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I'm 41 years old and started my own business one year ago. I would like to take the next step and set a some type of retirement savings plan but I know nothing about them. I am the only employee of this business so I'm only saving for myself. Do I consider a 401K plan, stocks or something else? Anyone have any suggestions?

2007-01-25 04:35:43 · 9 answers · asked by Anonymous in Business & Finance Investing

9 answers

You are confusing two separate important points.
1. A vehicle to operate retirement income 401, IRA, KEOH,ROTH. The differences between them are the anual deposit amounts, and tax considerations.

2. What to invest in with the funds put in those accounts. The investment ideas are pretty much the same but the vehicles have different rules to contribution limits,taxation considerations. Stocks, mutual funds, hedge funds, and bonds are purchased in any of these vehicles.

If you can set up a Self Empoyed Retirement Fund do it. Brokerage houses will do the legal paperwork to start one. Even if you are the only employeee. You can put up to 18% of your income tax deferred into that type of account.

Even though you have the 401 vehicle, you can in addition to this do a Roth IRA (taxes paid on the money in... tax free for all the earnings) $4000 a year or if you make more than 165k a year... just the regular IRA (tax deferred) $4,000 yearly.

If I was just starting out in my 40's, I would put every surplus dollar into both until the contributions were maxed each year. (Do the 18% in the 401K contribution first then the Roth or simple IRA second. Why the 401 first? If you are a business, it reduces the amount of money considered "profit" in your company so less taxes on the business and the business is contributing 1/2 of the funds "matching dollars" so it's basicly done without paying (deferred) Federal, and State taxes. The 401 deposits make you a cool 15.3% on your money just for depositing them since you totally avoid paying your matching business 7.64% and personal 7.64% FICA deposits because you avoid taking the money as your salary first. How neat is that? :D

In a ROTH you are getting some of the taxes back by reducing your taxable gross income by $4000.00...but your business and you STILL paid the FICA on those funds and those are not tax deferred. Since YOU are the business, that means less money in your pocket.... therefore always max out the 401 first.

If I maxed out the contributions allowed then start up a separate account for your non-retirement dollars. This way there is no penalty for pulling money out early before age 65 if you are fotunate to retire early. : ) This will also act as a very effective emergency fund since there are no penalties for early withdrawal.


Now what to invest in is a different story but the basic idea is to have a multiple approach investments so that one market area downswing doesn't cause a big loss to your portfolio. Brokerage houses usually have better maintenece fees for operating your accounts than do banks. Shop around and it is different for each mutual fund invested in. Make sure the fee structure does not overpower it's earnings potential.

My advice would be to "hire" an independent financial counselor that does NOT invest or have a stake in the ideas brought to the table. Let him set up the types of investments to be involved with so that the recommendations are made for your benefit and not the brokers or the banks benefit. Watch out for financial consultants that are pushing insurance. The make a hefty profit on these schemes and less real money reamains for investments. If you need insurance buy TERM insurance on your own for pennys on the dollar. It has no cash value unless you die but the coverage is great and you will outperform any insurance policy by miles. It is NOT a good investment.

2007-01-25 04:52:54 · answer #1 · answered by Bob 5 · 2 0

Starting out this late you will really have to work hard to retire early, but it is possible. Since you are self-employed you can contribute to a SEP plan or an Traditional IRA. I would say the SEP plan would be better but don't take my word for it. If you don't want to mess with anything that will give you tax savings then just start investing it into stocks or other investments like real estate. I am a stay at home father who makes a little on the side. I lend out my money using the web site below. I am currently making about 14% after deducting the fees. I am now taking half of the interest that I make with this site and investing it into stocks. Once these are built up, my next step will be investing in real estate. Even though these are not tax shelters they are an income for me that I can do until I die and pass them onto my heirs. I have a IRA but I am making more money the other way.

2016-03-29 02:06:08 · answer #2 · answered by Anonymous · 0 0

You really should speak to a Financial Advisor about this. You don't have to put all your money into any one thing, in fact, it should ideally be spread out among insurance, funds, stocks. For your situation, I would personally look at your insurance coverage and make sure you are protected against all uncertainties before planning your retirement. What is your budget? Risk appetite? How much do you need to retire and when do you want to retire? All this and more should be discussed with your Financial Advisor.

2007-01-25 04:50:18 · answer #3 · answered by floozy_niki 6 · 0 0

Start at the beginning, Set your goal for $250,000 in real estate. Start with your house, add a duplex rental property. Use mortgages to set up the purchases and the income of rent pays for it. (consider your home mortgage rent) Add additional property as you build.

Place the payment of the mortgage on all properties at top priority, then up-keep of property, then income to a savings vehicle. This strategy will run by itself after awhile.

INCREASE THE GOAL WHEN EVER YOU GO OVER.

2007-01-25 04:50:31 · answer #4 · answered by whatevit 5 · 0 0

IRA - Indivdual Retirement Account

2007-01-25 04:39:33 · answer #5 · answered by Anonymous · 0 0

Individual retirement fund or IRA can be started at most financial institutes. You should check with your bank and see if they have a financial adviser you can sit down and talk to. Most banks offer this service for free

2007-01-25 04:42:28 · answer #6 · answered by oreobabylove 3 · 0 0

Fund a SEP IRA....it is a vehicle which you can contribute somewhere in the range of $44,000 tax free if you qualify (depending on total income). Contact me offline for more info if needed.

2007-01-25 04:48:22 · answer #7 · answered by lbeachguy2003 1 · 0 0

There are many different options you could take. Talk to a broker dealer, a personal finance adviser, or even your insurance company! Some of them (like Farmers) offer this service to their clients.

2007-01-25 04:44:47 · answer #8 · answered by BMW BFD 5 · 0 0

a personal pension scheme

2007-01-25 04:39:18 · answer #9 · answered by epbr123 5 · 0 0

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