Safe Harbor 401k
A powerful formula is combining a cross-tested profit sharing with a safe harbor 401(k).
Advantages
- Owners can defer the maximum amount
- Profit Sharing allocations favor the owner
- Tax-deferred retirement savings
- Availability of life insurance with tax-deductible premiums
Considerations
- Safe harbor contributions are required
- Owner profit sharing allocations impated by employee demographics
Sample Max Contribution Comparison Scenario
Scenario: Business Owner age 55, Spouse 52; Two employees age 24 and 33
| Profit Sharing + Safe Harbor | 401(k) | Total Annual Contributions | |
| Owner & Spouse | $67,000 | $50,000 | $117,000 |
| Employees | $ 2,600 | $ 2,600 | |
| Employer Contribution | $69,600 | ||
| Percent to Owner & Spouse | 98% |