bmcper 
CEO/Auditor
(8/30/00 5:48 pm)
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Retirement Plans !!!
Tax-deferred plans for small and home-based businesses!
Employers and employees have to know which retirement plans are best for them. From IRAs to SEPs, retirement plans depend on you and your company’s needs.
Picking the right retirement plan isn’t easy. If you work for yourself or you need to save for retirement on your own, the burden is yours to search out the right plan.
If you’re a small business owner, for instance, the decision on what type of retirement plan and how much to contribute is up to you. After all, there is no employee benefits manager to hand you that nice, descriptive brochure for the company plan and no simple form to sign that will make someone else automatically deduct retirement contributions from your monthly paycheck.
Even if all you qualify for is a $2,000 Individual Retirement Account contribution, your search is worthwhile because of those twin benefits of tax-deduction and tax-deferral. Social Security's future is not promising, with the possibility of huge tax increases to pay for benefits. So the sooner you take responsibility for retirement into your own hands, the better off you will be. The biggest obstacle you have to overcome is that instead of someone else devising a strategy for dealing with the Internal Revenue Service, filing endless tax forms, and making the appropriate tax contributions, you have to set up the plan and come up with the money yourself.
Keogh plans
The traditional retirement plan for self-employed persons (or a partnership of self-employed persons) is the Keogh plan.
Keogh plans can be time-consuming to set up, and require annual filings to the IRS and the Department of Labor. This is a major reason why only 42% of the nation’s businesses with less than 100 employees offer retirement plans to their workers, and why only 11% of businesses with fewer than 25 employees do so. To encourage small businesses to help their employees save for retirement, two new plans, the SEP-IRA and the SIMPLE-IRA, have been designed to streamline the administrative process by eliminating IRS and Labor Department filings.
The SEP-IRA
The Simplified Employee Pension IRA is an excellent choice for employers that don’t want to be required to put money in each year.
THE SIMPLE-IRA
The other new plan, just introduced in 1997, is Savings Incentive Match Plan for Employees, or the SIMPLE-IRA. Its name is well chosen.
Whomever you choose as trustee (usually an insurance company or brokerage firm) has to manage the plan and make the required reports, including reporting back to you and your participating employees. You and any of your employees can contribute up to $6,000 a year or 100% of your income, whichever is less. As the employer, you match up to 3% of a participating employee's income, or put in 2% of your company’s payroll for every eligible employee, whether contributing or not. The SIMPLE-IRA and the SIMPLE-401(k) are basically the same.
The traditional IRA
What if you’re working for someone else and there is no plan? Or maybe there is a program, but with your modest income not much is being socked away. The IRA is probably the answer.
Even non-working spouses can now put in $2,000. If you contribute to an IRA, you automatically get the benefit of tax-deferral. The earnings on your investment are not taxed until you take the money out at retirement.
What people find confusing is whether the contributions are tax-deductible.
If it’s your plan, and you’re making the decisions, where should you invest? The good news is that competition for your retirement plan dollar is fierce. If you have fewer than 500 employees, however, you may not get the customer support you deserve. Whenever possible, choose no-load (no-commissions and no 12b1-1 fees) mutual funds. You have a chance to shelter the money from taxes. Why take some of those dollars out of the tax shelter unnecessarily?
Whatever you do for your own retirement planning, do something. Even if you work for a company, start trying to earn some outside income to put into one of these retirement plans on your own. After all, retirement plans are some of the best tax shelters anywhere and the person who benefits is you.
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