SEP IRA

Archive for February, 2009

Question: I am 53 and investing $13,000 in my simple plan , can I also invest $5,000 in a traditional ira ?

My income will be around $45,000. My husband who is 55 wants to do the same. We are sole proprieters.

Answer: A SIMPLE plan is like a 401K or 456 or 403b. It does not affect the amount that you can contribute to a traditional IRA. You can contribute the same amount to the traditional IRA as if you did not have the SIMPLE plan.

However, if you are covered by a retirement plan from work, including a SIMPLE plan, and your modified adjusted gross income exceeds a certain amount, then you cannot deduct your contributions to the traditional IRA.

What Are the Differences Between a “Traditional” SD Custodian and a TRUE SD Custodian

Question: Can I apply for a retirement plan if I am “not in the labor force?”?

I am not employed, and am not and do not intend to look for any work that results in income in the near future. My income does not come from an employer, nor from self-employment (business, trade, profession, or contracting per IRS definitions). According to the Bureau of Labor Statistics, I am “not in the labor force.” I supposed I could call myself “retired,” although it will be many years before I reach the typical retirement age.

When I look up information about retirement plans, it seems like I need to be employed for most plans (employer makes the contributions out of your paycheck?), and self-employed for plans such as the SEP-IRAs. Does that mean I am ineligible for any retirement plans? If I am eligible, which plans would those be? As a side question, if I decided to invest in residential real estate, is rental income considered as NOT self-employment (I thought the answer is yes, i.e. IRS publication 225)?

Thanks for any info.

Answer: You don’t qualify for any traditional retirement plans, because you don’t receive earned income. You can save in standard taxable accounts at banks, mutual funds and brokerage firms. If you want some form of tax shelter, a deferred annuity would provide that. But deferred annuities tend to have high fees and expenses and often aren’t a great deal. Another way to defer taxes is to buy stocks and other investments and hold them, selling only when you need to. That way, you avoid paying taxes on the gains until you realize them through the sale. (Of course, dividends from stocks are taxable in the year they are received.) Ultimately, saving early, often and regularly does more to build your wealth than any particular type of retirement plan.

1/3 La pauvreté en Israel lorsque Netanyahou était ministre des finances