Part 3: What if I am Self-Employed

Many of you probably have access to employer’s 401K programs. I like 401K programs as long as they give matching funds into my account.  That means that they give me free money.  I was in a 401K program back in 1980 to 1985 that matched 50% for the first 6% that I put into the account.  I loved it because it matched my funds.  If the program does not match my funds then I don’t need 401K programs.  For people who are in such a program, you can take your money with no penalty at age 59.5.

However, if you are not retiring at that age, I would roll the money over into an IRA to avoid the taxes. You can take the money without penalty for some medical reasons or financial hardship. You can also take the money if you receive it after age 55 in equal installments based on your life expectancy.  However, if you do and you are under age 59.5, you will have to pay taxes and a 10% penalty. It is better to take a loan against the account if you badly need the money.  See your plan for details about how to borrow money from your 401K.

Firms with fewer than 100 employees can establish a SIMPLE plan (Savings Incentive Match Plan for Employees). This plan is a cross between an IRA and a 401K program.  The employee chooses where the money goes just like in a regular IRA. Here employers must match up to 3% of pay contributed to the plan. Another way it can be set up is to give every employee of the company, contributing or not contributing to the plan, 2% of their pay automatically. Employees are vested immediately in the employees’ plan.  The plan grows tax deferred. However, the rules for withdraw are more than twice as harsh as the other plans.

What if you are Self-Employed? Keogh Plans are favored by doctors, dentist, architects, lawyers, and other professionals. Moonlighting consultants and free-lance writers have been known to use Keogh Plans. You can have this plan while you are in your company's pension plan and your IRA. Money for this plan is deducted from your taxable income in the year in which you made the money. You can use the “Money Purchase Keogh Plan”, “Profit-sharing Keogh Plan”, or “Defined-Benefit Keogh Plan.” See your investment adviser on what type of plan to use. 

Dividends, interest, and other earnings accumulate tax-deferred. Most of the rules for this plan are similar to most regular IRA Plans.  You can take the money at age 55 if the business closes.  If you have full-time employees, they must be included in your Keogh plan. 

A Simplified Employee Pension (SEP) is a combination of an IRA and a Keogh. The annual contribution limit is about 20% of income, the same as for profit-sharing Keoghs, up to $44,000 per year. The rules governing deductibility of contributions, tax-deferral of earnings, and penalties are the same as with an IRA. The advantage of a SEP over a Keogh is that it is simpler to administer.  This program is ideal for people with businesses as second jobs. It cuts the tax bill while saving for retirement.    

In these last three blogs, we studied how to get started in retirement accounts. Whether you are self-employed, you work for someone else, or your spouse has income, we covered a retirement program that fits your needs. The key is to start building that account today with whatever money you can. As you can afford more, increase your contributions. Start with $25 a month if you have no money, take full advantage of your tax-favored investment vehicles now while you can. When you are old and your income is limited, it will be too late to do something about it.        

A Special Note for all my reader’s around the world!  

Hi my loyal readers around the world. I just finished making my final plans of my life. I will be retiring in a few short years and moving into my luxury retirement home. I will spend most of my time getting my seven year old grandson ready for the 2028 Olympics. I have no idea what my younger grandson is going to do. As of now, I would say it has something to do with electrical engineering because at 1 years old, he knew how to operate an IPad. But whatever it is, I will be around to lend assistance to his education.


My plans also involves my readers. I am starting an online stock club design to give my loyal readers as much as one million dollars, maybe more depending on when you start my plans. That money will be to remember me by.


Please read the blog below and follow my instructions if you want a chance to get one million dollars.

http://bondinvestments.blogspot.com/2012/06/how-would-you-like-to-have-over-one.html

The younger you are; 35 and below, the greater the chance of getting over one million dollars. If you are starting at 60 years old, chances are you will only make it to $100,000.



I started out at age 23 and spent a lot of time laid off and giving money away to my children for cars. I bought 3 homes. One home was paid off in full. The other I bought in a partnership paid in cash. All my cars since 1971 were the current year and I have not had a car note since 1983. I even gave two girlfriends a car each. That is why I don’t have a million dollars today. But if you become one of my “Greedy Friends” I am sure with my instructions, you can get that million.