SEP IRA

Posts Tagged ‘sep’

Question: Simple ROTH IRA question?

Hello, I am 29 year old self employed programmer working from home in the US. If I were to get a Roth IRA with mutual funds, do I have to constantly monitor and buy/sell stocks within the IRA? I used to trade stocks and used to freak out when the stock tanked in one day, so I told myself I will not get involved in that.

I am thinking that a financial advisor can pick a few good mutual funds for me and all I have to do is send a certain amount of money to it per month and when I am 55 1/2 years old I can begin withdrawing. Please let me know how this works and thanks.

Answer: The expenses at mutual funds can eat away greatly at your profits. Exchange Traded Funds hold many benefits over mutual funds. Besides, with all the mutual funds out there today, how do you know who to trust? My other belief is that by adjusting just a little bit, you can greatly increase your overall return.

Here is what I do with my long term trading account. It is a very simple concept. Look at a chart of the S&P 500 – most places the ticker symbol is SPX. Make it a weekly chart – meaning each unit (bar, candle, etc.) of time is one week. Then put a 50 week exponential moving average on the chart. This setup has an uncanny ability to direct the S&P 500. Since you can’t buy SPX, you can use SPY as an alternative. When the price is above the moving average, you buy the stock. When the price gets below the line and continues moving down, you sell it. This was an easy way to be out of the market during 2000-2003 and again at the beginning of 2008.

I am not a stockbroker or licensed in anyway. Just someone fed up with the system and decided to do a little research. Your mileage may vary.

Investment Finance Tips : How to Combine Retirement Accounts

Question: i requested an inservice withdrawal from my SIMPLE IRA and was told that it is not allowed, is this correct?

Answer: Read your plan document. A SIMPLE should be covered by the same withdrawal rules as an IRA: withdrawals constitute taxable income (ordinary income); 10% penalty if withdrawn before 59-1/2 (25% if in the the first 2 yrs of the plan); money must be in SIMPLE for 2 years before you can roll to an IRA.

There are some special withdrawals allowed for SIMPLEs:
- for medical expenses
-to buy a first house
- if you are completely disabled
- to purchase health insurance
- to pay for college expenses

So the withdrawals should be allowed, providing the money has been in the plan for at least 2 yrs.

Prohibited Transactions — What Are They?

Question: Tax regarding contract income and business loss?

I work in a contract positions and will make 90K , i was planning to put in 20% ie 18K in SEP IRA .
I also have a startup business this year , which generated 40K in capital losses.

I have 2 questions–
1) Can i use my capital losses to reduce my total income { 90K-40K = 50K}
2) The 20% limit for SEP IRA is for my self employed income only or since i may have a loss for the leftover income( ie is it 20% of 90K or 20% of 50K)

Thanks a lot.

Answer: I think you have some confusion about the startup business.

“Capital loss” is only possible on the disposition of a “capital asset”. Using the word “generated” makes it sound like what you have is an operating loss. That’s actually good news for you. Capitial losses can only offset cap. gains plusanother $3k of ordinary income. This operating loss is ordinary, meaning that you are not limited (unless other limitations apply such as passive loss or at-risk limitations).

Now, before you do a happy dance you have probably not figured the loss correctly. You must distinguish between start up costs ( money spent getting ready to open the doors) and operating expenses incurred once you are in biz. Start up costs must be amortizwed ( you can elect to expense up to $5000 of start up costs) but you must amortize the excess above $5000 over a 15 year period.

SEP-IRAs are set up on a per business basis. If youv had employees in one biz, it is not right that they be shorted because you lost $$ in another biz. This is true even though you have no employees.

Also, even though you will net your bottom lines for SE tax , you must figure SE tax on the SEP IRA biz only and reduce net income by half of SE tax before applying the 20%.

Good luck.

Self-Employed? How to Save