Creating a Pension for Self Employed?

[infoseeker]

thanks for that info one question-are there pension specialst i can go through to get advice or should i go through etrade for advice and lower fees. Or is this something i should go through my accountant with. to get it setup

 

[SWM]

thanks for that info one question-are there pension specialst i can go through to get advice or should i go through etrade for advice and lower fees. Or is this something i should go through my accountant with. to get it setup

Do you not sell annuities? Do it yourself if you can.

 

[scagnt83]

thanks for that info one question-are there pension specialst i can go through to get advice or should i go through etrade for advice and lower fees. Or is this something i should go through my accountant with. to get it setup

You need to work with someone who knows what they are doing and has experience in working with retirement plans.
This would be an advisor of some form or another. Certainly not etrade, and probably not your accountant. However, if your accountant is a true CPA then they should be able to help give some advice here. But you will need someone who sells the investments to set up the plan and give the ultimate advice.

Insurance agents who are registered reps often do retirement plans. Some stock brokers do retirement plans.

Since you are an agent you could sell yourself an annuity to fund whatever plan you decide on. I would offer to split the business with an experienced agent who could guide you through the process.

 

[njh_lfg]

You do not need anyone to set up a SEP. Simply complete the IRS form and keep it in your files. You can open an account through any custodian if you want to manage it on your own.

As for prior questions: a SEP is based on employer contributions only. One cannot discriminate but there are two conditions to become eligible: age, hrs worked, years with co (examples as I do not have the form in front of me).

 

[Mr_Ed]

the first thing you should do is a Roth IRA.

 

[Justin Bilyj]

the first thing you should do is a Roth IRA.

I so agree with this, setting up a couple at the moment. It is much wiser to pay tax on the seed instead of on the harvest (especially the way our gov.'t is going)..

 

[scagnt83]

A bundled Solo 401k with a ROTH option is probably your best bet.
You could even put an IUL inside of it if it was unbundled and you controlled the Plan Documents.
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the first thing you should do is a Roth IRA.

This is a bit short sighted.. especially with a business owner. Its more than just taxes now vs. taxes later.

ROTHs are great, but pretax funds have lots of advantages.
Since he is a business owner he could do a Solo401k w/ a ROTH option. Then split contributions between the two accounts (ROTH & non-roth). He also has much higher contribution limits with this.

 

[Mr_Ed]

A bundled Solo 401k with a ROTH option is probably your best bet.
You could even put an IUL inside of it if it was unbundled and you controlled the Plan Documents.
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This is a bit short sighted.. especially with a business owner. Its more than just taxes now vs. taxes later.

ROTHs are great, but pretax funds have lots of advantages.
Since he is a business owner he could do a Solo401k w/ a ROTH option. Then split contributions between the two accounts (ROTH & non-roth). He also has much higher contribution limits with this.

he only made $50K last year.

 

[scagnt83]

he only made $50K last year.

I take it you have low expectations of his future... lol


He said his Net income. So I was assuming he meant his AGI.
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Infoseeker,

How is your business set up? LLC? S-Corp? C-Corp?

This should be the third question asked in this scenario before anyone can make a decent recommendation.

Exactly how much per year are you looking to contribute? (fourth question)
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To add to this; the Solo401k has advantages that the SEP or SIMPLE does not have.

- It is fully protected from creditors in all 50 states. IRAs are subject to state by state limitations.

- It can grow with you as you earn more since it has higher limitations on contributions.

If you compare a Solo401K to a SEP using Fidelitys calculator, a 52 year old with a corporation making $100k per year can contribute $10k to the SEP, but $32,000 to the Solo401k. (And that is not including a profit sharing plan either.)

- It can give you both a traditional pre-tax account as well as a ROTH account, all in one plan.

- 401Ks often have lower expense ratios for the funds inside them when compared to the funds retail counterpart.

- If you go with an "un-bundled plan" (meaning a TPA does the admin for it, and you have full control of the plan docs), then you can add annuities or even cash value life insurance to it.


On the flip side the SEP will give you every choice under the sun as far as investment choices go. But there are plenty of good ones on 401k platforms.


More info on how much you plan to be able to contribute each year would really dictate a suggestion.

 

[njh_lfg]

To add to this; the Solo401k has advantages that the SEP or SIMPLE does not have.

- It is fully protected from creditors in all 50 states. IRAs are subject to state by state limitations.

- It can grow with you as you earn more since it has higher limitations on contributions.

If you compare a Solo401K to a SEP using Fidelitys calculator, a 52 year old with a corporation making $100k per year can contribute $10k to the SEP, but $32,000 to the Solo401k. (And that is not including a profit sharing plan either.)

- It can give you both a traditional pre-tax account as well as a ROTH account, all in one plan.

- 401Ks often have lower expense ratios for the funds inside them when compared to the funds retail counterpart.

- If you go with an "un-bundled plan" (meaning a TPA does the admin for it, and you have full control of the plan docs), then you can add annuities or even cash value life insurance to it.


On the flip side the SEP will give you every choice under the sun as far as investment choices go. But there are plenty of good ones on 401k platforms.


More info on how much you plan to be able to contribute each year would really dictate a suggestion.

SEP contributions are 25% or income or max 50k (2012), SOLO you must file DOL forms, expenses of SEP vs SOLO is not relevant as they are types of accounts, 401k platforms have same options as SEP when it comes to investments.