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Self Employed - Where to start with Retirement
Posted on 5/11/13 at 2:12 pm
Posted on 5/11/13 at 2:12 pm
Here is my situation:
-25 - Working 3 years now
-Self Employed as a consultant
-Only debt is mortgage
-Just refinanced my home from a 30 year FHA to a 15 year conventional loan at 3%. Originally had been throwing as much money into the house because I wanted to be debt free, but am realizing that this isn't a smart idea with low rates.
-Engaged but we are both happy keeping our money and investments separate besides a joint checking account for our bills and mutual purchases.
-50K just sitting (I know, I am an idiot up to this point)
1) I have decided to start putting the max 5K into a Vanguard Roth each year, but I also want to know about setting up another retirement fund for self employed individuals (Possibly an SEP? or another type that I am unaware of?) but I do not know too much about this and how/if it will effect my Roth allowance. Any advice would be great!
2) What types of accounts are recommended to start saving for kid's college funds?
3) Are there any disadvantages to keeping our finances separate like this?
-25 - Working 3 years now
-Self Employed as a consultant
-Only debt is mortgage
-Just refinanced my home from a 30 year FHA to a 15 year conventional loan at 3%. Originally had been throwing as much money into the house because I wanted to be debt free, but am realizing that this isn't a smart idea with low rates.
-Engaged but we are both happy keeping our money and investments separate besides a joint checking account for our bills and mutual purchases.
-50K just sitting (I know, I am an idiot up to this point)
1) I have decided to start putting the max 5K into a Vanguard Roth each year, but I also want to know about setting up another retirement fund for self employed individuals (Possibly an SEP? or another type that I am unaware of?) but I do not know too much about this and how/if it will effect my Roth allowance. Any advice would be great!
2) What types of accounts are recommended to start saving for kid's college funds?
3) Are there any disadvantages to keeping our finances separate like this?
9
Posted on 5/11/13 at 2:18 pm to jsquardjj
quote:
SEP
Posted on 5/11/13 at 2:27 pm to jimbeam
Self employed here also. SEP is what we use. Wife and I also have our Roth's we contribute to.
Posted on 5/11/13 at 2:33 pm to jsquardjj
Does an SEP work any differently than a traditional IRA?
Posted on 5/11/13 at 2:53 pm to jsquardjj
How the heck did you go straight into consulting? Congrats on the success but I wouldnt want any advice from anyone with 3 yrs of work experience. 
Posted on 5/11/13 at 3:03 pm to TyOconner
quote:
How the heck did you go straight into consulting? Congrats on the success but I wouldnt want any advice from anyone with 3 yrs of work experience
Same here.
Most are in there late 40's early 50's.
Posted on 5/11/13 at 3:15 pm to jsquardjj
Much higher contribution rates with a SEP and can still contribute to an IRA, depending on income level.
Posted on 5/11/13 at 3:20 pm to jsquardjj
Also consider a Health Savings Account with a high deductible health insurance policy. Money goes in tax free and can use it to pay medical/drug bills with the untaxed $. Meanwhile grows tax free also.
Posted on 5/11/13 at 3:22 pm to Paul Allen
quote:
Most are in there late 40's early 50's.
meh. i started consulting when i was 33. 42 now. 20 years worth of experience in my field. no problems. clients are happy.
Posted on 5/11/13 at 3:25 pm to Pop
quote:
How the heck did you go straight into consulting? Congrats on the success but I wouldnt want any advice from anyone with 3 yrs of work experience
Honestly, I wonder that myself. A lot of luck so far.
You would have to see my clientele base to understand. There are so MANY foreigners who come over here with start up costs to open up horribly ran businesses. Plus, they are still afraid of the internet. Why not hire someone young and innovative if you are only paying them on sales increase?
Posted on 5/11/13 at 3:26 pm to Fat Bastard
Yeah, but three years work experience? I have 8 yrs with 2 in management and I would be laughed off if I tried to consult. I could do private work but I am definitely not ready for "consulting". It does depend on the field for sure, though.
Posted on 5/11/13 at 3:29 pm to jsquardjj
quote:
Also consider a Health Savings Account with a high deductible health insurance policy. Money goes in tax free and can use it to pay medical/drug bills with the untaxed $. Meanwhile grows tax free also.
This is interesting--I will definitely look into it.
Posted on 5/11/13 at 4:10 pm to jsquardjj
Serious question. What does a consultant do exactly? I would like more than a definition, please. Some real-life examples, even if dumbed down, would be awesome.
Posted on 5/11/13 at 4:38 pm to wegotdatwood
In my case, if one of my clients wants their business to be more profitable, I "consult" them on how to obtain more sales.
I work in the hospitality field, so my job mainly involves marketing, fixing prices, and adjusting their operating procedures to be more competitive. It varies from one client to the next on what they need to fix or add.
I work in the hospitality field, so my job mainly involves marketing, fixing prices, and adjusting their operating procedures to be more competitive. It varies from one client to the next on what they need to fix or add.
Posted on 5/11/13 at 5:01 pm to jsquardjj
Self employed. Set up a SEP. put wife on payroll at a minimal salary and double retirement contribution until she finished grad school. Now she contributes to her own retirement and has pretty much the same as I do.
Posted on 5/11/13 at 5:31 pm to jsquardjj
Look into a Uni-k or solo K. Same format. You could do the Roth version and put away a lot more than in a Roth IRA. No income limits either.
It's a 401k profit sharing plan format for solo (husband /wife) operators. High funding parameters, flexible and inexpensive to set up.
Dated info below but Kiplinger article compares the two. funding limits are now higher than in 2007.
Despite what article says, Solo k is as easy to setup as SEP.
It's a 401k profit sharing plan format for solo (husband /wife) operators. High funding parameters, flexible and inexpensive to set up.
Dated info below but Kiplinger article compares the two. funding limits are now higher than in 2007.
Despite what article says, Solo k is as easy to setup as SEP.
quote:
The best choice for you depends on your self-employment income for the year. It's easier to set up a SEP -- most brokers and mutual fund companies offer them, generally with the same range of investment choices as their IRAs. But you may be able to contribute more money by opening a solo 401(k). Your contributions are tax-deductible with both plans. Contributions to a SEP are limited to 20% of your business income (which is business income minus half of your self-employment tax), up to a maximum of $45,000 for 2007. So if you earned $15,500 from self-employed freelancing, for example, you could contribute about $2,863. The maximum contribution for a solo 401(k) also is $45,000 in 2007. However, you can contribute up to $15,500 plus 20% of your business income (defined the same way). Because the first $15,500 in a solo 401(k) is not based on a percentage of your income, you'll generally be able to contribute a lot more to a solo 401(k) than you can to a SEP, especially if you earn just a little extra money from a freelance job. You can't contribute more than your business income for the year, but if you earn just $15,500 from self-employed freelancing, then you can contribute the whole amount to a solo 401(k).
This post was edited on 5/11/13 at 5:54 pm
Posted on 5/11/13 at 5:31 pm to jsquardjj
SEP here.
Posted on 5/11/13 at 9:33 pm to jsquardjj
LINK
I use a solo 401K. Not many folks know about this option, but it allows you to contribute 17500 up front and 25% of net profits.
From fidelity: "Employer can contribute up to 25% of compensation up to a maximum of $51,000 in 2013
Employee (owner or spouse) can make salary deferral contributions of up to 100% of compensation, not to exceed $17,500 for 2013
Catch-up contributions of up to $5,500 (2013) available for those age 50 or older
Total of salary deferrals and profit-sharing contributions cannot exceed 100% of compensation or $51,000 in 2013 if under age 50 or $56,500 if age 50 or older"
SEP is another good option, but solo 401K will usually allow you to shelter more money.
I use a solo 401K. Not many folks know about this option, but it allows you to contribute 17500 up front and 25% of net profits.
From fidelity: "Employer can contribute up to 25% of compensation up to a maximum of $51,000 in 2013
Employee (owner or spouse) can make salary deferral contributions of up to 100% of compensation, not to exceed $17,500 for 2013
Catch-up contributions of up to $5,500 (2013) available for those age 50 or older
Total of salary deferrals and profit-sharing contributions cannot exceed 100% of compensation or $51,000 in 2013 if under age 50 or $56,500 if age 50 or older"
SEP is another good option, but solo 401K will usually allow you to shelter more money.
This post was edited on 5/11/13 at 9:48 pm
Posted on 5/11/13 at 9:42 pm to Paul Allen
Consulting really depends upon the field. I'm only 25 and could go into consulting in my field easily, only because my field is relatively new (health information systems).
Posted on 5/11/13 at 11:04 pm to Epic Cajun
quote:
Consulting really depends upon the field. I'm only 25 and could go into consulting in my field easily, only because my field is relatively new (health information systems).
Could you guys give me some information on how I could do this as well. I'm 25 now and have a degree in construction management. It's very hard to be a consultant in Construction with no to little experiance. If you can e-mail me that would be great.
This post was edited on 5/11/13 at 11:06 pm
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