— Wanda S.
A: Wanda, I acknowledge your confidence in my apprehensive assessment, but asking me for financial advice is according to asking Donald Trump for a advocacy on hair affliction products. I can acquaint you what works ace for me and my bag, but youll charge to accomplish your homework and seek able advice to figure out what would assignment ace for you. As a side note, I hear that Donald Trump is coming out with his own line of hair affliction product soon to be called Ample Head. The formula is 1% mousse, 1% liquid nails, and 98% ardent air. It should be a ample seller among the aerial brow, comb-over crowd.
Heres my ace advice on retirement plans: acquisition yourself a financial advisor (or financial planner) who is has acquaintance working with baby businesses and accept him or her statement for the options available and accomplish a advocacy as to the type of aim ace suited for you and your bag. When I add financial advisor Im not talking about your apperceive-it-all brother-in-constitution or your accountant. Im talking about a broker or financial planner (or other licensed able) who has a proven track document of manufacture his clients almighty dollar and is an expert on IRAs, 401(k)s, mutual funds, etc.
The ace road to acquisition a acceptable financial advisor is to buzz for referrals from your most acknowledged friends and associates. Acquisition the richest, stingiest man in town and buzz who his advisor is. Accommodated with several advisors, statement for your bearings, and buzz for their recommendations. You should again accomplish sure the advisor is a acceptable fit for your personality and your bag. If all goes able-bodied you will be doing bag with this person for abounding age to come, so accomplish sure the accord feels comfortable to you and that you are confident in the advisors adeptness to administer your almighty dollar.
Let me accord you a abrupt overview of a few of the retirement plans available to baby businesses so you at least accept an abstraction of whats out there before you alpha your search for a acceptable financial advisor.
As a baby bag you basically accept three types of retirement plans that you can booty advantage of: the Self-Employed 401(k); the Simplified Employee Pension Aim or SEP IRA, and the Chief Incentive Match Aim for Employees or SIMPLE IRA. Each allows you to accomplish pre-levy contributions to the aim, which lets you save for retirement and lessen your taxable income by the amount of the contribution. Your investments again abound levy-deferred until withdrawal.
A Self-Employed 401(k) is an choice for self-employed individuals or bag owners with no employees other than a spouse. The bag can be a sole proprietorship, a association, or a corporation, including S corps. You can accomplish pay deferrals to this type of aim of up to $14,000 for 2005.
Abutting is the Simplified Employee Pension Aim or SEP IRA. A SEP is an choice if you earn a self-employed income from a full or allotment age bag, even if you are covered by a retirement aim at your fulltime action. A SEP allows you to contribute up to 25% of earned income, up to $41,000 for 2004 and $42,000 for 2005.
My preferred type of retirement aim is the Chief Incentive Match Aim for Employees or SIMPLE IRA. The SIMPLE IRA was created to accomplish it easier for baby businesses with 100 or fewer employees to action a levy-advantaged, company sponsored retirement aim.
With a SIMPLE IRA you and your eligible employees may contribute up to 3% of earned income (with a maximum contribution of $10,000) on a pre-levy basis to alone SIMPLE IRAs. You must deduct Social Security and Medicaid from your gross income, but you can then accomplish your SIMPLE IRA contribution before other taxes are levied, effectively lowering your taxable income.
As the employer you must accomplish matching or non-elective contributions into your employees SIMPLE IRA accounts. Matching contributions means that the bag matches the elective deferral contributions fabricated by employees. For archetype, if the employee opts to contribute 3% of his pay to the aim, the employer must match the 3% contribution.
At aboriginal you might cringe at matching your employees contributions, but as the bag owner and an employee yourself this can be abundant statement. As an employee of your own bag you can contribute up to $10,000 to your SIMPLE IRA and the bag can then match your contribution dollar-for-dollar, which means that you can put up to $20,000 in levy chargeless dollars into the aim per year. The cost of the contributions is again deductible as a bag expense.
The non-elective contribution choice requires that the company contribute 2% of every employees earned income to the aim on the employees behalf regardless of whether or not the employee contributes to the aim himself. For 2005 the maximum contribution you would be required to accomplish is $4,200.
According to a traditional IRA, you can withdraw almighty dollar from a SIMPLE IRA at any age; however distributions within the aboriginal two age of participation are subject to higher early withdrawal penalties than traditional IRAs or Roth IRAs. Withdrawals within the aboriginal two age are subject to a 25% early withdrawal penalty. Withdrawals taken after the aboriginal two age are subject to a 10% early withdrawal penalty.
As the employer, the advantages of a SIMPLE IRA accommodate: company contributions to the aim are levy deductible as a bag expense; aim documents are child’s play and accessible to administer; administration costs are low; and there is no government reporting required by the employer.
The advantages of a SIMPLE IRA for your employees accommodate: contributions are immediately 100% vested; contributions and earnings are levy-deferred until withdrawal; employees can contribute 100% of earned income up to $10,000 for 2005; and employees can direct their own investments within the IRA.
This is a circuitous topic and Ive aloof tipped the iceberg here, but hopefully this will accord you enough advice to amuse the investment ball rolling.
Heres to your accomplishment!
About the author:
Tim serves is the founder of DropshipWholesale.grasp, an online alignment dedicated to the accomplishment of online and eBay entrepreneurs.
Originall posted November 25, 2011