I don't know if this subject has been approached before or not. I don't alway get to catch every post during the busy season.

My accountant says I am behind on retirement planning. I need to start putting $2,000 per year in an IRA and he would like to see me put $6,000 a year in a SEP plan. OUCH! I have eaten a lot of popcorn or soup dinners to survive as a self employed person and may have to eat more it sounds like. (o.k. I can do a little better than that at this point).

I know it's a personal subject and I do not expect to have everyones finances posted, but I would like to know how self employed small businesses handle the thought of finances later in life. Planning for retirement. I plan to work until I drop, but, my mom became sick with cancer and suffered 3 years before dying. How do we plan for the years that we may not be able to work?

I know many sign painters who worked well into their 70's, luckily in good health. I know one who lives behind a gas station in a small trailer with an electric cord running to it from the station. He doesn't see so well anymore, so he isn't working much.

Many people are becoming self employed today. We used to be able to count on a job in a company with health insurance, holiday pay, retirement plan etc. You give a good days work to the company and they take care of you. Those jobs are becoming very scarce.

Any advice on planning for retirement?

My brother (contractor) says why save for retirement? wonder if you don't live that long. I say, wonder if you do and didn't save?

How can a one person sign business plan for retirement? What are good things to do with any extra money we may scrape up?

Any suggestions would be greatly appreciated.

Pam, Pam's Signs

Shirley and I have both been placing the maximum amounts allowable for several years now.

Also, we own our home, no mortgage. It will be a major source of retirement funds when we retire and sell it.

Shirley works at a "real" job and has a company pension plan and she plans on retiring at age 60 (just under 4 years from now). She will be finished working totally.

I am the self employed person and will be retiring in 3 years. BUT I intend to continue "working" after that...I will just be working a lot less, especially in the winter when we will be somewhere warm for the duration of that season.

Will we have enough to live on? I can't say until it happens but I believe we will be OK.

1) you will defer taxes on that money until you choose to retire and probably will be in a lower tax bracket.

2) the money will grow tax deferred.

So I say you are wise in saving for your retirement, I do because it is my goal to leave my present job before retirement age.Been railroading for 23 years next month....started when I was 19, the summers and winters are taking a toll on the body and benefits are not greatly enhanced after 30 years service and I cant draw a RR check until I am 60, not to mention I love to make signs.

I am certainly no CPA so take this advice accordingly. Hope this gives you some food for thought.

AND before anyone throws rocks my way I REPEAT I am no CPA AND what I have shared is to the best of my knowledge(limited of course) correct.

my 2 cents

I'll throw my 2 cents in as well...

I assume your accountant is trying to get you to maximize your retirement plans.

Assuming this is so, your best bet is probably to start with the SEP contribution. It lets you contribute more than an individual account.

After the SEP contribution, if you have more funds to invest, you do have two individual accounts that are good choices, a traditional IRA or a Roth IRA. Both let you contribute up to $2,000 total per tax year.

With a traditional IRA, you may be able to deduct all or part of the contribution from your income for the year(depending on how much you make -the phaseout ranges are rising every year - too much info to list in this post).

With a Roth IRA, you can not deduct the contribution, BUT, after the Roth is 5 years old AND you are age 59.5, the gain comes out TAX FREE! (fyi, I say the gain is tax free because your contributions always come out tax free being you already paid taxes on them).

Of course there are phaseout ranges with the Roth, too, however, it seems you probably are under all of the phaseout ranges for either the Traditional or the Roth IRA (I'm guessing based on the amount of your SEP contribution - again, I'm assuming that $6,000 is the maximum you can put into a SEP).

I hope I haven't confused you. Let me say, also, that I am NOT a CPA either. I've just worked with all of these plans before. Although you didn't mention the Roth, it sounds like your CPA is sending you in the right direction.

Hope this helps!

Randy

Have your accountant do you an exhibit showing $100 per month saved for 30 years, compounded monthly at 6%, and no taxes withheld, and see how much money you have. My fancy calculator that does this is broken or I would do it for you. Maybe another 'head can do it and tell us the answer.

Which had you rather have?....$100,000 now OR a penny doubled every day for a month.

My divorce lawyer tried to get me to go to his accountant buddy 7 years ago and have him do my business taxes. I didn't feel I could afford to hire a fancy accountant. I finally got smart 7 years later (slow learner), and he said I needed to figure retirement into my future plans.

The response from you guys on this subject is greatly appreciated. You are the experts, with or without the CPA after your name because you guys are in this business. You know the financial ups and downs in the sign business and what is necessary to survive.

I really like this group of people here at Letterville. There is always good advice about making signs, and I am glad you have been willing to give advice on the financial end too. I always worry about pricing my signwork and usually undercharge. I know I have to cover-materials, overhead, and have a little profit. We all have to remember to figure in "retirement" in the whole equation. I am just learning this and wish I would have learned it sooner. My self employed customers were looking ahead (and charging me a good price when I hire them), while I was cutting myself short in the past.

I can see why competitors didn't like my prices, (and I wasn't trying to undercut anyone,) I thought I had all bases covered. I just didn't realize I needed to include a few bucks to throw into retirement.

We should have a few discussion once in a while about finances. You know, covering the unexpected, retirement, vacations, etc. My accountant said I should have enough money set aside to cover 6 months worth of bills incase something happens and I cannot work. I have always kept a little amount of money back, but wasn't thinking of keeping that much back.

I am charging a little more now and not feeling guilty like I use to. I have as much right to retirement as my customers do. Right?

I appreciate you guys being open about retirement plans. It is a personal subject,I know, but it helps me get going on my own retirement savings. Something we all need to do as soon as possible. I wish I would have started 7 years sooner.

Thanks again,
Pam