 | ||
 |  | |
The MDTAXES Network is an affiliation of CPAs that specialize in the tax planning and preparation for young health care professionals. Please leave your questions or comments for our CPAs, who visit the message board regularly, or review the answers, suggestions and ideas posted in response to your colleagues' questions.
Please check out our other Message Boards available at www.FindAGoodCPA.com.
Please note: We are NOT affiliated with the Maryland Tax Department. If you're looking for information about Maryland income taxes, go to www.marylandtaxes.com.
Eric-
412i plans are a form of Defined Benefit Pension plan.
The amount you can contribute is based on a number of factors including your current age, your age at the start of retirement, the amount of money you desire and a hypothetical return on your investment.
If you are older (and have less time until retirement), and use a low assumed rate of return on your investments, (hence, the reason for life insurance and annuities in the 412i plan) you will be able to put more money away that is tax-deductible compared to other types of pension plans.
However, as the annuity or life insurance policy performs better than the minimal assumed rate, the amount that you can contribute will decrease. The contributions also must be made year after year with no real degree of flexibility.
I, myself, am not a big fan of 412i plans. Unless you are looking to purchase life insurance on a tax-deductible basis or are extremely conservative, there are better options available.
Hope this helps.
Larry
Lawrence B. Keller, CFP®, CLU, ChFC, RHU, LUTCF
CERTIFIED FINANCIAL PLANNER™ professional
Zip Code: Lkeller@physicianfinancialservices.com