Small business owners: increase retirement savings with individual 401(k)
July 25, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
If you’re self-employed or own a small business, you’ve probably considered establishing a retirement plan. If you’ve done your homework, you likely know about simplified employee pensions (SEPs) and savings incentive match plans for employees (SIMPLE) IRA plans. These plans typically appeal to small business owners because they’re relatively straightforward and inexpensive to administer. What you may not know is that in many cases an individual 401(k) plan may be a better deal for you. An individual 401(k) plan is worth considering if you’re looking to set up your first retirement plan or increase tax-preferred savings.
What is an individual 401(k) plan?
An individual 401(k) plan (also known as a solo 401(k)) can be implemented only by self-employed individuals or small business owners who have no other full-time employees (an exception applies if your full-time employee is your spouse). If you have full-time employees age 21 or older (other than your spouse) or part-time employees who work more than 1,000 hours a year, you will typically have to include them in any plan you set up, so adopting an individual 401(k) plan will not be a viable option.
What makes an individual 401(k) plan attractive?
- Contribution levels can generally be higher than SEP or SIMPLE
- The employee part of your contributions can be designated as Roth or traditional regardless of income level
- Easy to set up at most discount brokerages without a lot of extra costs
With an individual 401(k) plan you can elect to defer up to $16,500 of your compensation to the plan for 2011 as either Roth or traditional contributions ($22,000 if you are age 50 or older by the end of the calendar year). In addition, your business can make a maximum tax-deductible contribution to the plan of up to 25 percent of your compensation (slightly less than that if you are a sole proprietor or unincorporated).
There are other details to be aware of, so consult your tax or financial advisor prior to establishing a plan.
Keller Social Security Planning Workshop
July 18, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
I am conducting a free social security strategy workshop at the Keller Public Library on Tuesday, July 19 at 6:30 pm.
It’s designed for baby boomers to help you maximize your retirement income. If you are 55 or older, have not yet filed for social security, and live in or around Keller, you should strongly consider attending this financial information session. Attendees will learn:
- 5 factors to consider when deciding when to apply for benefits
- Why you should always check your earnings record for accuracy
- How to coordinate benefits with your spouse
- How to minimize taxes on Social Security benefits
- How to coordinate Social Security with your other sources of retirement income
You are welcome to attend and bring your questions! Please RSVP to library@cityofkeller.com for planning purposes.
A copy of “The Smartest Retirement Book You’ll Ever Read” by Daniel Solin will also be given away.
July Personal Finance Newsletter
July 14, 2011 by Jean Keener, CFP, CRPC, CFDS · Leave a Comment
The July personal financial planning newsletter is now available.
Because of the tumultuous investment markets and economic uncertainty, the newsletter includes two investing columns — one a recap of the second quarter market performance with a look forward, and another by Jim Parker with Dimensional Funds providing some compelling data on the importance of maintaining investment discipline.
The newsletter also has information on the new IRS mileage rates for the second half of 2011, a summary of how A/B and A/B/C trusts work for estate planning, and an overview of the tax and policy issues involved in taking a loan from your life insurance policy.
Plus, there’s an invitation to my social security workshop this coming Tuesday at the library.
Click here to read the newsletter.