How Much Should I Save?

August 18, 2011 at 3:40 am | Posted in Uncategorized | Leave a comment

To answer this question, you should first answer “How much do you want to spend each year when you are retired?” There is no “rule of thumb” to follow; financial experts suggest saving between 10-20% of your income. However, it isn’t always easy to start saving. Take care of your monthly living expenses, credit card debt (reduce high monthly interest charges), and put 3-6 months living expenses in a fund for emergencies before taking chunks of money out of your paycheck. Once you start saving, here are some common sense tips:

  • The earlier you start saving, the longer your money will have time to grow
  • Live within or below your means
  • When you receive extra money (e.g. bonuses, gifts), put it in your savings right away before you can spend it

Take some time, sit down, and do the math. Make your goal and then determine the steps you need to take to reach that goal. Here are some financial calculators at my website to help you: http://darrensmithcpa.com/fintools.php?category_id=6

Start saving!

Advertisements

Small Business Retirement: Comparing the Solo 401k v. SEP IRA

August 16, 2011 at 1:45 am | Posted in Uncategorized | Leave a comment

Hmm..

The Solo 401k and SEP IRA are the two most common small business owner retirement plans.

Who are eligible for these plans?

To qualify for the Solo 401k, you must be the sole owner of the business, although a spouse can also be included in the plan. You must also not be expecting to employ any other staff in your business in the future.

Those eligible for SEP IRA are sole proprietors, partnerships, incorporated and unincorporated small businesses including Sub S corporations, and individuals with self employment income even if they are covered by their employers retirement plan such as a 401k, 403b or 457 plan.

If you are a sole proprietor, which one should you choose? Here’s a basic comparison between them:

Solo 401k

  • Has potentially greater retirement contributions at identical income levels
  • Allowed to take out a loan against a Solo 401K to up to 50% of the 401K’s value ($50,000 maximum)
  • Greater administrative responsibilities and fees

SEP IRA

  • Less contribution and tax deduction
  • Not allowed to take a loan against it
  • Easy to set up and low administrative responsibilities

So which one should you pick?

If you think you will need to use the loan feature or you want to maximize your annual retirement contributions, you should consider a Solo 401k. If you want to stick with something simple, you should go with the SEP IRA.

Blog at WordPress.com.
Entries and comments feeds.