategically choosing their investments and saving a certain amount every month they will be able to purchase their dream home on the water in 5 years. 

David and Heather still work incredibly hard but can now have and enjoy more free time. They can breathe easily because they know they have the systems in place to achieve their goals.

View Their One Page Plan