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Pension rules change annually.
The IRS regs can be complicated.
Use this site to
gather a general understanding. Then refer to an expert.
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Click
here to discuss your pension plan options with
Richard Greenwald, a financial advisor with 10 years experience specializing in pensions.
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Quicken
Deluxe
2008
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Personal Finance made easy
$44.99
Pay bills with checks or
online, create family budgets, download bank transactions,
track tax data, monitor net worth and asset allocation, plan
for retirement, college or new home, find hidden tax
deductions
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Quicken
Premier
2009 |
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Same great features as
Quicken Deluxe Plus
$71.99
Analyze investments;
Investment tutorials; Tools to minimize capital gains tax;
Morningstar ratings on your funds; Generate schedule A, B, D
tax reports.
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Quicken
2009
Home & Business
for Schedule C filers
$79.99 |
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Same great features as
Quicken Deluxe and Quicken Premier Plus
Create & customize
estimates & invoices; generate business reports; track
mileage; track multiple jobs per customer; accounts receivable
reports; track accounts payable; guidance for starting &
running a business.
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Popular business choices
(0-few employees) |
401(k) Plan: The 401 (k) plan is ideal for
small retail business owners, writers, consultants and professionals
without employees. Contributions to this plan can come from
part-time income but if you work for another company full-time
and contribute to their 401 (k) plan, you cannot exceed the maximum
allowable annual contribution between the two plans. This
plan permits the owner to contribute plus have his/her company
match a percentage of your personal contribution up to an annual
total of $44,000 (2006) $45,000 (2007) or 100% of your income whichever is less.
The limit of personal contributions for year 2006 is $15,000 ($20,000 if you
are over 50) and in 2007 $15,500 ($20,500 if you are over 50), and your company can contribute 25% of your
earnings up to a maximum annual contribution.
A 2006 example: You are 54 years old and earn $96,000 and an employee of
your own S-Corp. Under the new law, your maximum contribution
to a single individual 401k plan would consist of the following: 25
percent of your salary contributed for profit sharing as a business
($24,000), the maximum allowed elective deferral as an
employee ($15,000), plus a catch up contribution for being over 50
($5,000). Total $44,000.
The contribution is deducted from income, lowering your tax
burden. Once the business begins to hire employees, the 401(k)
plan will incur expensive administrative costs and required
expensive contributions to the employee's account.
Click here for an easy to read
guide to choosing a 401K
plan that discusses the different types of 401Ks, the vesting
issues, the contribution amounts and more.
Simplified Employee Pensions (SEPs): An IRA is set
up for the owner and any employee in the plan. Contributions are
made only by the business, not the individual (as in a 401K).
The business can make a choice each year, at tax time, how much (if
any) to contribute regardless of what was contributed in prior
years. Maximum contribution limits are, the lesser of
25% of earned income or $44,000 for 2006 $45,000 for 2007. A big
advantage of SEPs is the minimal administrative requirements to set
up and maintain this type of plan. Employees who have earned $450
for 2006 and $500 for 2007
per year in 3 out of the last 5 years must be included in the plan.
Your
broker or mutual fund can help you with the paperwork to get
started.
Learn more- The ABCs of SEP Plans
Checklist to see if you are in compliance with IRS rules and regs.
SIMPLE IRA: The SIMPLE IRA allows employees to
contribute a percentage of their income up to $10,000 ($12,500 if
over age 50) and in 2007 $10,500 ($13,000 if over age 50) of each paycheck and the employer, to contribute a
percentage as well. (1 to 3%) Or, the employer can choose to make a
fixed contribution of 2% of compensation for all eligible employees.
Your broker or mutual fund can help you with the paperwork to get
started.
Learn more- The ABCs of Simple Plans
Checklist
to see if you are in compliance with IRS rules and regs.
Profit Sharing and Defined Contribution Plans.
Through 2001 the tax regulations in effect made these
plans ideal choices for small business owners looking to fund
amounts up to $30,000 per year in their retirement. But with
the increased contribution limits to plans like the SEP and SIMPLE
that have no administration costs, the profits sharing/defined
contribution plan is becoming an obsolete choice. Be prepared
to pay a pretty penny to close this type of plan in favor of one of
those mentioned above. Terminating a plan requires bundles of
paperwork and lots of crossing t's and dotting the i's to get a
clean bill of health from the IRS. Before making a
decision to change, talk to a pension expert who will calculate your
savings and provide you with the benefits and detriments of making a
change. The limit for defined contribution plans under
for 2006 is $44,000 and $45,000 in 2007. The annual
compensation limit is $220,000 for 2006 and $225,000 in
2007. |
