Retirement Options if Your Work is Your Life

By Elsie Dudukovich0 Comments

No matter how much passion you have for what you’re investing your time in today, there may come a time when you want to retire.  Launching and running your own business requires hard work, determination, and planning.  As a self-directed account holder, use these same business skills to maximize your retirement investing.  If you’re a business owner, take a moment to explore if a self-directed business plan is a good fit for you.

Simplified Employee Pension (SEP)
If you’re self-employed or own a small business, this plan can be a way of contributing significantly more towards your retirement (and the retirement of your employees) than the contribution limits allow for traditional and Roth IRAs.

A SEP account overview according to the IRS:
  • Available to any size business, although typically with 25 or fewer employees
  • Easily established by adopting Form 5305-SEP, a SEP prototype or an individually designed plan document
  • If Form 5305-SEP is used, you cannot have any other retirement plan (except another SEP)
  • No filing requirements for the employer
  • Only the employer contributes
    • To a SEP-IRA set up for each eligible employee
    • Employee is always 100% vested in (or, has ownership of) all SEP-IRA money
For more information review the IRS resource page on SEP accounts.

Savings Incentive Match Plan for Employees (SIMPLE)
If you’re a small business owner with 100 or fewer employees, a SIMPLE is an option. With a SIMPLE, both you as the business owner and your employees may contribute.

An overview from the IRS of SIMPLE IRAs:
  • Available to any small business – generally with 100 or fewer employees
  • Easily established by adopting Form 5304-SIMPLE, 5305-SIMPLE, a SIMPLE IRA prototype or an individually designed plan document
  • Employer cannot have any other retirement plan
  • No filing requirements for the employer
  • Contributions:
    • Employer is required to contribute each year:
      • A matching contribution of the employee’s elective deferrals up to 3% of compensation, or
      • A 2% non-elective contribution for each eligible employee
        • Under the “non-elective” contribution formula, even if an eligible employee doesn’t contribute to his or her SIMPLE IRA, that employee must still receive an employer contribution to his or her SIMPLE IRA equal to 2% of his or her compensation up to the annual limit of $265,000 for 2016 (subject to cost-of-living adjustments in later years)
    • Employees may elect to contribute
    • Employee is always 100% vested in (or, has ownership of) all SIMPLE IRA money
Review the IRS resource page on the SIMPLE IRAs for more details.

Free Education – Super-Sized IRAs: Inside the SIMPLE, SEP and Solo 401(k)

If you’re looking for ways to contribute more (and potentially have larger tax deductions) to your retirement account, there may be an answer. In this presentation Equity University dives into small-business retirement accounts, including the SEP and SIMPLE IRAs, and explains how they can potentially magnify your wealth building.

Think you don’t qualify for a small-business account? You might be surprised!