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Small Business Retirement Plans

BOSTON (CBS) - If you are smart enough to start your own business, you should be smart enough to start a retirement plan as well! Here are some ideas to get your retirement savings started.

IRAs: You can contribute up to $5,500 this year and if you are over 50 you can use the catch-up provision and put away an additional $1,000.

Let's say your net income for this year is $30,000. You can shelter up to $5,500 of it by contributing to an IRA.

SEP-IRAs: Simplified Employee Pension Plan uses an IRA format. You can contribute up to 25% of compensation up to $53,000 for this year. Now if you choose a SEP-IRA and have employees you will need to contribute to their SEP-IRAs also.

Let's use $30,000 again and you would be able to contribute $7,500 to your SEP. Easy to set up with a mutual fund company or a brokerage company. Contributions can be made with your tax return next year.

SIMPLE-IRAs: Savings Incentive Match Plan for Employees was designed for small businesses with under 100 employees. But it is useful for the self-employed as well. Here you are both the employee and the employer. You can contribute up to 100% of compensation up to $12,500 for this year and if you are over the magic age of 50 an extra $3,000.

As the employer you will have to match the employee's contributions usually up to 3%. So if you are self-employed and have a net income of $30,000 this year you could possibly put away as much $12,875. SIMPLEs must be set up by October 1st if you want to use the plan this year.

401(K)S For The Self-Employed: You can contribute up to $18,000 with a catch up provision of $6,000. So with that same $30,000 income here you could contribute up to $18,000 this year. $24,000 if you are over 50.

All of these retirement plans are easy to set up so there is no excuse for not saving for your retirement years!

One more thing: Plan on doing something. You can always do something different next year. But do put some money away for retirement.

Using $30,000 of net income as our basis depending on which you plan you set up you could legally shelter over half of your income ($18,000) for the year.

IRA:                 $5,500
SEP-IRA           7,500
SIMPLE          12,875
401(k)              18,000


You can hear Dee Lee's expert financial advice on WBZ NewsRadio 1030 each weekday at 1:55 p.m., 3:55 p.m., and 7:55 p.m.

Subscribe to Dee's Money Matters newsletter here.


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