Cleaning & Restoration Association News

Put a Price on Your Future

When it comes to planning for retirement, many people simply glance at their employer’s 401(k) plan, check off a box here, fill in a percentage there, send it off to HR and viola, they’re done. For the small-business owner, however, the game is not so simple.

Steve Toburen and others often discuss the viability of creating a business with the intention of selling it down the road, building a company in which the value does not lay solely with the owner-operator. And for many entrepreneurs things work out just fine: the business is born, it grows and succeeds, and is later sold for enough money to allow for a comfortable retirement. Kudos.

But what about everyone else? The truth is, you need a solid retirement plan outside of simply selling your company. The good news? Small-business owners have a number of options to choose from. Here’s a quick look at some of them.

With a Simplified Employee Pension, or SEP, IRA, if you are incorporated you can contribute up to 25 percent of your income (to a maximum of $44,000) in 2006. If you’re self-employed, you can contribute 20 percent of your Schedule C income (minus one-half of your self-employment tax) up to that same maximum.

Solo 401(k) Plans first appeared in 2002. Designed for self-employed individuals with no employees (other than a spouse), you can contribute up to 100 percent of your income to a maximum of $15,000 – $20,000 if you are age 50 or older – in 2006. In addition, you can use the profit-sharing portion of the plan to contribute more, up to 25 percent of your income to a maximum of $44,000. In all, your contributions cannot exceed $44,000 ($49,000 for those 50 and older).

A SIMPLE IRA allows you to establish a retirement plan for you and up to 100 employees. Employees can contribute up to 100 percent of their compensation to $10,000 ($12,500 for those 50 and up). The employer is required to match 100 percent of the first 3 percent contributed by eligible employees (which can be reduced to 1 percent in any two out of five years), or else choose 2 percent of each eligible employee’s compensation. Employer contributions are mandatory, while employees have the option to fund their own accounts as well.

Some other items on the menu include the Traditional IRA, the Defined Benefit Plan and the Roth IRA. Each has its own merits; if you have not already done so, make an appointment to discuss your retirement plan options with a financial planner. After all, there’s no time like the present to solidify your future.

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