Question: What do you get when you combine a 401(k) retirement plan with a 529 college savings plan? The answer is a new product from Fishkill-based Max It Out Retirement: the 930 Plan, designed for young professionals as an alternative vehicle for their retirement savings strategies.
According to the company, the 930 Plan culls the best features of the 401(k) and 529 plans while leaving out their respective thorny caveats. Chuck Omphalius, managing partner of Max It Out Retirement, explained that while 529 plans seem like a solution for funding a child”™s college education, it becomes a problem if the child either decides to skip college or obtains a scholarship and doesn”™t need extra financial help.
“If it”™s used for anything but the specific purpose of education, then that money is not only taxed when you take it out, but it”™s also heavily penalized,” he said. “It can”™t be reused for retirement purposes without big penalties, so it has to be used for education.”
And unlike the 401(k)s, 930 Plan holders will not be taxed or penalized for a withdrawal before they reach 59½. Omphalius said that this mandate is an added problem for cash-strapped people who prematurely withdrew funds to cover their cost of living during the most perilous economic stretches of the Covid-19 pandemic.
“Regardless of what age you are, if you”™re contributing to it and you want to pull money out before you are 59½, on top of the taxes there”™s also penalties and restrictions for what it can be used on,” he said. “And if you want to continue to save it beyond age 73½, you have to start taking distributions ”” there”™s just a lot of rules that go along with it.”
Omphalius stated his product comes at a time when young professionals are showing a great interest in finance, albeit by toying with investment vehicles such as cryptocurrency “where they think they can make a quick hit.”
While acknowledging that the 401(k) plan was an ideal savings vehicle for an earlier generation, today”™s plans are not helpful for young professionals pursuing long-term savings because many employers are no longer matching the plans.
“They”™re forced to save in a different way,” he said of his target audience. “Part of what the 930 is about is showing you a different way to do so. None of the savings mechanisms that we use to execute the 930 Plan are attached to the markets, so there”™s no volatility involved ”” and, we”™ve had 11 straight bull markets and we”™re ripe for a correction.”
Omphalius is rolling out the 930 Plan in the New York metro area. His company also has offices in San Francisco and Tampa where he is scheduled to introduce the product later in the year.
As for taking the 930 Plan wider, Ompahlius envisioned the 930 Plan as a proprietary brand within his company and is not seeking to market it to financial institutions.
“It was a natural, next natural progression to the core business,” he said, referring to his company”™s focus on retirement planning. “It”™s just a branding idea to approach a different generation and get them the education they need to make these decisions earlier in life.”
