Self Employed 401k

Frequently Asked Questions

1. QUESTION:
   Best Savings Plan for Self Employed: 401k, IRA, CDs, Stocks, Bonds, or what?
   I am almost 29 years old and I am self employed. I have saved (in a savings account), roughly 50k.

   I am wondering what the best method of savings/interest would be for me. Should I do a self employed 401k plan? Should I invest it in CDs? Should I invest in bonds? Roth IRAs?

   What would you recommend? Preferably something that is safest (insured), while offering the best interest possible.

   • ANSWER:
     The best is likely a tax deferred account – IRA, or a 401k. A sep401k, you could put more money into. However they might be difficult to set up on your own. Check with one of the large mutual fund companies on this – Vanguard, Fidelity or TRowe Price.

     It’s hard to see how you would ever have a comfortable retirement putting your money into something safe. These don’t even keep up with the drag of inflation and taxes. You want to grow your money, equities is the way to do it.

2. QUESTION:
   How do I check if Turbo Tax handled my Self-Employed 401k correctly?
   I can’t find it in any of the forms..

   • ANSWER:
     Your solo 401k contribution is deducted on Line 28 of Form 1040. View your return and see if it is there. If so, you did it correctly in Turbo Tax.

3. QUESTION:
   how to enter Individual 401k (“Solo” / Self-Employed 401k) deduction into Turbo Tax?
   The instructions on their website are wrong… Has anyone faced this?

   • ANSWER:
     The deduction goes on line 28. See IRS pub 560.

4. QUESTION:
   Is it better to be self-employed or work for someone in regards to 401k?
   Would you go self-employed without the benefits of a 401k from an employer or no?

   • ANSWER:
     You can deduct your expenses if you are self-employed, but not if you are under a W-2. However, 1099 contractors are taxed at a higher rate. When it comes to a 401K, it doesn’t matter. The money that you put in is treated the same way (with the exception, of course, being where the funds come from: ore-tax or post paying them). Of course, Roth is treated differently, tax-wise, than a traditional IRA. If you have a “match” from your employer, then that is yet another factor in deciding!

5. QUESTION:
   What is the best retirement plan for a self employed (not incorporated) person with no employees?
   And by “best” I mean, which plan will offer me the best tax break now? The web sites are confusing, can I deduct 100% of my contributions to a self employed 401k?

   • ANSWER:
     Check with a local financial advisor. Most have free consultations or open houses. You should always incorporate your business because it limits your personal liability, provides tax breaks, and enables you to set up different types of retirement plans. 401Ks are offered by employers to employees. Your best bet would most likely be a traditional or Roth IRA. Again, check with your local advisor.

6. QUESTION:
   Can I self administer my self employed 401K?

   • ANSWER:
     Read this and see if it helps:

     http://www.smsmallbiz.com/The_Solo_401(k).html

7. QUESTION:
   What are the steps to rollover a 401k, will be self employed.?
   I have let my 401k at my old company for the last 2 years.
   I think it’s time to put it somewhere, but I have no idea where to
   invest it. Or how to start.
   Thanks for the help.

   • ANSWER:
     IT is a fairly simple process. How you go about it will depend on how much you have invested and how much time and effort you want to put into building and managing your portfolio.

     If you have relatively little invested and you don’t want to spend a lot of time on it the least expensive/easiest way if to open an IRA directly with a Mutual Fund company and put it in a nice balanced fund within your risk tolerance. American Funds is a good one. They offer lots of funds that have great performance records and don’t get killed as badly in a bear market Like the Vanguard funds generally do. (I do not work for or have any affiliation with them)

     If you enjoy and have the time and knowledge to build your own portfolio as well as manage it, an on line broker (E-trade, TD, etc) might be a good idea. they will not offer you any advice but will give you the tools to do it yourself.

     Lastly, If you don’t have the time, interest or knowledge to do it yourself, and you have a significant amount of money or a more complicated investment/financial situation. I would say consider hiring a good Financial Planner/Advisor. Sure, it will cost a little more but if their performance and service justifies the fees it can be worth it just to sleep well at night knowing the experts are handling it. Just shop carefully, trust your gut, and interview more then one.

     Oh, and if they try to sell you products in the first meeting or are not upfront with how they are compensated-RUN!

     Good luck!

8. QUESTION:
   Where do I enter Individual 401k (“Solo” / Self-Employed 401k)?
   I am a contractor, not a corporation

   • ANSWER:

9. QUESTION:
   what is the accounting entry for a deposit to a self employed 401k? Is it credit cash, debit retained earnings?

   • ANSWER:

10. QUESTION:
    What do you do with a 401k when you become self-employed?
    I’m planning to quit my day job to run my business full time. What do I becomes of my 401k? Can I basically do what I want with it (let it sit and grow, contribute)? It’s always been tied to a corporation, so now I’m not sure what to do with it. I want to avoid any penalties.

    • ANSWER:
      You can move it into an IRA

      Here’s a good (although 2 years old) article explaining the options:

      http://www.fool.com/personal-finance/general/2006/09/25/changing-jobs-take-care-of-your-401k.aspx

11. QUESTION:
    if i become self employed can i still contribute to my currrent employers 401k plan?
    I have a 401k with my current employer and i’m thinking of retiring and become self employed

    • ANSWER:
      Generally speaking, once you leave the employ of the company who sponsors your 401(k) plan, you are no longer entitled to contribute to it, or to borrow against it.

      There are a ton of self retirement savings plans that you can contribute to. Take some time, do some cost/benefit comparisons and roll your current 401 into a new plan, and then contribute to it.

12. QUESTION:
    seeking a 401k for the self employed or small business owner?

    • ANSWER:
      Setting up a Self-Employed 401(K) plan is a breeze relative to other larger 401(k) plans. Many providers, mostly mutual fund companies, offer easy administrative requirements – without any voluminous paperwork involved.

      There are a number of 401K providers, and some have different features offered compared to others. Some — but not all providers — allow you to get a loan of up to the lesser of ,000 or one-half of your Self-Employed 401(k) account balance. Others allow you to invest in real estate.

      We have our 401K for the self employed with Fidelity Investments http://personal.fidelity.com/products/retirement/getstart/newacc/keogh.shtml.cvsr – they don’t allow real estate investments and has no loan feature but the variety of mutual funds, stocks. ETFs, money market instruments, etc. that are available is what we need to grow the money. Some 401Ks only allow mutual fund investments.

      Aside from Fidelity, here are other 401K solo providers:

      AIG SunAmerica Funds http://www.sunamericafunds.com/sun.nsf/home?OpenForm
      AIM Funds http://www.aiminvestments.com/
      BenefitStreet http://www.benefitstreet.com/
      Enterprise Funds http://www.enterprisefunds.com/
      NorthTrack Funds http://www.northtrackfunds.com/display/router.aspx?docid=10001
      Pioneer Funds http://us.pioneerinvestments.com/default.jhtml?jumpto=Investor http://www.dws-scudder.com/t/external/splash/index.jhtml
      Scudder Investments

13. QUESTION:
    does any1 know about 401k Plans for the Self-Employed?
    I am a self employee for my S Corp..was looking into 401k plans for saving some $

    please advice

    TIA

    • ANSWER:
      Google is quite the useful tool.

      Type in 401k self-employed and the information is limitless.

      I am surprised that more people do not use this function to find info.

      Check this link: explains some of the benefits that Solo 401k plans offer

      https://www.bcmadvisors.com/retirement_plans/solo-401k.htm

14. QUESTION:
    What retirement options are available here in the Philippines for one who is employed and self- employed?
    If the US has 401K and etc. for employed ones, and SEP for self-employed, what is available here in the Philippines?

    • ANSWER:
      The government gives you a fish net and a coconut tree seedling along with their best wishes for a safe and happy retirement

15. QUESTION:
    I have my own business (Self Employed) can I enroll in some kind on 401K…?
    Ok, I am Self Employed and have my Business Tax Permit with my Business Name on it, but I want to enroll in other programs I currently pay federal, medicare and social security taxes through my business, and now I been a Business Owner for a year and want to enroll in other programs like 401K can you please help… Thanks, can someone give me any advice for been self employed what I can pratcipate and enroll in been self employed. thanks

    • ANSWER:
      Initially, look at a SEP-IRA. You can roughly put away up to 20% of your net self-employment income, or ,000, whichever is less. If your net income were ,000, for example, you could contribute roughly ,000, and get a deduction for it. I say “roughly” because there is an adjustment for self-employment tax paid, but it’s beyond the scope of your question. If you have eligible employees, you have to cover them, as well.

      If you’re limited by the 20% and can afford to put away more, look at a Solo 401k, if you qualify, and a SEP. The 401k will allow a contribution of up to 100% of net self-employment income or ,500 (,000 for age 50 and older), whichever is less, PLUS you can fund the SEP, as well.

      Hope that helps.

      PLEASE VOTE to avoid a TIE. On behalf of all of your responders, who take the time and effort to help questioners in this free Yahoo! community, THANK YOU in advance for taking the time to choose your “Best” Answer. We really appreciate it.

      DISCLAIMER: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual, nor shall it be considered a solicitation for business. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances.

      Bradley Mann, CFP®, EA, BCE, CFS, AAMS
      Certified Financial Planner™ Practitioner
      Enrolled Agent | Admitted to Practice before the IRS
      Board Certified in Estate Planning

16. QUESTION:
    If I am self-employed AND also work for an employer, can I contribute to both an SE 401K & my employer’s 401K?

    • ANSWER:
      Yes, but the contribution limit is ,500 combined….so the only advantage to doing so would be if your compensation in one or the other plans is limited. Otherwise you should be contributing the maximum to get the match in each plan and then maximizing the contribution in whichever plan offers the best investments…and for those reading this….no, the SE 401k doesn’t always offer the best investments.

      The other limit is the DC plan limit of 46k. This is a PLAN limit so you can exceed that amount on an individual level. So make sure you maximize your employer and employee contribution in the SE plan.

17. QUESTION:
    I am a single mother, I am self employed but made a loss this year and had to take money from my 401K?
    Will I get a tax return or anything from the government

    • ANSWER:

18. QUESTION:
    What is the difference between IRA and 401K Plan?
    If they are about the same, why do both exist? Are IRAs for the self employed while 401K is for the 9-5 grind???

    • ANSWER:
      401(k) is sponsered by an employer. They sometimes provide a match of funds. It has a limited number of funds to choose from

      An IRA is similar, but is self directed. You can pretty much buy what ever you want – stocks, bonds, mutual funds. CDs, etc

      there are special types of IRAs for self employed people that allow you to put away more than in a traditional IRA

19. QUESTION:
    Is there any good disability insurances for self employed business owners that will cover lost income?
    How can I preserve my income with inflation if I am injured on the job using disability, 401k, social security, etc. and cover health insurance and expenses if I am a self employed business owner who is innvolved in lawn work?

    • ANSWER:
      There are plenty of disability policies available to the self employed.
      You can google disability insurance brokers or try this link http://www.disabilitybroker.com/

      Don’t call your auto and home agent they specialize in property and causality insurance. You need someone that specializes in disability insurance.

      A Broker represents multiple carriers and can help you sort through all the different insurance companies and plan options in your state.

20. QUESTION:
    What are the tax implications for two jobs where one is self employed?
    Say if you work for a company full time but are also a landlord and rent apartments out. Can you use the deductions from being a self-employed landlord to offset your full time income? Also, how would 401ks work? Can you max out your company 401k at 15.5k/yr + company match and then max out a solo 401k as long as the total does not exceed 49k a year?

    • ANSWER:
      you need to see the definition of a real estate professional to see if you qualify to report this rental income on Sch C as a business(generally those are places like motels, etc)
      you report rental income on Sch E
      there is a limit to 401(K) no matter how many income sources you have

21. QUESTION:
    can you have 401k without working for someone? self employed?

    • ANSWER:
      Hi, i suggest a great site with plenty of Issues related to your Investing and everything around it. it also provide clear and accurate answer to many common questions.

      http://investing.sitesled.com/

      I am sure that you can get your answers in this website.

      Good Luck and Best Wishes!

22. QUESTION:
    Self Employed Individual Retirement Account: SEP IRA or Solo 401k?
    I have an S corporation established couple years ago, I am the president, vice president, treasurer, and janitor… I do engineering consulting, with no employees…i’m generating about 0k per year in income.. my overhead/expense are very very minimal, so i normally get hit with a big tax bill at the end of the year… So I am seeking an individual retirement account…and need your help/opinion…

    The options are SEP IRA or Solo 401k, i was researching and seems i can contribute about 40k or so into each… what are the advantages/disadvantages of each? how about admin fees? (i read for the first 3 years they give you a 0 tax break for admin fees).. besides that, I would like to save up about 20-25% of each income check into that retirement account…Any advise is greatly appreciated.. Thank you.
    No I do NOT pay myself W2, I just dig into the bank account (i am working on setting up a payroll for me), but at the end of the year, i file the 1120 i think tax form for the corporation, all revenue less deductions, issue a K1, and roll that into my personal…

    • ANSWER:
      Tax deductions are the same for both. SEP-IRA is less paperwork and tax reporting (hence the “S”, Simple). The tax credit is the same. I’ve had a SEP, and it was as easy as opening an IRA. We’ve opened solo 401ks, and there’s a lot more paperwork, and you have to file a report to the IRS every year. No annual report required with a SEP-IRA.

      http://www.dol.gov/ebsa/publications/SEPPlans.html

      http://www.smsmallbiz.com/benefits/The_Solo_401(k).html

      Schwab, Fidelity, Vanguard all sponsor both types. Call their Retirement Plan depts and ask them.

23. QUESTION:
    What is the best (and lowest cost) brokerage for an individual roth 401K?
    Many brokers (such as Fidelity, Scottrade, and ETrade) offer solo 401K (for self employed) but do not allow Roth contributions.
    I checked Schwab and talked to a rep. He said Schwab does not offer a Roth individual 401K. Is he wrong?

    • ANSWER:
      Charles Schwab is the best I know for that.

24. QUESTION:
    What is the best retirement plan for self employed worker?
    I am 32 and working as a real estate agent. I don’t have a retirement plan yet, people tell me to open a RothIRA or a simple 401k…i don’t know much about these things, any advice is appreciated.

    • ANSWER:
      Let me start by saying, what you need to start first is a ‘Traditional IRA. What is that? You take the money to a Savings institution, and Open an IRA acct.. You can put up to 00 dollars, in it each year. Preferably all at once on Jan 1 You shop all the banks for the best interest rate, and it is locked up in a time certificate for 18mon or 3yrs..And you do an annual contribution every year thereafter.. Now the good part,, you write off the 00 off you income tax, which will net you a refund from five to six hundred dollars, every year..Depending what your tax bracket is..The00 keeps earning interest and you got 600 of it back..It grows tax free till you take it, in retirement.. Then you can take the 0 refund and invest in stocks ,bonds ,whatever else you wish to try for additional retirement investments. A 401k is really only good if you have an employer who matches a percent of your contributions.. Your self-employed so its all your money.. You can also have a roth I RA which is an investment vehicle which uses the markets ,mutual funds and bond funds for growth. Do yourself a favor and stop in one day at your favorite bank , and sit down with a financial advisor and planner, ask them about retirement vehicles, but just listen.. Then check at several more.. After about three, you’ll have all you need to know to make a intelligent deceision.. Being a real estate agent, you know mortgage loan vehicles are different, and so is retirement investments.. Hope this helps,, I myself practiced this very method ,and retired financially secure.. GOOD INVESTING!! SOLOMON

25. QUESTION:
    Can I qualify for 401k self employment?
    I am unemployed and have been using the stock market to build my financial assets which is not much. Can I qualify for 401K or do I need a license to qualify as self employed with the IRS. How will this help me, 401K, if I plan on retiring at age 65 and 1/2 if I have no job and pension, only 0/mo in social security quailfied benefits?
    I really need your profession advise on this. Thanks. I want to create a 401K under personal investing by me.

    • ANSWER:
      If you’re self-employed you can create a Solo 401(k). Here’s more information:

      http://moneygirl.quickanddirtytips.com/solo-401k.aspx

      http://moneygirl.quickanddirtytips.com/how-to-save-for-retirement-without-a-401k.aspx

26. QUESTION:
    Does anyone know of any good long-term disability plans for self-employed business owners?
    I am thinking about leaving the post office to pursue my lawn service business which I have been pursuing for a few years now. I have my health plan and 401k covered. The only thing I am worried about is finding a good plan for disability in case I am not able to work anymore. Does anyone know of any good disability plans out there?

    • ANSWER:
      Most disability providers will not cover a self employed person unless they have been in business for at least two years. They do this so you can establish a record of income that they can base the disability benefit on. You would be able to purhcase an accident plan. That would provide disability income and cash for any accidental injury. You may need to do this before leaving the post office.

      I suggest you look for a local broker that can help you sort through the different companies available. You can use yellowpages.com to search for life disability brokers in your area.

      A Broker represents multiple carriers and can help you sort through all the different insurance companies and plan options in your state.

27. QUESTION:
    Retirement savings ideas for someone who is self-employed?
    I’m 41 years old and started my own business one year ago. I would like to take the next step and set a some type of retirement savings plan but I know nothing about them. I am the only employee of this business so I’m only saving for myself. Do I consider a 401K plan, stocks or something else? Anyone have any suggestions?

    • ANSWER:
      You are confusing two separate important points.
      1. A vehicle to operate retirement income 401, IRA, KEOH,ROTH. The differences between them are the anual deposit amounts, and tax considerations.

      2. What to invest in with the funds put in those accounts. The investment ideas are pretty much the same but the vehicles have different rules to contribution limits,taxation considerations. Stocks, mutual funds, hedge funds, and bonds are purchased in any of these vehicles.

      If you can set up a Self Empoyed Retirement Fund do it. Brokerage houses will do the legal paperwork to start one. Even if you are the only employeee. You can put up to 18% of your income tax deferred into that type of account.

      Even though you have the 401 vehicle, you can in addition to this do a Roth IRA (taxes paid on the money in… tax free for all the earnings) 00 a year or if you make more than 165k a year… just the regular IRA (tax deferred) ,000 yearly.

      If I was just starting out in my 40′s, I would put every surplus dollar into both until the contributions were maxed each year. (Do the 18% in the 401K contribution first then the Roth or simple IRA second. Why the 401 first? If you are a business, it reduces the amount of money considered “profit” in your company so less taxes on the business and the business is contributing 1/2 of the funds “matching dollars” so it’s basicly done without paying (deferred) Federal, and State taxes. The 401 deposits make you a cool 15.3% on your money just for depositing them since you totally avoid paying your matching business 7.64% and personal 7.64% FICA deposits because you avoid taking the money as your salary first. How neat is that?

      In a ROTH you are getting some of the taxes back by reducing your taxable gross income by 00.00…but your business and you STILL paid the FICA on those funds and those are not tax deferred. Since YOU are the business, that means less money in your pocket…. therefore always max out the 401 first.

      If I maxed out the contributions allowed then start up a separate account for your non-retirement dollars. This way there is no penalty for pulling money out early before age 65 if you are fotunate to retire early. : ) This will also act as a very effective emergency fund since there are no penalties for early withdrawal.

      Now what to invest in is a different story but the basic idea is to have a multiple approach investments so that one market area downswing doesn’t cause a big loss to your portfolio. Brokerage houses usually have better maintenece fees for operating your accounts than do banks. Shop around and it is different for each mutual fund invested in. Make sure the fee structure does not overpower it’s earnings potential.

      My advice would be to “hire” an independent financial counselor that does NOT invest or have a stake in the ideas brought to the table. Let him set up the types of investments to be involved with so that the recommendations are made for your benefit and not the brokers or the banks benefit. Watch out for financial consultants that are pushing insurance. The make a hefty profit on these schemes and less real money reamains for investments. If you need insurance buy TERM insurance on your own for pennys on the dollar. It has no cash value unless you die but the coverage is great and you will outperform any insurance policy by miles. It is NOT a good investment.

28. QUESTION:
    What is the difference between a 401K plan and a 401A?
    I used to have a 401K plan when I was self employed but now have a 401K plan as an employee.

    What’s the difference?

    • ANSWER:
      The differences between a employer based 401K and a self employed 401K, is the amount of money that you can contribute.
      employer based 401K for 2011 = 500
      self employed 401K for 2011 = 500 plus 20% of your income up to 000
      – there might be other things like loans and stuff but this is the basics

      A 401A is more of a deferred comp program. You are not taking money this year for money that you earned this year.

29. QUESTION:
    I am 27 yrs old and am self-employed (no steady/consistent income. What are my best svgs/investment options?
    Roth IRA? Traditional IRA? Mutual Funds? 401k?

    • ANSWER:
      Hi
      People not having regular income may plan their investment as per their risk aptitude.
      After getting any income put it in a saving bank a/c and up to a minimum liquidity for day to day expenses any surplus may be invested in small amounts in mutual funds of the duration of 1-3 years maturity . In such a period if the growth rate is satisfactory keep them there other wise change the strategy and invest in other options .
      Hope this idea would give you a new thought.

30. QUESTION:
    i am self employed, filing tax return-what to attach to 1040?
    I have completed my tax returns and really don’t have anything to attach to the 1040. I mean, I have a 1099 from my 401k which shows [FAQ-QUESTION] as a distribution because I transferred to an Ameritrade IRA. I also might have something from one financial institution showing like in interest income which I reported. I have no W2 as I am self employed. I paid estimated taxes during the year and am sending a check for 00 that I owe. Do I attach that one 1099 for [FAQ-QUESTION] that I have and the interest income statement?

    • ANSWER:
      No, you don’t send in 1099′s or interest statements with your tax return, W-2′s and all the different IRS issued forms are the only things you attach.

      But, keep these copies with your copy of the 1040, if ever audited you will want to have these in case the IRS states that they received information different from what your 1099/interest statement shows.

      Taxes suck, glad to see you have it done with more than a month to spare!

31. QUESTION:
    Question about the Solo 401 K Retirement Plan for Self-Employed?
    I have run a consulting business full-time for the past five years. I now want to accept a great opportuntiy to take a full-time job that requires me to shut down my business. In fact, a client wants me to go with them full-time. Can I still maintain my Solo 401 K even after self-employment ends? In other words, can I still access the self-loan component? Can I still rollover the proceeds from my previous 401K into one larger Solo 401 K account after I end self-employment? Those are the two biggest benefits of the Solo 401K that I’d like to continue. Thank you.

    • ANSWER:
      To answer your first question, the solo 401(k) is a qualified plan. The contributions are based on a percentage of self-employment income. If you are no longer earning income as a consultant, no further contributions can be made. You can, however, leave the money in the plan to grow tax-deferred.
      The loan provision is still in effect and you would be able to borrow up to 50% of the balance if it’s less than ,000 (I’m pretty sure about that limit, but you can check with your plan administrator).

      I’m not sure I understand the question about the rollover. You say “previous 401k into one larger Solo 401k” after you end self-employment. I know you would be able to roll your Solo 401(k) into your new 401(k) plan at your previous client’s company. I’m not sure about vice versa since you would technically be “separated from service”.

      Check with your plan administrator for confirmation on all the details. They will be able to answer the questions more in depth.

      Ron, ChFC

32. QUESTION:
    IRA options for salaried and self employed couples?
    I am a salaried employee and participating in employer sponsored 401k program. My wife becomes self-employed since June 2009. Before that, she was participated her employer sponsored 401k program (just 2 months). We file joint return. In this situation, Can we invest in traditional IRA (pre-tax investment) to minimize the AGI? What is the maximum limit for each for pre tax investment? Another question is where to start IRA investment, with minimum fee? Is a bank good place to start? Or the firms like fidelity are a good option? What IRA programs yield zero risk?

    • ANSWER:
      there are probably no zero risk investments except possibly at the bank
      you are limited to IRA deductions depending on income and age
      you can check IRA information at www.irs.gov

33. QUESTION:
    What are the best vehicles for retirement investing for a combination of salaried, self-employed, and pension?
    I’m retiring from the military after 20 years and moving on to a second career (still about 20 years from ultimate retirement), and looking for the best plan for accumulating retirement funds. I expect to have considerably more income than my current standard of living and would like to invest the maximum possible in IRAs and similar vehicles with tax advantages.

    I am married (wife is not employed outside the home) and will have three sources of income next year: my primary job will be salaried at K/year including an employer-matched (to 6% of salary) 401K plan; I’ll have a K/year self-employed consulting contract (potential for Keogh?), and I’ll receive K/year military retirement pension (unearned income). The sum AGI puts me over the limit for contributing to Roth IRAs, but I’m confused as to whether the 401K, Traditional IRA (for self and wife), or a Keogh plan are better, or can be used simultaneously. Assuming lots of $$$ to invest, where should I throw my money?

    • ANSWER:
      Invest at least the 6% in your 401K since that is what they match. IRA’s have pretty small contribution limits, so unless you open multiple IRA’s you won’t get much benefit here. I would max your investment in the 401K (after a year – usually – you can increase your investment significantly. I can put up to 22% in mine and I do). You can use them simultaneously. Rather than open a Keogh additionally (although you can certainly do so-I just think they are a hassle) you can just open an investment account with your local bank to invest in stocks similar to your 401k (if they are good ones) because since you will already be following them you can invest more with less research.

34. QUESTION:
    If I open a Solo 410K and a Roth 401K, are the contribution limits separate or combined?
    I am self-employed and have a SEP IRA. I am thinking of opening a Solo 401K and a Roth 401K. I want to convert the SEP into the Solo 401K. When I’m done I can reduce my taxable income with the Solo 401K and can have the Roth for tax free withdrawals at retirement. Are the contribution limits separate or combined for these 2 401K accounts?

    • ANSWER:
      All 401k contributions must be treated as one big contribution just as IRA accounts do. You can have many 401k accounts, but all your contributions must be added together.

      The maximum contribution to 401k is ,500.
      The maximum contribution to IRA is 00 (00 if you are 50 years old or older). The amount you can contribute to IRA could be reduced if you earn too much income. IRS publication 590 goes into full details on how much you can contribute into Traditional IRA or Roth IRA.

35. QUESTION:
    If my company is not matching, should I enroll in their 401K?
    Everybody says that you should enroll for lowering taxes but my husband is self employed and has more losses than profit and we file jointly. So my gross income being K/year and him having about [FAQ-QUESTION] income (his income equals his losses), would I still benefitiate of enrolling in my company 401K? Would my taxes decrease a lot?

    • ANSWER:

36. QUESTION:
    My company does not offer 401k account. how can I contribute Pre-tax money to an IRA account i have in a bank?
    if my company doesn’t offer 401k plan. is it possible to contribute employee pretax money from my paycheck to my traditional IRA account that I have with the bank. how about if you are self-employed, can you deduct your IRA fund as above the line deduction to reduce your taxable income up to the limit?

    • ANSWER:
      You can contribute up to K per year (K if over 50) to an IRA as long as you have earned income for that year. You don’t contribute to an IRA through your employer – you do it on your own.

      You cannot move large amounts of savings into an IRA – the annual contribution limit always applies. IF you are self-employed, look into SEP IRAs.

37. QUESTION:
    Can you transfer old 401K into current SEP?
    I still have money in my 401K with my previous employer. I now want to roll that money into a current SEP that I have since I am now self-employed. Can this be done? Or should I just roll that money into a IRA?

    • ANSWER:
      A SEP IRA is a bit of a different animal. I think it would be cleaner to just roll the 401(k) into a separate IRA.

38. QUESTION:
    Can I contribute to a Roth IRA if I am self-employed and have a NOL?
    I am self-employed and had a net operating loss and carry back on my taxes last year. This year, I expect to be in the same situation – I have brought in some income but my expenses out weight my income.

    Since I am in my 30s and have next to no retirement funds, I have done some research and really like the Roth IRA. The contribution rules state that I must have “earned income” in order to contribute and in some places I read they also talk about my adjusted gross income (AGI). I will have no income to report on 1040 line 7 and line 12 Schedule C I expect to be a negative number (Net Loss).

    Does this mean I cannot contribute to a Roth IRA? I have small hopes that the number I really should be looking at is line 1 of schedule C as my earned income instead of line 31 of Schedule C.

    If I cannot contribute to a Roth IRA, what is the next best option to save for my retirement when I have a net loss?

    More information that may or may not help: I am single but being supported by a same-sex partner while I get my business going. Due to same-sex discrimination I cannot use my partner’s income to contribute like DMOA spouses can. I have an old 401k (only 10k) under my old employer that I’ve been told I need to rollover at some point. I’ve also looked into a SEP-IRA but it requires net profit and even then I can only contribute 18.6% of the net profit (I am many years from being able to put much money into one of these!). Due to my medical issues, our plan is for my personal business to just be our supplemental income so I will only work part-time in the long term. This might mean I will probably be limited for retirement contributions even if I reach my current business goals.

    • ANSWER:
      It’s true. You need “earned income” (wages, NET self-employment income, etc.), or surprisingly, alimony, to fund a retirement plan like a Roth IRA, SEP-IRA, or Traditional IRA. Your regular and Roth IRA contribution limits are 100% of earned income or ,000 (,000 age 50 and older), whichever is less. SEP-IRA limits are 20% of (net self employment income less 1/2 of self- employment tax), or ,000, whichever is less. Other retirement-planning investment options could include:

      1. Annuity (Variable or Fixed). Much like a non-deductible traditional IRA, earnings, if any, grow tax-deferred until withdrawn, and a 10% IRS early-withdrawal penalty may apply to earnings withdrawn prior to age 59 1/2. No contribution limits except those that may be imposed by the insurance company.

      2. Mutual Funds and/or Brokerage Account. If you’d like to avoid probate at your death, you can title these as Transfer on Death accounts with one or multiple beneficiaries.

      Find a strategy you can embrace and invest systematically, monthly, for example, regardless of all the “noise” you’re bound to hear in the media.

      Hope that helps.

      On behalf of all of your responders, who take the time and effort to help questioners in this free Yahoo! community, THANK YOU in advance for taking the time to choose your “Best” Answer. We really appreciate it.

      DISCLAIMER: While the information in this response was obtained from sources believed to be reliable, its accuracy and completeness cannot be guaranteed. The opinion voiced in this answer is for general information only and it shall not be construed as tax, legal, or investment advice for any individual. Questioners are urged to consult with their professional advisers before making any decisions regarding their finances

      Bradley Mann, EA, CFP®, BCE
      Enrolled Agent | Admitted to Practice before the IRS
      Certified Financial Planner™ Practitioner

39. QUESTION:
    Add to my 401k now while the markets down?
    I am self employed and can add a lump sum of up to k to my 401k before the end of this year. Should I do it right now while the market is low or wait til the market stabilizes.

    I don’t plan to retire for 20 years

    • ANSWER:

40. QUESTION:
    I’m self-employed. What kind of retirement fund should I open?
    And how much per month is good to put away? I’m 36 now and have a little savings, but not much.
    I do know that business owners cannot have a 401K plan. What else beside a SEP IRA is an option?

    • ANSWER:
      Actually business owners can have a 401k plan. However, a SEP IRA has no cost to administer and will allow you to defer up to 25% of your compensation. You might want to talk with your accountant and have him/her help you with how much/if any to invest in a SEP IRA. You can actually make a SEP IRA contribution for 2006 up to your tax filing deadline. The SEP IRA is also flexible. You don’t have to contribute to it each year.

      If you don’t like the SEP IRA you can also set up a SIMPLE IRA. This doesn’t have any administration costs and will allow you to save more than a Traditional or Roth IRA. However, you can’t make a SIMPLE IRA contribution for 2006.

      There is no guideline as to how much you should be saving per month. However, the sooner you can start saving for retirement the better off you will be later on. You may want to create a budget that breaks down your income and expenses. Then you can figure out how much you can comfortably save each month. I hope this helps.

41. QUESTION:
    How to contribute to INDIVIDUAL 401K?
    How does the indivdual 401K work? It’s for self-employed folks like me with no employees and other limitations. I don’t understand the contributions. I swear that I read one portion happens by year-end (me as the employer?) and the other happens by April 15 (as the employee??). Or maybe it’s vice-versa. I also don’t understand the monetary limits. Anyone care to comment?

    • ANSWER:
      Do not research SEP’s. They’re old school and don’t allow you to put away enough money. Basically a solo-401k allows you to put away 15,500 throughout the year based upon your pay that is subject to SE taxes and social security. This is the employee part that you speak of. Then at the end of the year you can put away an additional 25% of your income up to a total of ,500 of your income as your employer contribution. Total amount is ,000. You can put this much away if you earn as little as 125k. In order to get that much in a SEP you’d have to earn 225k. Deadline to contribute the Employer portion is your extended due date of your tax return filing.

      In order to have a 401k you need to sign a plan document, get a EIN for your trust, and also sign a deferral agreement. You’ll have to keep the document up to date but you can pay people to do that. After that it’s just a matter of contacting whoever you plan on investing your money with and getting the account application.

      Contact a third party administrator to get the documents prepared. Startup costs are about 2k…or you can contact a mutual fund company and they’ll do it for much less but you’ll have to use their funds and if you leave them you’ll have to get a new document anyways. There’s a lot more to know but this is the gist…contact that TPA for more detailed info.

42. QUESTION:
    im self employed as a barber. i want a retirement plan.what are my options and who’s the best companies?
    solo 401k, variable life insurance, etc.

    • ANSWER:
      What about an IRA or a roth IRA?

      check this website http://www.fool.com/retirement/index.aspx?source=ifltnvpnv0000001 they have a ton of information about retirement and investing

43. QUESTION:
    Can my former employer force me out of the 401k plan?
    I left my account with my previous employer and am now self-employed. The company notified me that they are changing administrators and want only current employees in the plan. I think it is a bad time to sell the funds and roll over to a IRA cd. Am I correct? What are my options?

    • ANSWER:
      1. I don’t recall the legality of whether an employer can kick you out of a 401(k) plan as a former employee. I left a major Wall Street firm and no one forced me to rollover the 401(k). They can ask you to leave, but they would be severely liable under ERISA law if they liquidated your assets and sent you a check without your written instruction to do so. They can charge you an “administration fee” to hold the 401(k) for you however.

      http://www.dol.gov/dol/topic/health-plans/erisa.htm

      2. You can opt to move the 401(k) to an “IRA Rollover.” I would not do this with a bank or insurance company. Most bank/ insurance employees are poorly trained and inexperienced when it comes to investing and investment strategy. I would go get professional advice from a broker with 15+ years of retirement and market experience.

      3. You can often transfer the assets “in kind.” This means you keep exactly what funds (assets) are in the 401(k) when you move it to an IRA Rollover.

      Historically, CD’s are bad investments long term, esp if you have 10+ years before retirement.

      There is no such thing as an “IRA CD.” This is an incompetent banker wanting you to liquidate your funds at loss and buy a CD which he/she gets paid on that.

      You can have an IRA account, and inside the IRA are the investments. An IRA is nothing more than a shell that holds assets under a certain legal structure.

      http://www.investopedia.com/terms/i/ira.asp

      I don’t know what you are holding, or your situation, so I cannot give you personal advice.

      In general, I would look to Dollar Cost Average each month or bi-monthly (better) in major market indexes such as the S&P 500.

      http://en.wikipedia.org/wiki/Dollar_cost_averaging

44. QUESTION:
    my employer doesn’t sponsor a 401k plan, how do i take tax advantage for my retirement?
    I’m not self-employed, and other than IRA is there any other tax advantage pension plan for me?

    • ANSWER:
      If you mean by tax advantage, tax deferred, then a deferred variable annuity could be an option. Unlike a 401 (k) or an IRA, it does not have a limit. But find one with very low fees because most have high fees and have to be held at least 20 years for the earnings to outweigh the fees. But they do provide income for life after age 59.5.

45. QUESTION:
    What are some other good tax shelters besides 401k and college for kids.?
    I’m a self employed property owner. The property that I’m renting is gonna net me about 0,000. This is after everything, and puts me in the 33% federal tax bracket. What are some other tax shelters I can use? If I were to pay an additional 0k toward the principal of my mortgage, could I use that as a deduction?

    • ANSWER:
      No, no, no! Interest is deductible. Principle is not. Pay the minimum payment.

      Call your bank/broker and ask about Keogh plans and Simplified Employee Pension plans. It sounds like Keogh (which is a pension plan for self employed people) is what you need, but you should have someone look at the details of your situation.

46. QUESTION:
    Can I open a SEP or Solo 401k?
    I was a W2 employee but am now doing some work as a 1099 contractor for a few months. I am not incorporated or have a seperate TIN for my business or anything like that. I probably will get a W2 job again by the end of the year.

    What constitutes being “self employed”? Am I eligible to open a SEP or Solo 401k?

    • ANSWER:
      You can do either. You won’t need the TIN for the business as you’re just going to run everything through the schedule C. But you will need a TIN for the SEP or Solo 401k. Easy to do…you can even do it online. Go to www.irs.gov and do a search for SS-4.

      Now as to whether you should or not….If you don’t plan on putting in very much then the SEP is the way to go. You’re limited to 20% of your earnings using the SEP. plan set up is easy and cheap. You can do this yourself. If you want to exceed that amount then the solo401k is the way to go but to set up the plan set up would be more expensive and little more difficult. Can’t do it yourself. Only do this if going to be an ongoing business.

47. QUESTION:
    Which IRA should I roll over my 401K?
    I’m changing jobs and I need to roll over my 401K plan.

    Currently I have a non-deductible IRA that I’m actively contributing and a SEP-IRA that I had when I used to be self employed. SEP-IRA is “inactive”, that is I can’t put any money into it as I’m not self employed.

    My question is, where do I roll over my IRA into?

    Can I open another IRA account, say a Roth IRA and roll it over there?

    Thanks for any advise. Preferably right ones!

    • ANSWER:
      A Roth is funded with dollars that you already paid income tax on, so you can’t put 401K dollars in it.

      Your previous employer will carry your 401K account until you make a decision, so there isn’t a rush to do anything immediately.

      Simply contact your stock broker (if you have one) or your banker and tell him you want to rollover 401K funds into an IRA account. They will send the necessary paperwork to the original 401K administrator and the funds will be rolled over into a new IRA Rollover account. It’s important that the transfer be made directly to the new account.

      However, if the plan is performing well with the old employer, you might want to leave it alone for the time being. I am not aware of any law or requirement that you move your account when you terminate your employment. If you have been receiving regular statements the plan administrator’s name should be on there someplace. Call them.

48. QUESTION:
    Tax Question about SEP IRA and individual 401k?
    If im:
    44 years
    a self employed contractor
    contributed ,000 to my employer sponsored 401k
    During 2009, my schedule C income was 0,000

    What is the maximum amount that I can contribute to (1) a SEP IRA and (2) an individual 401(k)?

    okay, not gonna lie, this is a problem i need help with for class… any help appreciated! much thanks!

    • ANSWER:
      My uderstanding is that you can put up to 45% of your income as a contractor into an SEP and it is fully deductible

49. QUESTION:
    What is required to get a tax ID #?
    I want to start a self employed 401K.

    • ANSWER:
      It’s trivial. You apply online through the IRS from here. https://sa1.www4.irs.gov/modiein/individual/index.jsp

      http://www.irs.gov/businesses/small/article/0,,id=102767,00.html

50. QUESTION:
    Young, single, self-employed female looking for best Retirement Plan?
    I am 24 years old and the sales and event director of a booming event venue. I have a passion for my job and am expecting to make a ,000+ commission at year’s end on top of my ,000 guarenteed salary. Unfortunately, I am
    10-99′d. But I do have a signed agreement that my employer will pay (tax free) the extra 7.65% that I normally would not have to pay if I was on a regular payroll. I get paid weekly (6.92/week). I have trying to set aside money to pay my taxes that I will owe, but it is hard.
    1.) How much should I be saving a week to cover my taxes at the end of the year?
    2.) Should I file taxes quarterly? And how do I go about doing so?
    3.) Beyond saving for taxes I would like to invest in some sort of retirement plan or 401K or something that will gain interest. What would be the best route to take? I do not have a substantial savings to invest intially. Do I have to deposit a minimum amount to get started?

    Thanks so much for anyone who tackle this one!

    • ANSWER:
      As a 1099 employee, you are officially self-employed meaning you can set up a SEP IRA, a Roth or a traditonal. You need to talk to a brokerage firm to determine your risk tolerance.

      For the taxes, you do get to write off your work expenses which helps with the tax burden. But without knowing your write offs it’s hard to deterimine your tax bracket. Minimums are usually 0.

      Based on 2007, your tax liablity would have been 15,180 plus the social security payment for being self employed. Your state tax will depend on the state you’re in.