If you are anyway involved in the sales of 401k plans, you know how difficult it can be to help a Plan Sponsor understand all the details that go into choosing the right type of plan. Explaining plan design is about as simple as taking my 4 chihuahuas to a dog park and that is a near impossible task.
Plan Sponsors/Decision Makers don’t want you to walk them through a detailed 4 hour PowerPoint presentation or leave them with a 16-page white paper explaining all the nuances of 401k. They rely on you to cover the highlights and then guide them to a decision. By using a little magic (magic secret provided in this post), anyone can turn the very complex into something easy to consume and digest.
He ain’t David Copperfield and maybe he can’t pull a rabbit out of his hat, but boy when it comes to retirement plan design my magician of choice is Chad Johansen. He has developed an approach that anyone can follow to win new business and help clients make design decisions with confidence. He calls it the Magical Staircase of 401k….hahaha….well actually I named it that on a recent episode of Retireholiks (episode 17) but he has agreed to use the new moniker going forward. Which he kind of has to do…because I’m his boss. 🙂
The first step is a simple but crucial one, we must determine how much the owner(s) or group of employees we are trying to benefit want to stash away. Is it 10 grand a year? 15k? Are they looking to sock away 50 thousand? Or maybe they are a (play cool rap music background here) baller/shot caller and looking to shelter way more than that. Either way, we first need to determine that specific objective and then we can build the proper design off of that.
The Magical Staircase is a simple way to walk a client through many potential design concepts like Salary Deferral Only Plans, Safe Harbor Solutions, Profit Sharing components and the almighty Cash Balance Combo. It’s done in a progression format where each step builds on the step before it. Instead of me trying to cover and explain the process in this blog post, it would be much more effective for you to click on the following link and spend 9 minutes watching a clip from The Retireholiks Episode #17 (minute 2:21-11:41) where we break down the whole thing from start to finish. And besides my writing skills have never been compared to Ernest Hemingway, so better to hear and see it.
If you are curious what the Magical Staircase handout looks like, you can download a copy here: http://www.plandesign.com/storage/pdf/FundingStaircase2017.pdf