Pensions - What Should I Do ?

ebet sanders asked:


tiring from the service of selling pension payments to gain more profit in it for the money, which in turn can be used for future personal needs.

Retirement plans are offered to companies and organizations for their employees. Eläkkeelle the time, the flat amount has been paid back to the employee each month. They will receive an amount of benefit of the same, which is the amount calculated as they were deposited during the course of the professional. Some systems even provide the pension payments and health benefits.

Today, many insurance companies, employers, government agencies and trade unions or employers’ associations “are coming to present a plan to sell the pension payments. These pension payments are sold in such a way that it will be able to meet the individual’s financial needs, and to make a small profit for the company. One person may receive a considerable amount of the sale of some or all of the pension payments.

Many types of payment strategies will be available in each of the rights of the creditor, which may be a monthly, annually, or a certain period of time. Depending on the payment selected, the person may receive more benefit from the pension payments.

For certain persons to sell the pension payments to reduce the tax levied. If the pension payments in excess of its taxable limit, so they have the income tax. The sale of the pension payments, one of which may be exempt from state and local taxes a large extent. Some others are selling their pension payments to secure more money for investment.

Even companies that offer the potential to sell pension payments have benefited from this process. Since these payment strategies will be time-based fees, they can target this amount to meet their urgent needs.

Julian

Vince Shorb asked:


Have fun and retire young is the mantra of many high school and college students today. Unfortunately, only a minority of them will be able live their dream life.

Social Security and pensions probably won’t be around when your teenager reaches retirement age. In the last ten years we’ve experienced a large reduction in pension plans offered to employees. Employers are replacing pension plans with contributory retirement programs. Unfortunately, according to a report of the National Association of State Boards of Education, “most workers with access to these contributory programs are not participating sufficiently to allow them to retire in their sixties without suffering a great decrease in their standard of living.”

This may mean that everyone under age 30 will need to self-fund their own retirement. In order to be financially prepared, it is important they start investing young and avoid financial pitfalls that plague many of their peers. This requires they learn the basic financial education skills so they are financially prepared.

To be financially prepared for retirements today’s youth will need to have over a million dollars to be fully financially prepared for a self-funded retirement. After calculating the long-term inflation rate, a young adult today will need over a million dollars in order to retire on an annual income of around $35,000 (today’s dollars, adjusted for inflation and salary increases). This is assuming that they live to be ninety years old. However, with the improvements in medicine, many experts feel we will live beyond that mark, so just planning to live to 90 may not be enough. And $35,000 annual income per year is not a lot of money to enjoy the golden years.

What’s the answer? One answer may be a simple investment of $100 per month starting at age 18. If that investment earns a return similar to the S&P 500 average over the past 82 years, they would have over a million dollars many years before they reach retirement age.

Have fun and retire young by following these simple steps.

1) Invest Young -There are powerful financial forces on your side when you start investing young. One of the most beneficial to young investors is compounding interest.

Compounding interest occurs when you invest money and earn a return on what you invest. The amount your investment returns then starts to earn you money. This forms a snowball affect that will make your money grow bigger the longer you are invested.

To break it down, you’re making money off the interest your investment already paid you. Then you continue to make money off the interest that you made each year. That means year after year your investments can grow at a faster and faster pace.

2) Consistent, young, investment plan. Investing on a consistent basis may allow you to generate long-term gains over time. For most, simplicity equals consistency; and consistency over time leads to financial security. Follow a consistent investment plan immediately; then as your investment knowledge grows you can add other forms of potential higher-return investments.

3) Use investment vehicles that offer tax benefits -Roth IRA may allow you to withdraw money at retirement tax-free. Many people don’t realize about 40% of your income goes to pay taxes. You will keep more of the money you earn by investing in an IRA.

Diversification - For young investors the stock market can be a great place to start investing. As your account size grows you could take some of that money and move it into real estate or business ventures.

Diversification lowers risk. For example, if you have ‘all’ your money invested in the stock market when prices are declining then ‘all’ your money may decline in value as well. Now if you diversify your holdings and had a portion of your money invested in the stock market, some in the real estate market and some in businesses you might avoid a big loss.

The thought of funding one’s own retirement makes some people nervous but if people start young and stay consistent, today’s generation will be able to afford the lifestyle they want now and through out their life.



Paige

John Horace asked:


 

Pension release is a provision in the UK that allows you to withdraw money from your pension scheme prior to full retirement. Eligibility for this procedure requires in the very least that the person is over 50 and has a UK pension plan. Other factors will be assessed on application before you can be deemed fully eligible to receive a tax free cash sum and/or income. For the most part, people go through with the process of releasing their pension funds as they may require some money now but not have reached retirement yet. Alternatively, an individual may be thinking about retirement and want to look at their options.

 

By taking pension benefits early, the applicant will reduce the amount of money they will receive in retirement, but it is a way of getting money out when you need it. A total cash sum of just over 25% of the full pension fund can be acquired in the first year after applying to have a pension unlocked. Nearly all of this is tax free. The money can be taken as Income immediately or left until a later date where it will be taxed as earned income.

 

A pension release applicant need not release all available cash benefits from their pension fund, and it is advisable not to do so if you do not need it all. Only take out what you need. If all the money allowed is unlocked, an applicant must be aware that the rest of your pension fund must be used to provide an ongoing income. This money can be taken immediately or it can be deferred (as from April 2006) leaving the pension fund available to take another time. The main advantage of taking less than the maximum available cash sum is that the undertaken money will stay invested in your pension.

 

Pension release also works by taking just an income without any cash sum immediately, and there different ways to do this. An annuity can be bought - in this case the pension fund is handed over to an insurance company and they pay back a regular income for the rest of applicant’s life. The annuity market is a very competitive place and rates vary between companies. By doing some investigation and research, it is possible to substantially increase your pension income by purchasing an annuity from the company with the best rates.

 

The alternative to buying an annuity is to leave the pension fund invested and draw an income directly from it. This avoids handing over the pension funds to anyone else, but there are disadvantages that need noting.

 

As a best practice, advice should be sort before deciding to release money from a pension fund. It is important to make sure that the implications of releasing pension funds is fully understand before any decisions are made. Pension Release Experts can help with quotes for unlocking pensions according to the individual pension scheme.

 



Eugene

Moneyman asked:


The Government has in place a State Second Pension (S2P), which is in addition to the Basic State Pension. It is available to employees and is earnings related, with funding coming from your National Insurance Contributions (NICs). It was previously known as the State Earnings Related Pension Scheme (SERPS).

The Government give people the option to contract out of the State Second Pension (S2P) into a personal pension or stakeholder pension. National Insurance Contributions are paid in the normal way but are then ‘diverted’ into this private pension pot. Added to these contributions is any income tax relief due and other incentives that may be offered by the government. However, such incentives to contract-out are not currently available. These contributions and the pension pot this provides then replaces the individuals S2P.

The fund grows as any other money purchase pension scheme would do. It is based on the level of contributions, the number of years the fund has to grow to retirement and the performance of the assets the funds are invested in. As with all such investments, returns are not guaranteed and so funds can go down as well as up.

However, as a general rule, the earlier you start saving for retirement and the more money you invest, the bigger the final pension fund will be.

At retirement the pension is used to purchase an annuity which will provide an income, which will depend on the annuity rates prevailing at the time of retirement. There are specific rules surrounding this annuity for example, if you have a spouse or civil partner at retirement, the annuity must pay 50% of the income to them if you die first.

One good thing is that the annuity does not need to be purchased from the same company where the pension fund is held. This means that you can shop around for the best annuity rates on offer. The smallest difference in returns available can make a sizeable difference to the amount of income received.

Twenty-five percent of the fund can be taken as a tax-free cash lump-sum when you retire. This will reduce the amount available to purchase an annuity so it is worth knowing what you’re going to do with the moeny before you take it. It may well be that using 100% of the fund to purchase an annuity actually proves to be more tax efficient or will generate a better return than other investments on offer.

Whether it is appropriate to contract out from the S2P depends on individual circumstances, though age at the time of contracting out is a key factor. Although it is possible to contract back in to the second state pension at a later date and as retirement nears. It is usually beneficial to contract back in at this time as the contributions into a personal plan will have less time to grow and so returns could well be lower than benefit derived from a government pension.

The Pensions Service and Financial Services Authority (FSA) have guides for those wondering whether to contract in or out or wanting further information on the subject. Visit their website for details.



Xavier

christopher william asked:


The early years of retirement are generally the worst time for an investor to begin his investments,this is because he might suffer or go through a major market decline.In many cases, retirement will still be possible, but it may not be the retirement envisioned. It may be a retirement with part-time work, delayed Social Security,delayed pension,insufficient retirement funds or fewer trips to far away destinations or no trip at all.

If you’re short of cash and consider working a little longer or maybe getting a part-time job to reduce your dependence on deflated investments,think again.You can change those plans.On the other hand, you may choose to retire now, play a little less golf and sleep better.It’s all your choice.A sweet,comfortable and enjoyable retirement is in your hands.You could get started right now or wait 5 years more,it’s your choice.A good way to get started is getting a good manual and handy book,with a “do it yourself” step by step method,which ultimately will bring a flow of cash for you.One that has proved to be such a tremendous help is “12 month millionaire”Do I see doom and gloom ahead? Absolutely. But I also see tremendous opportunities made possible.The fact that money may be just a few clicks away is indeed tempting.Once you start your own business(as you will learn form 12 month millionaire), the advice pours in from all.Unsolicited advice doesn’t just come from family members. Friends, lawyers, accountants, even strangers you meet at networking events or soccer games suddenly become experts when they learn that you own your own business and see your cashflow. It’s a jungle out there.But always  remember, people close to you have their own motivations and their own fears coloring their advice.Follow your path and achieve your dreams,build now for an early,sweet,comfortable and enjoyable retirement.

www.zcashflow101.blogspot.com



Claire

Theodore D. Lanzaro, CPA asked:


Whenever advertising or articles regarding pension plans are mentioned, they are usually ignored by small business owners and the self-employed. Small businesses are often under the impression that pension plans are only for large corporations and do not apply to them. However, by ignoring these messages they are missing the opportunity to take advantage of the benefits that pension plans have to offer.

Businesses that offer this type of fringe benefit increase job satisfaction among their employees which can often result in a decrease in staff turnover. Another benefit pension plans can provide significant tax deductions for business owners and deferred earnings for employees.

Nowadays there are an abundance of plans and options to choose from. Many plans are very convenient to implement and require very little paperwork. So, there is no time like the present to implement a retirement plan for you and your employees.

In order to choose the plan that fits your company’s needs, you must begin with a sound understanding of what your options are. There are pros and cons to every plan so each should be carefully considered. To assist you in making the right decision for your company, below is an overview of the current and most common plans:

The 401(k) Plan

A 401(k) plan is a retirement plan sponsored by employers. With this type of plan, employees may choose to have a portion of their salary deferred to any of the 401(k) investment choices that have been selected by the employer. The employer may also contribute to the employee’s 401(k) by matching a portion of the investment. The benefit of a 401(k) is that employees are not taxed on the contributions they or their employers make until they withdraw from the plan. Another benefit is that accumulated earnings on the account are tax-deferred as well.

A 401 (k) can be more complicated to establish and maintain then other types of plans and there are annual IRS reporting requirements associated with it as well. Also, the law requires that if low compensated employees do not contribute enough by the end of the plan year, then the limit is changed for highly compensated employees.

There are individual 401 (k) plans that can be set up by a company (incorporated or unincorporated), in which the owner is the sole proprietor and/or only employee. The key advantage to plans such as these is that they permit larger contributions than other plans. The individual 401(k) also tends to be a little less complicated than the traditional 401(k).

Simplified Employee Pension (SEP) Plan

Often referred to as a SEP-IRA, this is essentially a retirement plan set up by a small business employer or by a self-employed person. This pension plan allows employers to contribute to SEP-IRA plans on behalf of their employees in an amount greater than traditional IRA limitations. The main advantages of the SEP-IRA to the employer is that the administrative burdens are few, the plan is simple to install, and it does not have the start-up and operating costs of conventional retirement plans.

Because you decide the amount to be contributed each year to SEPs, this plan can offer a great deal of flexibility. However, they can only be funded through employer contributions and annual contributions are limited to 25 percent of each employee’s pay. Another benefit of SEPs in contrast to other plans is that you can establish it up to the extended due date of your tax return.

Savings Incentive Match Plan for Employees (SIMPLE)

The SIMPLE plan gives small businesses an affordable way to offer retirement benefits through employee salary reductions and matching contributions similar to the SEP. A SIMPLE plan is available to yourself and eligible employees and is made up of individual retirement accounts (IRAs). A SIMPLE plan can also be set up as a 401(k) plan. Both of these types of SIMPLE plans can be established easily using a “model” plan document which is available from the IRS. With a SIMPLE plan, employers offer matching contributions equal to employee contributions or fixed contributions equal to a percent of employee wages.

Requirements and limitations for the SIMPLE plan dictate that employers must have fewer than 100 employees and must generally be established before October 1st of the calendar year. Employers that currently sponsor another retirement plan generally cannot sponsor a SIMPLE plan.

The Keogh (H.R. 10) Plan

A Keogh (or HR 10) plan is a tax-deferred retirement savings plan for self-employed individuals and their employees. Most self employed individuals who have earned income from self-employment are eligible under this plan.

Keogh plans have gained popularity in recent years thanks to tax legislation that has made it possible for contributions made to Keogh plans equal to that of plans held by large corporation. Outlined below are the two key types of Keoghs:

1. Defined contribution plans: These plans come in a few different forms such as target benefit plans, money purchase plans, and profit sharing plans. Each plan requires contributions that are based on either a percentage of an employee’s wages or percent of an owner’s profits. The amount the contributions have accumulated by retirement will dictate what benefits the participants will receive when they retire.

2. Defined benefit plans: Plans such as these have a set amount of retirement benefit that the plan will pay out upon retirement and contributions made are based upon the payout amount. Any benefit that a participant will receives upon retiring is limited by law and requires actuarial calculations to determine the amount of annual contribution needed.

One major drawback to all Keogh plans is that the reporting requirements are more complicated than the SEP and SIMPLE-IRA plans. Another disadvantage is that a business owner is required to make contributions for eligible employees and therefore cannot only cover themselves.

Contributions can be made to Keogh plans up to the company’s tax return due date (extensions included). However, they must be established no later than December 31st of the tax year that you will begin taking a deduction for contributions.



Ian

David De Souza asked:


You have worked hard your whole life, and have been taxed every step of the way. If you are thinking of retiring, here are five options to consider:

1. Cyprus

In number 1 spot is Cyprus. It tops the list of exotic destinations mainly because it has an income-tax rate of only 5% on all pensions for retired residents, as well as low property prices and no inheritance tax. It is also favored for its hot, dry summers, warm winters as well as its English speaking population.

The average price of a two bedroom property in Cyprus is only $77,000, though the islands property market is quickly catching up with prices in more established retirement hotspots such as France and Spain. Many see this as a benefit though, looking to Cyprus as a good place to invest in property, considering the state of the housing market in the rest of the world.

With southern Cyprus recently joining the European Union, pensioners from other EU countries are entitled to use the public health system free of charge, providing another financial incentive.

2. Panama

Panamas main attraction, (not including its year-round 30 Deg Celsius temperature), is the fact that English is widely spoken among the population, you have worked hard enough through your life, you do not really want to be learning a new language when you retire! There are numerous other benefits including a lower cost of living compare to Cyprus and other countries listed, a minimal crime rate and, for retirees, its pensio-nado scheme which offers numerous discounts on services including as healthcare, leisure activities and public transport. Another advantage is that Income from capital outside of Panama, whether they be your pension, bank deposits or your investment portfolio, is completely free from tax.

Do not presume you will escape tax altogether, however. There may be no inheritance tax as such, however, gifts of property attract rates from 4% to 33% depending on your relationship with the beneficiary, so make sure that you check before considering any such gifts. Anyone purchasing property may apply for permanent residence in Panama, one year after having applied for a residence visa, as long as the total value of the property and any bank deposits equals in excess of $200,000.

3. France

The country with the best quality of living on the list has to go to France. Despite the obvious language barrier, this will easily be made up for with the culture and cuisine this amazing country has to offer. If you are planning to retire with a large income, then France might not be the best option as the top rate of income tax in France is 49.8%, however retired couples with income of $70,000 or less would still be better off making the move because in France there are lower rates the lower your income.

Housing prices have increased dramatically in recent years, but this increased cost will be made up for by one of the best health care systems in the whole world. Something you really might need to consider when you reach retirement.

4. Belize

Belize has a tropical climate with temperatures ranging between a steady 24 and 27 degrees Celsius, however people should be aware of Belizes rainy season, which is likely to put some people off.

Despite this, however, it has always been a popular destination for American retirees. The income tax rate for citizens living in Belize is set at a low 1.75%, but income such as pensions is completely untaxed. On top of this there is no capital gains tax or inheritance tax for people looking into retiring to Belize. For those who can not wait until they are 65 there are advantages to early retirees also.

Investors in the island can direct foreign business activities from the country, as long as they have an income of $2,000 a month and are at least 45 years old. They can also import a car, light aircraft, boat and any personal belongings duty free. Compared to other places in the Caribbean, Belize is quite reasonable for property prices, with a 3 bedroom, beachfront villa costing $350,000. Anyone who is aged 45 or over can apply for residency through a retirement programme set up by the Belize government.

5. Spain

Spain is similar to France in that it has a good number of British speaking communities dotted around the country and it is one of the most popular retirement destinations for English people.

There are however a number of tax traps for those thinking of selling their property and moving to Spain which is why it has taken 5th place. If you are resident of Spain (I.E. spend more than 183 days there a year) you must pay tax at up to 40% on any income from your UK pension, bank accounts and investment portfolio. Capital gains tax may have been reduced last year from 35% to 18% however there is also a wealth tax of 0.2% to 0.5% of all citizens worldwide assets to consider.

One final thing for expats to consider is that they are liable to pay Spanish inheritance tax, regardless of the country in which the inheritance is situated. Spain is a wonderful, stable country, with an amazing culture but the above tax implications should be a big consideration for anyone thinking about retiring there. A Typical property will cost you around $137,000 and property costs amount to around 10%, which is higher than in many other countries.



Logan

Anthony Woods asked:


Pension’s Tips: It is said that people either “live too long or die too young”, and nowhere is this more typified than in the Construction Industry, where up to recently, both the safety record and the Pension planning record had been nothing short of appalling.

On the one hand, the fatality and injury record of workers in the Irish Building Industry was one of the highest in Europe (in 2001, 28% of all workplace fatalities were Construction Industry related), while those who were lucky enough to have survived working on Irish Construction sites faced a very uncertain future as they neared retirement.

While the authorities have made some strides in addressing the Construction Industries safety record in the recent past, there is still considerable scope for improvement with regard to adequate and proactive Pension Planning (in an IAPF survey dated October ,2005,it was found that nearly the entire Irish population was dependant on the state pension)While a recent IMPACT Trade Union report found that in Ireland, there are currently 5 people of working age for every person aged over 65, but that figure will fall to 2 to 1 by 2050,causing a huge funding crisis.

The lack of Pension planning is a symptom of a larger Irish malaise, namely their totally reactive nature to nearly everything. This especially applies to Construction Industry Pensions, where despite extensive publicity on the need for adequate Pension planning, the Pension expertise available and the negative effects of no Pensions being in place at retirement, excuses still abound for doing nothing. In an effort to be seen to do something, the Government is even rumored to being looking at making Pension funding compulsory.

In over 25 years of Pensions planning, here are the 7 most popular excuses I’ve come across in the Construction Industry for not planning a Pension.

* I can’t afford it

* I’m too young/old

* “Someone else” will provide for it

* I’ll do it “later”

* There’s a state pension

* I don’t want to think about it

* I’ll be dead by then

I can’t afford it — expansive pension ……ask yourself can you afford NOT to? Waiting until you can afford it will never happen. The minimum monthly premium for a self employed Pension is €25 gross, or with tax relief at 20%, €20per month ……that’s €1.00 per day. Given that the minimum Lottery ticket price is €1.50 per go, and there are absolutely no guarantees whatsoever with that, €1 is a small price to pay for securing your future and security of mind, isn’t it?

Insurance go first! I’m too young/old ….you’re never too young, or old for that matter, to start to proactively secure YOUR future. The earlier you start, the longer your funds have to grow and appreciate in value, while even starting much later in life will give you tax relief and help you to exercise SOME power over your finances.

A plan for my Pension? “Someone else” will provide it …………who, precisely? And why should they? While an employer may contribute to your Pension Plan, ask yourself how much of a benefit you’d expect to get, would it be guaranteed, and if so, for how long? Would you be happy to have “someone else” pick your clothes, choose your car or have any other say in your life - but if you don’t plan for your Pension, “someone else” WILL be deciding your future.

I’ll do it “Later …… look at the cost of delay - to provide a pension of €2,000 per month, a 20 year old would need to pay €270 per month into a pension plan, while a 40 year old saving for EXACTLY the same amount would need to pay €951 per month - FRIGHTENING, isn’t it??

There’s a State Pension …….there is alright. As of Jan, 2007, that stands at the princely sum of €209.30 per week. Now ask yourself, given the ever increasing cost of accommodation, transport, food, communications, entertainment etc., if you were relying on the State Pension ONLY, would you be LIVING or EXISTING?

I don’t want to think about it…….fair enough, that’s your prerogative, but burying your head in the sand on the Construction site won’t make planning for your future go away. Can you imagine a Builder deciding they didn’t want to think about something on a Construction site……would you be happy to work there?

I’ll be dead by then …perhaps you will, but suppose you’re not? Can you imagine HAVING to continue doing manual labor out of dire economic necessity? Or what if you’ve worked all your life and in spite of your best efforts, face 30 years of retirement?

Another alternative the Irish Government are looking at, as pointed out in a recent IBEC report in Feb 2006, is that they may increase the minimum retirement age to 70 or 75.Can you imagine the potential effect this would have on the Construction Industry? So, as an Irish Building worker, why don’t you take control of your future, ignore the 7 most popular excuses outlined above, and make your Pension THE KEYSTONE of your financial future……and if you need another incentive, try living on €209.30, and nothing else, for a few weeks!!!

For general pension’s information, please visit the website of the Irish Pensions Board or for Information relating specifically to Pensions visit Irish Construction Industry Pensions.

Ireland’s premier supplier of Pension and Retirement planning for those contractors, suppliers and sub-contractors who work in the Irish Construction Industry



Paige

Bernie Dozier asked:


There are as many reasons to start planning for retirement now as you want. If you are still in your early thirties and you want to start planning for retirement now, then there is actually nothing to stop you from doing this. You can have extensive plans of buying your own home, building your nest egg or even starting your own business. These things are actually just the tip of the iceberg when you start planning for retirement now. There are other more important things than leisure to plan for when it is time to retire.

The age of 65 is the retirement age stated by the government. There are some individuals who do retire earlier than 65. You will need to make amendments for your pension and your health care benefits if you do retire before the allotted age. It is best to make known your intentions of retiring early with the government branch handling pensions to be clear and for you to be aware of what to expect. These are just some of the things that you need to include in your plans as you start planning for retirement now.

Pension And Health Benefits

Your pension is something that you need to take care of as you are contributing to it. As you start planning for retirement now you need to be clear regarding your pension whether you are contributing to it accordingly so that there will be little problems of redeeming it as time comes. The same goes to all other contributions you need to make for your health card. It is a fact that our health will deteriorate as we reach around retirement age. Having something to help us financially when it comes to the unhealthy times can be a godsend.

Savings And Investments

Just because you have a pension to look forward to does not necessarily mean that you do not have to save for your retirement. As you start planning for retirement now, you may have many plans and activities in mind that will need more finances than your pension can provide. Saving whatever extra cash you may have is a good idea for up and coming rainy days. Savings can be easily eaten up by day to day expenses so it is best to be frugal when spending now while you still have some income.

Being frugal does not mean to be miserly with your finances, though. We have many needs which can only be addressed by buying cars, gym equipment and other luxuries which may seem expensive but will soon start to look better as you use them. The benefits of cars and gym equipment, when used accordingly can be seen in your health and demeanor. Investing in a house and small businesses can also be a good idea to build your nest egg as you start planning for retirement now.

Plotting one’s retirement plans is a way of ensuring you are well taken care of when you do retire. It is best to start planning for retirement now when you are still capable of doing so.



Antonio

Gordon Hall asked:


The Simplified Employee Pension (SEP) retirement plan is often touted by banks as a simple and effective way for self employed individuals and small business owners to save for retirement.  However, you should weigh the pros and cons of the SEP retirement plan carefully before deciding to open one.  

The point that’s usually considered the biggest perk of having a SEP retirement plan is the fact that you can reduce your taxable income even at the last minute.  For example, even if you open up an SEP plan in 2008, you can make a contribution for 2007.  You can open up an SEP plan at any point up until the tax income return.  

Another perk of the SEP retirement plan is that contributions do not have to be made every year and are made by the employer only.  Furthermore, employees of employers that have high turnover rates are not eligible for SEP contributions.  There are also no employer filing requirements.  

However, there is also a downside to having an SEP retirement plan.  SEP plans are required to cover part-time employees who have worked three out of the five past years making $500 annually.  If you contribute funds on your behalf you will have to do it for every employee that qualifies.   

Another problem with the SEP retirement plan is its tax structure.  The contributions are tax-deductible but the earnings and withdrawals are taxed.  This means more paperwork for you in order to report everything to the IRS.  Furthermore, you will ultimately be paying more in taxes since tax rates will probably be higher and you will most likely be in a higher tax bracket at retirement.  

Most importantly, when it comes to delivering returns, SEP plans are lacking.  The most lucrative investment plan out there is the self-directed Roth IRA.  Self directed Roth IRAs can be managed by a company that is set up to help people self direct their accounts.  These companies can guarantee to double or even triple your returns by investing your assets in real estate.  

The SEP retirement plan, like a traditional IRA or 401k, is limited when it comes to investment options.  On the other hand, self directed IRAs are much more flexible and offer a much wider range of investment options.  

The best investment venue to date is real estate because it is lucrative, stable, and low-risk.  That is because its value tends to increase over time, it is insured against common forms of loss like natural disaster, and there is always a demand for homes and land as long as prices are affordable. 

In order to capitalize on that demand, there are companies out there that buy up old homes in neglected urban areas, renovate them, and resell them to working-class families.  Since they charge affordable prices, the homes are bought quickly and there is even a waiting list of qualified buyers.  The whole process takes 4-6 weeks so your assets can be invested and re-invested in the same way.  

Do yourself a favor and weigh your options carefully.  If you want to maximize your returns, pay less in taxes, and have more control of your account, you should roll over to a self directed Roth IRA.  An SEP retirement plan may seem like an easy option initially but when you look closer, there are many downsides to having one.  Instead, focus on self directing a Roth IRA so you can save money and increase your returns substantially.



Layla