I work for a company that does not offer a retirement plan or a 401k I can contribute to. What is the best way I can set up my own plan?
Answers | 4
The SEP IRA (SEP means Simplified Employee Pension) which allows you to contribute up to 25% of your earnings from self employment up to a maximum of $53,000 in 2015.
All the IRAs are easy to setup and manage.
Having the money in a IRA is first decision the next one is what to do with the money. This depends a lot on age and a few other factors so it is a decision that can be made at the time you set up the IRA.
There also are 401k plans for the self employed which have different rules.
You have a lot of options, which one is right for you should be determined in consultation with a financial advisor who is a fiduciary pledged and required to put your interests first.
There are many choices. Perhaps, a better question is what do you want the plan to do for you? In other words, what is your MARR (Minimally Acceptable Rate of return)?
On investing being a business owner and not a consumer offers many advantages. Our folks love the higher returns with lower risk using our strategies.
Here are some links:
IRA & Roth
Simple (Savings Incentive Match Plan for Employees)-IRA
SEP (Simplified Employee Pension)-IRA
Traditional, ROTH, & Simple 401K
PSP (Profit Sharing Plan)& KEOGH
DBP (Defined Benefit Plan)
One of the first questions I'll ask is about your debt-load...how much debt are you carrying? Priority number one is paying off your highest-interest debt first, and subsequently paying off the rest of your debt in order of highest interest rates (that interest you pay will KILL your retirement).
Assuming no debt, if you don't already have a liquid emergency fund established, this should be priority number two (I like between 9 to 12 months' worth of living expenses). And it becomes much easier to get to the 9-12 months' worth mark once you roll the dollars you had going toward debt into your emergency fund. For this money, I like money market accounts, as they pay you a slightly higher interest rate than a typical savings account.
Once your debt is paid off and you have an emergency fund established, only then should you start to invest for retirement. Take the money you had going toward debt and toward building your emergency fund and put it to work for you. Not knowing your time horizon for retirement, concentrate on accumulation products WITHOUT exposing your money to risk. Depending on your age, you may not be able to afford any market losses, especially when there are safe-money strategies that will allow for a reasonable rate of return, typically 4% to 8%, with ZERO risk of losing principal. If you haven't read Patrick Kelly's book "The Retirement Miracle" I suggest you do, and incorporate that as one of your strategies.
I love the Roth IRA, but depending on how much you make (unless you're a Federal Employee), the maximum contribution allowed is rather limiting. I also love the idea of starting a home-based business, not only for the tax relief, but also for the ability to open a SEP. But if you can learn to live below your means and adjust your budget to do so, saving 15% to 20% of your annual salary will allow you to catch up rather quickly. If you can do more, than do more.
I'd be happy to answer any questions you might have throughout the process...just reach out.