Retirement Planning – Invest In Yourself, You Deserve It!

May 1, 2019

Summary

Retirement planning, simply put, is money saved for future use.

This is one of those inevitable phases of your life that’s often not very well planned. It marks the end of your business / career that you have built over the years by utilizing your different skills and hard work.

If you fail to prepare yourself financially, retirement can be quite hard for you and your family. Retirement is a time when your income drops and expenses rise.

Financial planning is required for a financially independent life during retirement.

There are so many different avenues and sources available for your investments that it would be very wise to seek out a financial advisor, unless of course you’re comfortable with doing it yourself.

This will help ensure you’re getting the best return on your money. A lot of banks and CPA’s can assist with this, especially when it comes to the various tax perks of your retirement plan.

Be cautious of annual fees, transaction fees and management fees, though - they can eat away good portions of your investments.

Remember, no-one cares more about your money than you!

Start Early

The earlier you start investing in yourself the better. It will provide greater financial rewards for you later in life.

Quit thinking about it...do it!

Diversify Your Savings & Investments

Spread your investments across several sources of investments, and make your money work for you.

Some Examples are:

  • IRA’s (Traditional / Roth),

  • 401(k), Mutual Funds, Stocks and Bonds,

  • Saving Plans,

  • Savings Bonds,

  • Certificate of Deposits,

  • Real Estate,

  • Mattress and Freezer

Stay Invested

Once you invest your money into whatever you decided is the best for your situation forget about it! Your retirement money is just that!

Stay patient and whatever you do stay invested.

Retire

Your planning and consistent investing has paid off! Now you can sit back and relax and enjoy your later years in life, without worrying about the finances.

One of the most common plans for the self-employed:

Simplified Employee Pension Individual Retirement Arrangement (SEP IRA)

For: Self-employed or small-business owners with zero, or few, employees.

Contributions Limits: The lesser of $56,000 in 2019 or up to 25% of compensation or net self-employment earnings, with a $280,000 limit on compensation that can be used to factor the contribution.

Net self-employment income is net profit, less half of your self-employment taxes paid and your SEP contribution. There’s no catch-up contribution, meaning SEP IRAs are flexible in that you don’t have to contribute every year.

Taxes: You can deduct the lesser of your contributions, or 25% of net self-employment earnings or compensation - limited to that $280,000 cap per employee in 2019 on your tax return. Distributions in retirement are taxed as income - there is no Roth version of a SEP IRA.

Employee element: Employers must contribute an equal percentage of salary for each eligible employee, and you are counted as an employee. That means if you contribute 10% of your compensation for yourself, you must contribute 10% of each eligible employee’s compensation.

Opening an Account: You can open your SEP IRA account just as you would a Traditional or Roth IRA, with just a few more pieces of paperwork. This can be accomplished with your financial planner, online brokerage firms, and many other places registered to sell securities.

There’s a low administrative burden with limited paperwork and no annual reporting to the IRS.

Disclaimer: This is written for informational purposes only. I’m not a Certified Financial Planner, and by no means endorsing or suggesting a particular avenue for your financial planning. I do personally manage my own retirement portfolios based on numerous years of research and investing based on my particular needs. However, I would not suggest handling this yourself unless you’re knowledgeable and comfortable doing do.

Now go start planning your future!

Jim Nelson